• Direct Subsidized & Unsubsidized (Stafford) Loans
Direct Subsidized and Unsubsidized Loans (also known as Stafford Loans) are part of the federal Direct Loan Program, which offers low-interest loans to students to help them pay for college. They are called Direct Loans because they are made directly from the U.S. Department of Education, without going through a bank or other lender.
Students who apply for financial aid are automatically considered for Direct Subsidized and Unsubsidized Loans. If you are awarded one of these loans, it will appear on your financial aid award notice. You will be required to complete the Direct Loan Program requirements described on this page in order to receive your loan funds.
Direct Subsidized Stafford Loans are offered to 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. In addition, students do not have to make payments until six months after they graduate or drop below half-time. Subsidized loans are also offered to both undergraduate and graduate students, but the interest rate is lower for undergraduates than for graduate students.
(Note: The Federal Budget Control Act signed into law on Aug. 2, 2011 eliminates the in-school interest subsidy on federal loans for graduate and professional students effective July 1, 2012. All Federal Direct Stafford Loans available for these students after July 1, 2012 will be unsubsidized.)
Direct Unsubsidized Stafford Loans are awarded to students with or without financial need. Unlike Direct Subsidized Loans, these loans do accrue interest while the student is in school, even 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. After graduating or dropping below half-time, students with Unsubsidized Direct Loans also have a six-month grace period before repayment of the loan begins.
More information about both loans is included in the Eligibility, Loan Terms, and Requirements table below.
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The terms of the Direct Subsidized and Unsubsidized Stafford Loans are included in the table below:
| Eligibility Criteria | Loan Terms | Additional Information/Requirements |
| • DIRECT SUBSIDIZED STAFFORD LOAN |
| • Need-based • Student must be enrolled at least half-time in a degree program • Borrower must be a U.S. citizen or eligible noncitizen | • 3.4% fixed interest rate after July 1, 2011, for undergraduate loan (6.8% for graduate student loan) • 1.0% origination fee, with a 0.5% rebate if first 12 monthly payments are made on time. Because of this fee, the actual Direct Loan amount applied to your University account will be lower than the amount listed on your award notice. • Repayment is deferred and there is no interest while the student is enrolled at least half-time. • See Borrowing Limits for Direct Stafford Loans below • Direct Loans 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 • Students accepting Direct Loan funds for the first time must complete an online Direct Loan Master Promissory Note before receiving their loan funds. • First-year students who are first-time borrowers 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 |
| • DIRECT UNSUBSIDIZED STAFFORD LOAN |
| • 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 | • 6.8% fixed interest rate • 1.0% origination fee, with a 0.5% rebate if first 12 monthly payments are made on time. Because of this fee, the actual Direct Loan amount applied to your University account will be lower than that listed on your award notice • Interest begins accruing immediately; may be paid periodically or capitalized (see promissory note) • Repayment of principal is deferred while the student is enrolled at least half-time. • See Borrowing Limits for Direct Stafford Loans below • Direct Loans 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 • Students accepting Direct Loan funds for the first time must complete an online Direct Loan Master Promissory Note (see below) before receiving their loan funds. • First-year students who are first-time borrowers 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 |
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Your financial aid award notice shows the amount of Direct Subsidized or Unsubsidized Loan funds you may borrow for the current award period. If you have already received a University of Michigan uniqname and password, you can view your financial aid awards on Wolverine Access (select Financial Aid > Awards). Wolverine Access also allows you to see the cumulative amount you have borrowed to date through all loan programs (select Loans > View Student Loan Summary).
You can also use Wolverine Access to determine what your loan payments will be for all loan programs (Direct Stafford, Perkins, Health Professions, Nursing, and private loans) once you graduate or drop below half-time enrollment. See Repaying Your Student Loans for more information.
The amount of Direct Subsidized or Unsubsidized Loan 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.
— Borrowing Limits for Direct Stafford Loans —
| | Subsidized Loan Base Amount | Additional Unsubsidized Loan Amount
(as of July 1, 2008) |
| For All Undergraduates | For Graduate Students | For Dependent Undergraduates* | For Independent Undergraduates** | For Graduate Students |
| First Year | $3,500 | $8,500 | $2,000 ($5,500 total) | $6,000 ($9,500 total) | $12,000 |
| Second Year | $4,500 | $8,500 | $2,000 ($6,500 total) | $6,000 ($10,500 total) | $12,000 |
| Third Year and Beyond | $5,500 | $8,500 | $2,000 ($7,500 total) | $7,000 ($12,500 total) | $12,000 |
| | Subsidized Loan Debt Limit | Total Loan Debt Limit (Subsidized + Unsubsidized) |
| $23,000 | $65,500; limit includes Direct Loans received as an undergraduate | $31,000 (only $23,000 can be subsidized) | $57,500 (only $23,000 can be Subsidized Loan) | $138,500 (only $65,500 can be Subsidized Loan); limit includes Direct Loans received as an undergraduate |
*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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If you have a Direct Subsidized or Unsubsidized Stafford Loan, you will be required to complete three Direct Loan Program requirements: sign a master promissory note, complete entrance counseling, and complete exit counseling.
• MASTER PROMISSORY NOTE
Parents and students who are borrowing for the first time through the Direct Loan Program must complete a Direct Loan Master Promissory Note (MPN) in order to receive their loan funds. The MPN authorizes the University of Michigan to credit the Direct Loan funds to the U-M student's account.
Once you complete the MPN, you will not have to complete another Direct Loan MPN for the duration of your University of Michigan education. (If you sign a Master Promissory Note one year and do not want additional loans, you must decline the loan the following year or it will be paid out to you.) Also, If you have accepted other federal loans (e.g., Perkins, Health Professions, or Nursing Loans), you will need to complete separate promissory notes for those loans. The Office of Financial Aid will notify you of how to complete them.
How to Complete an MPN
In order to receive your Direct Loan funds in a timely manner, complete the MPN online at StudentLoans.gov. When you complete the MPN online, you receive a confirmation number immediately so that you know immediately that the federal government (the lender) has received and accepted the MPN.
| Before completing the MPN, be sure you have collected this information: - A Department of Education PIN Number: You will need to have a PIN number issued from the U.S. Department of Education to complete the MPN on the web. If you do not already have a PIN number, you should apply for one immediately. It takes up to 3 business days to receive your PIN information by email and 7-10 business days to receive it by regular mail. If you already have a PIN number, but you cannot locate it, click here. (Note that your PIN is NOT the same as the DRN number shown on your Student Aid Report.)
- Your Social Security Number
- Your permanent address and telephone number
- Your driver's license number
- Names, addresses, and phone numbers for two references
|
To complete your MPN online:
Go to StudentLoans.gov
Sign in under Manage My Direct Loan. (If you are a new Direct Loan borrower, follow the instructions for applying for a PIN.)
After signing in, select Complete MPN and follow the instructions.
Be sure to select the correct name and address for the University of Michigan:
University of Michigan-Ann Arbor
503 Thompson Street
Ann Arbor, MI 48109-1340 - G02325
Review the What You Need and What to Expect sections of the website (under the Learn More menu). If you need technical assistance, click on Contact Us.
If you prefer, you may complete a paper copy of the MPN instead, but there are more steps involved before your Direct Loan can be approved and disbursed, which could cause delays in receiving your loan funds. To complete a paper MPN, sign in at StudentLoans.gov; then select Complete MPN to complete the MPN electronically or Print MPN to print, complete, and mail a paper MPN.
• ENTRANCE AND EXIT COUNSELING
Entrance Counseling
If you are a first-year undergraduate or graduate student and a first-time Direct Loan borrower, you must complete Direct Loan Entrance Counseling on the U.S. Department of Education's StudentLoans.gov website. This interactive counseling session will help you understand your loan responsibilities. The counseling session and quiz will help students develop a budget for managing educational expenses and also understand their loan responsibilities. You must complete the counseling before your loan funds can be disbursed to you.
Exit Counseling
Direct Loan Exit Counseling 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 PIN to access this counseling session. To complete the Exit Counseling session, go to the National Student Loan Data System (NSLDS) website. Click the Exit Counseling link and follow the instructions.
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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