What is a Federal Direct Loan?
A federal loan 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 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 Amount||Additional Unsubsidized Amount||Total 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
|Second Year Undergraduate
|Third Year+ Undergraduate
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 Study||Subsidized||Maximum Subsidized and Unsubsidized|
|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 2020-2021 interest rates for Federal Direct Loans disbursed after July 1, 2020:
|Loan Type||Student Grade Level||2020-2021 Fixed Interest Rate|
|Direct Subsidized Loans||Undergraduate||2.75%|
|Direct Unsubsidized Loans||Undergraduate||2.75%|
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.
- 1.059% for loans disbursed on or after October 1, 2019 and before October 1, 2020
- 1.057% for loans disbursed on or after October 1, 2020 and before October 1, 2021
Time Limitation on Direct Subsidized Loan Eligibility
In June 2012, President Obama signed into law the "Moving Ahead for Progress in the 21st Century Act" (MAP 21). This legislation permanently limits eligibility for Subsidized Loans to 150 percent of the published length of the student's academic program. Students who reach this limitation could continue to receive Unsubsidized Loans if he or she is otherwise eligible.
Additionally, once a borrower has reached the 150 percent limitation, his or her eligibility for an interest subsidy also ends for all outstanding subsidized loans that were disbursed on or after July 1, 2013. At that point, interest on those previously borrowed loans would begin to accrue and would be payable in the same manner as interest on unsubsidized loans.
These limitations will only affect students borrowing new loans on or after July 1, 2013. A first-time borrower is a borrower who has no outstanding balance of principal interest on a Federal Direct Loan or FFEL loan on July 1, 2013. Borrowers who had a loan balance which has been paid in full prior to receiving loans after July 1, 2013 becomes a first-time borrower.
Please click here for more information: Time Limitations on Direct Subsidized Loan Eligibility for First-Time Borrowers
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.
How Will Loan Funds be Sent to the LMU?
Provided that you have completed the online Federal Direct Loan Entrance Counseling session and the electronic Master Promissory Note (MPN), the loan will be sent in two disbursements; the first disbursement in the fall semester and the second disbursement in the spring. These funds arrive via Electronic Fund Transfer (EFT) and are applied directly to your LMU student account.
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.
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.