Direct Subsidized Student Loans

Overview

Subsidized loans are federal student loans which are made available to eligible students to help finance a higher education. "Subsidized" means that an eligible borrower does not incur interest charges on the subsidized portion of their federal student loan while enrolled at a participating institution on at least a half-time basis.

Borrowing Process for Subsidized Loans

Subsidized loans are only provided to undergraduate borrowers who have financial need. After you file the Free Application for Federal Student Aid (FAFSA) , your school's financial aid office will use that information to determine your eligibility and the amount you may borrow. Generally, the type and amount of federal loans you may borrow will be included in the financial aid award letter your school provides to you. You may not borrow more than your financial need or the maximum loan amount allowed for your level of study. As noted, "subsidized" is a type of Direct Student Loan that has a fixed interest rate and no payment or accrual of interest while a borrower is enrolled at least half time. Payment does not begin until you leave school or stop attending at least half time.

If your school determines that you do not have financial need but are otherwise eligible to receive federal aid, they will include an an unsubsidized student loan in your award letter. In some cases you may qualify for a portion of your loan to be subsidized and the other be unsubsidized. In any of these cases, the loan limits apply to the total of your subsidized and unsubsidized Direct Student Loan.

Subsidized Loan Limits

The amount you may borrow is determined by your level of study as follows:

  • $5,500 if you’re a first-year student enrolled in a program of study that is at least a full academic year (no more than $3,500 of this amount may be in subsidized loans).
  • $6,500 if you’ve completed your first year of study and the remainder of your program is at least a full academic year (no more than $4,500 of this amount may be in subsidized loans).
  • $7,500 if you’ve completed two years of study and the remainder of your program is at least a full academic year (no more than $5,500 of this amount may be in subsidized loans).

If you’re an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a Direct PLUS Loan for Parents, each year you can borrow up to:

  • $9,500 if you’re a first-year student enrolled in a program of study that is at least a full academic year (no more than $3,500 of this amount may be in subsidized loans).
  • $10,500 if you’ve completed your first year of study and the remainder of your program is at least a full academic year (no more than $4,500 of this amount may be in subsidized loans).
  • $12,500 if you’ve completed two years of study and the remainder of your program is at least a full academic year (no more than $5,500 of this amount may be in subsidized loans). This amount remains unchanged for both academic years.

Subsidized Loan Interest Rates

All Direct Subsidized and Unsubsidized Loans disbursed between July 1, 2014 and June 30, 2015 carry a fixed interest rate of 4.66% for undergraduates. Graduate or professional students are not eligible to receive a Subsidized loan. The rate for a Direct Unsubsidized Loan disbursed between July 1, 2014 and June 30, 2015 is fixed at 6.21%.

Subsidized Loan Fees

The fee for loans disbursed after December 1, 2013 and before October 1, 2014, a 1.072%. For loans disbursed on or after October 1, 2014 and before October 1, 2015, the fee will be 1.073%. The origination fee is deducted from the amount you borrow which means the school will receive 98.928% of the loan amount. Payment begins six months after you graduate or cease to be enrolled at least half time.

Subsidized Loan Repayment Plans

Repayment of Subsidized Loans does not begin until 6 months after you graduate or stop attending on at least a half-time basis. Because the federal government pays the interest on your loan while you are in school, interest does not accrue and you are not responsible for paying interest on the loan until repayment begins.

There are a number of different repayment plans available. You can find out more information about each at our Federal Student Loan Repayment Plans page. You will be given the option to select a plan at repayment. If you do not choose a plan, you will be placed in the Standard Repayment Plan and will make fixed monthly payment of at least $50 over 10 years.

Remember, borrow only what you need. Exhaust all federal student loan options before using private student loans. Be sure to compare private student loans to make sure you get the loan that’s right for you.