Federal Direct Loan

What is a Federal Direct Loan?

A loan funded by the federal government to help pay for your education. A federal student loan is borrowed money you must repay with interest. Eligibility for the variety of loans available may be determined by need and creditworthiness. It is awarded to all students who apply for financial aid and who are U.S. Citizens, permanent residents, or eligible non-citizens. Students must be enrolled at least half-time in a degree-seeking program to be eligible for the Federal Direct Loan.

Subsidized vs. Unsubsidized Federal Direct Loans

If you are offered a Subsidized loan, it means the federal government pays the interest that accrues on your loan while you are enrolled at least half-time. After you graduate, withdraw, or cease to be enrolled at least half-time, you are responsible for the interest and must begin to make payments after a 6-month grace period. Eligibility for the Direct Subsidized Loan is determined based on financial need.

If you are offered an Unsubsidized loan, it means that you are responsible for the interest from the time the loan is disbursed. While you are enrolled at least half-time you may defer interest payments but the interest will capitalize. Capitalization means that the interest is added to the loan balance, increasing the loan's size and cost. To reduce the total cost of your loan, consider making in-school interest-only payments.  If you would like to make in-school interest payments, please contact your loan servicer.

How Do I Apply?

Each academic year, after you have completed the FAFSA, you will receive a Financial Aid Award Letter that includes a Federal Direct Loan offer. To accept or decline the offered awards, you will log in to your PROWL account, through MyLMU, under the "Systems Login" drop-down menu.

How Much am I Eligible to Receive in Federal Direct Loans?

Based on the academic level and federal dependency status, students may borrow up to the amounts listed in the table below on an annual basis. Please note Subsidized Loans are limited by your financial need and Unsubsidized Loans are limited by your cost of attendance less other aid received.

Annual Undergraduate Federal Direct Loan Limits:

 Base Subsidized AmountAdditional Unsubsidized AmountTotal Loan Limits
Independent Students and Dependent Students Subsidized Loan Limits
Dependent Undergraduates (except students whose parents are denied PLUS Loans)
Total Dependent Undergraduate Students Loan Limits
Total Independent Undergraduate Students and Dependent Students whose parents are denied PLUS loans
First Year Undergraduate
(0-29 Units)
$3,500 $2,000 $5,500 $9,500
Second Year Undergraduate
(30-59 Units)
$4,500 $2,000 $6,500 $10,500
Third Year+ Undergraduate
(60+ Units)
$5,500 $2,000 $7,500 $12,500

Aggregate Federal Direct Loan Limits

Based on the academic level and federal dependency status, students may borrow up to the amounts listed in the table below for their entire academic careers.

Dependency and Program of StudySubsidizedMaximum Subsidized and Unsubsidized
Dependent Undergraduates $23,000 $31,000
Independent Undergraduates $23,000 $57,500
Graduate/Professional Students $65,500 $138,500
Certain Health Professional Students (MD, DDS, MHA, MPH) $65,500 $224,000

What is the Interest Rate?

The Bipartisan Student Loan Certainty Act of 2013 sets the annual interest rate on Federal Direct Loans issued to undergraduate students at the rate on high-yield 10-year Treasury notes plus 2.05%, but caps that rate at 8.25%. As a result, rates are expected to change annually. Students that borrow Federal Direct Loan(s) over multiple years will have a set of fixed-rate loans, each with a different interest rate. 

  • Current 2023-2024 interest rates for Federal Direct Loans disbursed after July 1, 2023:
Loan TypeStudent Grade Level2023-2024 Fixed Interest Rate
Direct Subsidized Loans Undergraduate 5.50%
Direct Unsubsidized Loans Undergraduate 5.50%

What are the Fees?

Federal Direct Loans require origination fees that are deducted from each disbursement. The net disbursement is the gross loan amount, less origination fees.

  • 1.057% for loans disbursed on or after October 1, 2020 and before October 1, 2023


What are the next steps after accepting my loan offer?

After accepting your Federal Direct Loan(s) in PROWL, you must complete the following requirements through Federal Student Aid:

We will report information about your loan to nationwide consumer reporting agencies (credit bureaus) and the National Student Loan Data System (NSLDS) on a regular basis.  This information will include the disbursement dates, amount, and repayment status of your loan (for example, whether you are current or delinquent in making payments).  If you default on a loan, we will report this to nationwide consumer reporting agencies.  Your loan will be identified as an education loan.  Schools may access information in NSLDS for specific purposes that we authorize.


How Will Loan Funds be Sent to LMU?

When all loan requirements are complete, funds arrive via Electronic Fund Transfer (EFT) and are applied directly to your LMU student account in two even disbursements. The first disbursement in the fall semester and the second disbursement in the spring semester.

Federal Direct Loan Proration

Federal regulations require the maximum annual Federal Direct Loan amount an undergraduate student may borrow to be prorated in certain situations where:

  • A borrower is enrolled in a program that is shorter than a full academic year.
  • A borrower is enrolled in a program that is one academic year or more in length but is in a remaining period of study that is shorter than a full academic year.

Loan proration is calculated based on the total number of units the student enrolls in for the year in relation to a full-time, full-year student (enrolled 24 units for the year).
Note: PLUS Loans and loans for graduate or professional students are not subject to proration.

When Do I Pay My Loans Back?

Repayment begins after your grace period, which is 6 months after you graduate, withdraw, take a leave of absence, or cease to be enrolled at least half-time. Under a standard repayment option, you have 10 years to repay the loan. Various repayment options are also available for more payment flexibility. Information on Federal Direct Loan repayment plans and repayment estimators are available at Federal Student Aid.  Additionally, there is no prepayment penalty, so you may pay the loan earlier if you wish.