Federal law requires that new federal student loans whose first disbursement is after June 30, 2010, must come from the William D. Ford Direct Loan Program. Direct Loans are funded directly by the federal government. Formerly, schools could choose to participate in the Direct Loan Program or Federal Family Education Loan Program, under which loans were funded by private lenders. The following describes terms for new Direct Loans.

Direct Subsidized and Unsubsidized Loans

Eligibility
You may qualify for a Stafford loan if you:

• Are a U.S. citizen or eligible noncitizen.
• Have a high school diploma or its equivalent, or you have been determined to have the ability to benefit.
• Plan to enroll at least half time in a postsecondary institution that participates in the Direct Loan program.

Subsidized loans are available to students who meet certain financial need criteria. If you qualify for this type of loan, the federal government will pay the interest on the loan while you are in school, during a six-month grace period after you leave school or fall below half-time enrollment, and during periods when you are authorized to defer your loan payments.

Unsubsidized loans are available to students regardless of their financial need. You are responsible for the interest that accumulates on an unsubsidized loan while you attend school, during the grace period and during any periods when you are authorized to defer your loan payments. You have the option to pay the interest during these periods or postpone payment. If you postpone payment, the interest will be added to your principal balance. This addition of interest to your principal balance is known as capitalization.

Interest Rates and Fees
Effective for loans first disbursed July 1, 2010, through June 30, 2011, the fixed interest rates on Direct Subsidized loans to undergraduates are reduced to 4.5 percent.  Rates on all other new Direct Subsidized and Unsubsidized loans are fixed at 6.8 percent.  View the current interest rates on Direct Loans.

An origination fee will be deducted from the amount you borrow. For Direct Subsidized or Unsubsidized Loans  whose first disbursement is on or July 1, 2010 tthis fee is 1 percent. You also qualify for an upfront interest rebate of 0.5 percent, which you will retain as long as you make your first 12 monthly payments on time.

Loan Limits
Federal law specifies annual loan limits based on your year in college and your dependency status.

If you are a dependent undergraduate student, you can borrow up to the following amounts each year:

• $5,500 if you are a first-year student enrolled in a program of study that is at least a full academic year. (Up to $3,500 may be in subsidized loans.)
• $6,500 if you are a second-year student enrolled in a program of study that is at least a full academic year. (Up to $4,500 may be in subsidized loans.)
• $7,500 if you are enrolled in your third or subsequent year of a program of study that is at least a full academic year. (Up to $5,500 may be in subsidized loans.)

If you are an independent undergraduate student or a dependent student whose parents are unable to obtain a PLUS loan, you may be able to borrow up to the following amounts each year:

• $9,500 if you are a first-year student enrolled in a program of study that is at least a full academic year. (Up to $3,500 may be in subsidized loans.)
• $10,500 if you are a second-year student enrolled in a program of study that is at least a full academic year. (Up to $4,500 may be in subsidized loans.)
• $12,500 if you are enrolled in your third or subsequent year of a program of study that is at least a full academic year. (Up to $5,500 may be in subsidized loans.)

If you are a graduate or professional student, you may borrow up to the following amounts each year:

• $20,500. (Up to $8,500 may be in subsidized loans. Higher limits may apply to students pursuing certain health professions.)

In addition to annual loan limits, the total amount of all Stafford loans that you take out for all years of enrollment may not exceed the following aggregate limits:

• $31,000 for dependent undergraduate students.
• $57,500 for independent undergraduate students.
• $138,500 for graduate or professional students.
• $224,000 for graduate or professional students enrolled in approved health professions programs. 

Grace Period
You are entitled to a grace period of six months after you leave school or drop below half-time enrollment before you must begin repaying your loans.

Direct PLUS Loans

Eligibility
You may qualify to take out a PLUS loan if:

• You are the parent of a dependent undergraduate student.
• You are a graduate or professional student.
• You, or the dependent undergraduate student for whom you are taking out a PLUS loan, are enrolled at least half time at a postsecondary institution that participates in the Direct Loan program.
• You — and in the case of a PLUS loan taken out by a parent, the dependent child for whom you are obtaining the loan — are U.S. citizens or eligible noncitizens.
• To qualify to borrow a PLUS loan, a parent must be the student’s birth parent, adoptive parent or stepparent, if the stepparent’s income and assets were taken into account when calculating the student’s Expected Family Contribution.
• The parent applying for the loan is responsible for repaying the loan.
• Parents may take out a PLUS loan for more than one dependent student at a time, although a separate Master Promissory Note is required for each student.
• PLUS loans are available without regard to financial need.
• To qualify for a PLUS loan your credit will be checked to verify that you do not have an adverse credit history.

Interest Rates and Fees
New Direct PLUS loans carry a fixed interest rate of 7.9 percent. An origination fee of 4 percent of the loan amount will be deducted from your PLUS loan proceeds.

Loan Limits
Parents and graduate and professional students may borrow up to the student’s full cost of attendance, less any other financial aid.

Post-Enrollment Deferment
For PLUS loans first disbursed on or after July 1, 2008, parents may defer principal payments on their PLUS loans for up to six months after the parent-borrower or the student for whose benefit the loan was issued drops to less than half-time enrollment.  Payments on PLUS loans to graduate and professional students also qualify for six-month post-enrollment deferment after the student no longer is enrolled at least least half time.

Direct Consolidation Loans

Learn more about Direct Consolidation loans.