William D. Ford Federal Direct Loan Program
William D. Ford Federal Direct Loans (Direct Loans) are guaranteed federal student loan programs that include federal subsidized and unsubsidized loans and the federal PLUS (parent loan) programs. Direct Loans are awarded as part of the financial aid package if the student has requested loans on the FAFSA. First-time borrowers must complete a loan entrance interview and sign a loan master promissory note. First-time borrowers must also wait 30 days after the beginning of the semester before funds are available.
First Year Undergraduate, Dependent Student maximum eligibility for combined subsidized and unsubsidized loans is $3,500.
First Year Undergraduate, Independent Student maximum eligibility for combined subsidized and unsubsidized loans is $7,500.
Second Year Undergraduate, Dependent Student maximum eligibility for combined subsidized and unsubsidized loans is $4,500.
Second Year Undergraduate, Independent Student maximum eligibility for combined subsidized and unsubsidized loans is $8,500.
All students are eligible for $2,000 in an unsubsidized loan, which is in addition to the above amounts at each grade level.
The maximum amounts may be awarded as a combination of subsidized and unsubsidized federal loans. Dependent students whose parents are unable to borrow a Federal PLUS loan may borrow an additional $4,000 per year in unsubsidized loans. All students must pay the interest on the portion that is unsubsidized while in school and during any grace or in-school deferment periods, unless they elect to have the interest added to principal (capitalization). Having the interest capitalized will mean larger payments when repayment begins.
Federal Direct Loans have an origination fee of 2% with a rebate of 1.5% that will be deducted from the loan amount. The effective loan fee is 0.5% but is subject to change. The interest rate for 2009-10 is fixed for all subsidized loans at 5.6% with a cap of 8.25%. Unsubsidized loans have a fixed interest rate of 6.8%, capped at 8.25%. Loan principal and interest payments do not begin until six months after the student graduates or ceases to be enrolled at least half-time, and, under the standard repayment plan, must be completed no later than 10 years from that date (excluding periods of deferment and forbearance).
The Federal PLUS program allows parents of dependent undergraduates to borrow federal loan money to help pay the cost of their children's college expenses. Eligible parents may borrow amounts not to exceed the difference between the student's cost of attendance and all other financial aid the student will receive. The Federal PLUS Loan interest rate is fixed at 7.9%, with a cap of 9%. Federal PLUS borrowers are subject to a credit check and the repayment period for PLUS Loans begins sixty days after the second loan disbursement with a standard repayment period of 10 years.