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 Direct Loans

Direct Subsidized and Unsubsidized Loans (also called Stafford Loans) are part of the Federal Direct Loan Program, which are offered through the U.S. Department of Education. Students are considered for these when they apply for financial aid by completing the FAFSA (Free Application for Federal Student Aid).  You will be required to complete Direct Loan Program requirements in order to receive any Direct Loan funds

If you are an eligible undergraduate awarded a Subsidized Direct Loan or a graduate or professional student awarded an Unsubsidized Direct Loan, it will appear on your financial aid Award Notice. (Some undergraduate students may not receive Unsubsidized Direct Loans in their initial financial aid package. See our Smart Borrowing page for information).

Families who are not eligible for Direct Loans or who need additional resources to cover college costs may want to apply separately for a supplemental loan through the federal government or a private lender. Alternatively, the U-M Payment Plan helps some families avoid borrowing supplemental funds.

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DIFFERENCES BETWEEN SUBSIDIZED AND UNSUBSIDIZED LOANS

Direct Subsidized Loans are offered to undergraduate students with financial need. They have a low fixed interest rate and do not accrue interest while the student is enrolled at least half-time in a degree program. Students do not make payments until six months after graduating or drop below half-time. Direct Subsidized Loans are available only to undergraduate borrowers.

Direct Unsubsidized Loans are available to undergraduate and graduate students with or without financial need. These loans accrue interest while the student is in school and during deferments and grace periods. Students may defer interest payments until after they graduate, but doing so will result in a higher loan payment over the life of the loan.

Interest rates on these loans change each June with changes becoming effective on July 1. Loan origination fees are adjusted each fall due to federal sequestration legislation. More information about both loans is included in the Eligibility, Loan Terms, and Requirements table below.

ELIGIBILITY, LOAN TERMS, AND REQUIREMENTS

  DIRECT SUBSIDIZED LOAN

Eligibility Criteria Loan Terms Additional Information/Requirements

• Need-based

• Must be enrolled in an undergraduate degree program at least half-time

• Borrower must be a U.S. citizen or eligible noncitizen

• Students borrowing after June 30, 2013 have time limits on how long they can receive  loans.

• 4.29% fixed interest rate  (effective July 1, 2015;  Rates change each July 1) 

• 1.073% origination fee (effective Oct. 1, 2014; 1.068% for loans originated Oct. 1, 2015. Fees change in the fall) 

• Repayment deferred and no interest while enrolled at least half-time

• Can be consolidated with other federal loans

• Limited deferment provisions; see "Your Federal Student Loans: Learn the Basics and Manage Your Debt" and "Cancellation/Deferment Options for Teachers" on the Dept. of Education website

• First-time Direct Loan borrowers must complete an online Direct Loan Master Promissory Note before receiving their loan funds

• First-time borrowers at U-M must complete Direct Loan Entrance Counseling.

• Exit Counseling required when students graduate or drop below half-time

• More information from the U.S. Department of Education

There is a separate process for some undergraduates. Visit the Smart Borrowing page

 DIRECT UNSUBSIDIZED LOAN

Eligibility Criteria Loan Terms Additional Information/Requirements

• Non-need-based

• Student must be enrolled at least half-time in a degree program

• Borrower must be a U.S. citizen or eligible noncitizen

• 4.29% fixed interest rate for undergraduates  (effective July 1, 2015; Rates change each July 1) 

• 5.84% fixed interest rate for graduate students 
effective July 1, 2015; Rates change each July 1)

• 1.073% origination fee (effective Oct. 1, 2014; 1.068% for loans originated Oct. 1, 2015. Fees change in the fall) 

• Interest accrues immediately; paid periodically or capitalized

• Principal repayment deferred while enrolled at least half-time

• Can be consolidated with other federal loans

• Limited deferment provisions; see "Your Federal Student Loans: Learn the Basics and Manage Your Debt" and "Cancellation/Deferment Options for Teachers" on the Dept. of Education website

• First-time Direct Loan borrowers must complete an online Direct Loan Master Promissory Note before receiving their loan funds

• First-time borrowers at U-M must complete Direct Loan Entrance Counseling

• Exit Counseling is required when students graduate or drop below half-time

• More information is available from the U.S. Department of Education

There is a separate process for some undergraduates. Visit the Smart Borrowing page

 

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BORROWING LIMITS

Your Award Notice shows how much in Direct Subsidized or Unsubsidized Loans you may borrow. View your aid awards on Wolverine Access by selecting Financial Aid > Awards. You may also view the amount borrowed to date through all loan programs (select Loans > View Student Loan Summary).

The amount of Federal Direct Loans you may borrow by year in school and the total amount you may borrow are shown in the table below. These amounts are determined by the federal government.

Direct Subsidized Loan Time Limitation

Direct Loan subsidies are limited for first-time and new Federal Direct Subsidized Loan borrowers (effective July 1, 2013).  Students who have exceeded 150 percent of the published length of their program will be:

  • ineligible for additional Direct Subsidized Loans (though you may borrow a Direct Unsubsidized Loan) and
  • responsible for interest on all loans accruing after exceeding the 150 percent limit.

New borrowers are students with no outstanding federal loan principal balance when taking out a new loan (transferring between programs does not reset loan eligibility). Interest not paid will be capitalized, effectively increasing your loan principal upon repayment. For more information, visit the Federal Student Aid website

U-M Students approaching graduation:

If you are enrolled less than full-time during your final term, you may not be eligible to receive the full, annual maximum federal loan limit due to proration rules. Consult with an aid officer about your specific situation.

 BORROWING LIMITS FOR DIRECT LOANS

YEAR 1 YEAR 2 YEAR 3

Subsidized Base

Subsidized Base Subsidized Base

FOR ALL UNDERGRADUATES:
$3,500

FOR ALL UNDERGRADUATES:
$4,500

FOR ALL UNDERGRADUATES:
$5,500

FOR GRADUATE STUDENTS:
N/A

FOR GRADUATE STUDENTS:
N/A

FOR GRADUATE STUDENTS:
N/A

Additional Unsub Loan Additional Unsub Loan Additional Unsub Loan
FOR DEPENDENT UNDERGRADS*:
$2,000 ($5,500 total)
 
FOR DEPENDENT UNDERGRADS*:
$2,000 ($6,500 total)
FOR DEPENDENT UNDERGRADS*:
$2,000 ($7,500 total)
FOR INDEPENDENT UNDERGRADS**:
$6,000 ($9,500 total)
FOR INDEPENDENT UNDERGRADS**:
$6,000 ($10,500 total)
FOR INDEPENDENT UNDERGRADS**:
$6,000 ($12,500 total)
FOR GRADUATE STUDENTS:
$20,500
FOR GRADUATE STUDENTS:
$20,500
FOR GRADUATE STUDENTS:
$20,500

Subsidized Loan Debt Limit

  • FOR ALL UNDERGRADUATES: $23,000
  • FOR GRADUATE STUDENTS: $65,500 (limit includes Direct Loans received as an undergraduate)

Total Loan Debt Limit (Subsidized & Unsubsidized)

  • FOR DEPENDENT UNDERGRADS*: $31,000 (only $23,000 may be subsidized)
  • FOR INDEPENDENT UNDERGRADS**: $57,500 (only $23,000  may be subsidized)
  • FOR GRADUATE STUDENTS: $138,500 ($65,500 may be subsidized; limit includes undergraduate Direct Loans)

 ** Excluding students whose parents are unable to obtain a PLUS Loan
*** Or dependent students whose parents are unable to obtain a PLUS Loan

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COMPLETING YOUR LOAN REQUIREMENTS

If you have a Direct Subsidized or Unsubsidized Loan, you will be required to complete three Direct Loan Program requirements: sign a Master Promissory Note (or MPN), complete entrance counseling, and complete exit counseling. Visit this page for details about completing your MPN.

Entrance  & Exit Counseling

Entrance Counseling: If you are a first-time Direct Loan borrower at U-M, you must complete Direct Loan Entrance Counseling on the U.S. Department of Education's StudentLoans.gov website under the "Complete Counseling" link. This interactive counseling session and quiz helps students develop budgets for managing educational expenses and also understand their loan responsibilities. You must complete the counseling before your loan funds can be disbursed to you.  (Note: Entrance Counseling is not the same as the Financial Awareness Counseling Tool on the same site. Taking a demo counseling session will not fulfill your requirement.)

Exit Counseling: This is required for Direct Loan student borrowers who are graduating or dropping below half-time enrollment. This counseling session helps borrowers understand their rights and responsibilities in repayment and helps them choose a repayment plan. You must use your Department of Education FSA ID to access this counseling session. To complete the Exit Counseling session, go to the StudentLoans.gov website. Click the "Complete Counseling" link and follow the link to "Exit Counseling" to begin.   (Note: Exit Counseling is not the same as the Financial Awareness Counseling Tool on the same site. Taking a demo counseling session will not fulfill your requirement.)

RECEIVING YOUR LOAN FUNDS

You must have signed all of your loan documents and be enrolled at least half-time to receive your loan funds. See Disbursement of Your Aid Funds for information about how your loan will be paid to you. Each time you borrow through the Direct Loan program, you will automatically receive your loan funds unless you decline them (see How to Accept, Decline, or Reduce Your Awards).

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