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William D. Ford Federal Direct Loan Program

Direct Loans are long-term, low-interest loans from the U.S. Department of Education. This is the largest federal aid program and it consists two types of Federal Direct Student Loans: subsidized and unsubsidized.  Student Loans are monies borrowed from Department of Education that must be paid back in full.

Subsidized loans are based on financial need. The federal government pays the interest for the student while the student is in school , and during deferments (periods when payments are temporarily postponed).

Unsubsidized loans are not based on financial need. Unsubsidized loans are for students who do not qualify for a subsidized loan or to supplement a student's subsidized loan. Students are responsible for paying all of the interest on unsubsidized loans.

Interest rate and fees

Direct Subsidized Loans made to undergraduate students have different fixed interest rates depending on the date the first loan disbursement is made.

Beginning, July 1, 2013, the interest rate on Direct Subsidized Loans on or after July 1, 2013 is 3.86% with a Rate Cap of 8.25%.

Direct Unsubsidized Loans made to all students beginning July 1, 2013 have a fixed interest rate of 3.86%.

 Department of Education has placed TSTC Harlingen in an Unsubsidized Experiment, which will allow us to limit the amount of unsubsidized loan a student may receive.

Federal law requires certain fees be charged for each loan made, including an origination fee. The law specifies the maximum amount of each fee and authorizes both fees to be deducted from the loan amount. If a fee is charged to the borrower, the fee is deducted from the loan proceeds when the money is sent to the student's school. The loan fee is an expense of assuming a Direct Loan.

Time Limitation on Direct Subsidized Loan Eligibility for First-Time Borrowers on or after July 1,2013.

There is a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. In general, you may not receive Direct Subsidized Loans for more than 150% of the published length of your program. This is called your "maximum eligibility period". You can usually find the published length of study in your school's catalog.

For example, if you are enrolled in a 2-year associates degree program, the maximum period for which you can receive Direct Subsidized Loans is 3 year (150% of 2 years = 3 years).

Your maximum eligibility period is based on the published length of your current program. This means that your maximum eligibility period can change if you change programs. Also, if you receive Direct Subsidzed Loans for one program and then change to another program, the Direct Subsidized Loans you received for the earlier program will generally count against your new maximum eligibility period.

How to apply

Students can request Direct Loans by completing the Free Application for Federal Student Aid (FAFSA). The FAFSA can be filled out online at http://www.fafsa.ed.gov/. Students are asked to list the schools they are considering, and information from the FAFSA will be sent to each of the schools. The school generally informs students of the financial aid programs for which they qualify (including Stafford loans) and of the next steps required to receive the Stafford loan and other financial aid.

Loan amounts

Schools decide how much students can borrow in Direct Loans, based on federal law. Students with financial need will receive as much as possible in Subsidized Direct Loans.

The most that students can borrow in Subsidized and Unsubsidized Direct Loans is equal to the student's estimated cost of attendance minus other estimated financial aid and resources, without going over the maximum amounts permitted for the student's academic level.

Federal Stafford Loan Maximums
Annual Loan Limit for Direct Subsidized and Direct Unsubsidized Loans
Type of student Subsidized Total (subsidized and unsubsidized)

Dependent undergraduates
First year $3,500 $5,500
Second year $4,500 $6,500

Independent undergraduates
(and dependents whose parents are unable to borrow under the PLUS program)
First year $3,500 $9,500
Second year $4,500 $10,500

Who qualifies

Stafford loans are available to undergraduate students and graduate students who are:

  • U.S. citizens or eligible non-citizens
  • Enrolled or accepted for enrollment at least half time in an eligible program at an eligible school
  • Registered with the U.S. Selective Service System (for males not exempt from registration)

Borrowers may not qualify if they have adverse credit, have defaulted on a federal education loan, owe an overpayment on other federal education aid, have been convicted of a drug-related offense while receiving federal student aid, or are incarcerated. The borrower also may be ineligible if, while receiving federal student aid, they have been convicted of or have pled nolo contendere or guilty to a crime involving fraud in obtaining Title IV funds and have not completed the repayment of such funds.

Full details on eligibility are provided with the Federal Direct Loan Master Promissory Note, the form students sign to obtain loans.


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