Direct Student Loan

Direct Student Loan

Direct student loans serve as a funding source for borrowers to pay for their higher education. The loan program is hosted by the U.S. Department of Education and features attractive interest rates and repayment options.

Subsidized Direct student loans are the best loans available to students. Based on financial need, the government pays the loan’s interest while the borrower is in school and during the first six months after the student exits school (also known as the grace period). The government also subsidizes the interest if the borrower requests and qualifies for a deferment during loan repayment.

Direct student loans are also available in unsubsidized form. This type of loan is for students who don’t demonstrate financial need but require assistance paying for their education expenses. Unsubsidized loans are the exact opposite of subsidized. The borrower is responsible for interest accrued during their studies, grace period, and any other deferments on the loan. As interest accumulates, the borrower has the option to pay it off. In the long run, this helps to reduce the student loan debt accrued while in school. If the interest is not paid off during deferments or grace periods, it will be capitalized. In other words, it is tagged onto the loan’s principal balance and ultimately increases the amount the borrower must repay. Additionally, interest is charged on what was once interest.

Students can borrower both subsidized and unsubsidized Direct student loans. The main requirement is that combined, the loans do not exceed the maximum borrowing limits. The borrowing limits are as follows:

Dependent/Undergraduate Students
First year - $3,500
Second year - $4,500
Third year and beyond - $5,500

Independent/Undergraduate Students
First year – $7,500 (with no more than $3,500 subsidized)
Second year – $8,500 (with no more than $4,500 subsidized)
Third year and beyond - $10,500 (with no more than $5,500 subsidized)

Graduate Students
Per year - $20,500 (with no more than $5,500 subsidized)