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Federal Direct Loan Program

Federal Direct Loan Program

Federal Direct Loan Program

The Federal Direct Student Loan Program provides low-interest loans to students to help pay their costs of postsecondary education. The U.S. Department of Education acts as the lender and the student (or parent) is the borrower. 

Eligibility Requirements

Students enrolled at least six (6) units in an eligible program of study, who:

  • Are U.S. citizens or eligible non-citizens
  • Have completed the FAFSA
  • Have completed Loan Entrance Counseling and Mastery Promissory Note
  • Are not in default on any federal educational loans
  • Are maintaining Satisfactory Academic Progress

Types of Federal Direct Loans

There are two types of Direct Loans; subsidized and unsubsidized.

A subsidized loan is awarded on the basis of financial need. Student borrowers are not charged interest during periods of at least half-time enrollment, grace periods, or authorized periods of deferment. The federal government "subsidizes" the interest during these periods.

An unsubsidized loan is not awarded on the basis of need. Student borrowers are charged interest from the time the loan is disbursed until it is paid in full. If the interest is allowed to accumulate, it will be capitalized; that is, the interest will be added to the principal amount of the loan and additional interest will be based upon the higher amount. This increases the amount to repay. A borrower who chooses to pay the interest as it accumulates will repay less in the long run.

Loan limits: Maximum loan limits for eligible students are:

 

Dependent Student

Subsidized

Unsubsidized

Total

First Year

$3,500

$2,000

$5,500

Second Year

$4,500

$2,000

$6,500

 

Independent Student

Subsidized

Unsubsidized

Total

First Year

$3,500

$6,000

$9,500

Second Year

$4,500

$6,000

$10,500

*Definition of first year student: 0-30 credit hours recorded on the Middlesex County College transcript.

*Definition of second year student: 31 or more credit hours recorded on the Middlesex County College transcript.

Aggregate loan limits: The aggregate unpaid principal amount of all Direct Loans may not exceed:

  • $31,000 - dependent undergraduate students (only $23,000 of this amount may be in subsidized loans).
  • $57,500 - independent undergraduate students (only $23,000 of this amount may be in subsidized loans).

    *First Time Borrowers as of July 1, 2013 will be subjected to the 150% time limitation on his/her Direct Subsidized Loan. First time borrowers, will have a limit placed on the maximum period of time (measured in academic years) one can receive Direct Subsidized loans. The maximum eligibility period will be based on the length of the eligible academic program.

    Example: 2-year Associate Degree Program, the maximum period for which you can receive Direct Subsidized Loans is 3 years (150% of 2 years = 3 years).

    Initial Grace Period: 6 months

    During the grace period on a subsidized loan, no principal and no interest is charged. During the grace period on an unsubsidized loan, no principal is due, but interest accrues; borrowers may either pay the interest or allow it to be capitalized.

    Repayment period begins: Six months after graduating, leaving school, or dropping below half-time enrollment.

    Direct PLUS Loans for Parents

  • Allows parents to borrow money to pay for a dependent student's college education
  • Plus Loans are in the parent's name, making them responsible for the loan, not the student
  • Requires a credit check, to determine credit worthiness
  • Student is required to fill out a FAFSA

    Interest Rate Information

    Interest rates for Federal Direct Loans are established by Congress each year. Please refer to the Federal Student Aid website for up to date information pertaining to interests rates for the Federal Direct Loan Program at http://studentaid.ed.gov/types/loans/interest-rates.

    How to Apply

  1. Complete the FAFSA (www.fafsa.gov)
  2. Submit all requested supporting documentation to the Office of Financial Aid
  3. Complete Loan Entrance Counseling online via www.StudentLoans.gov
  4. Complete the Mastery Promissory Note online via www.StudentLoans.gov
  5. Select “Request a New Loan” from your Financial Aid Self Service and complete all steps. If you are applying for a Parent Plus loan you must indicate so in the Comments on the Request a New Loan page and submit Federal Direct PLUS Loan Request Form
  6. After your loan is approved, view and accept federal direct loan award on Financial Aid Self-Service

For FAQs, please follow this link: https://studentloans.gov/myDirectLoan/faqs.action

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