What is the difference between a Direct Subsidized and a Direct Unsubsidized Loan?

The Federal Government pays the interest for Direct Subsidized Loans while the student is in college or while the loan is in deferment. Interest begins accruing for Direct Unsubsidized Loans as soon as the loan is taken out.

How much can I borrow?

For subsidized loans, the maximum is $3,500 for freshmen, $4,500 for sophomores, and $5,500 for juniors and seniors. Undergraduates who are not eligible for Direct Subsidized Loans may borrow an identical amount in a Direct Unsubsidized Loan. Undergraduates may also borrow an additional $2,000 in a Direct Unsubsidized Loan after they have exhausted their initial subsidized/unsubsidized eligibility. Graduate students may borrow a Direct Unsubsidized Loan for up to $20,500.

Undergraduates may not borrow subsidized loans in excess of their financial need (the difference between the cost of attending Drew and our estimate of your contribution to you or your child’s education). No student may borrow unsubsidized loans in excess of his/her cost of attendance.

What are the interest rates?

2014-2015 Direct Loan Interest Rates and Fees
(for loans with a first disbursement date on or after October 1, 2014)

Direct Loan Program Interest Rate Fee*
Subsidized Federal Direct Loan
(for undergraduates only)
4.66% 1.073%
Unsubsidized Federal Direct Loan
(undergraduate students)
4.66% 1.073%
Unsubsidized Federal Direct Loan
(graduate students)
6.21% 1.073%

*Direct Loan Fee: The Subsidized and Unsubsidized Federal Direct Stafford Loans have a 1.073% origination fee which will be deducted from the gross amount of the loan borrowed.

When are the payments due?

Repayment begins six months after leaving college, payments are made monthly, and you have ten years to repay the loan.

New 150% Rule for Federal Direct Subsidized Loans

Maximum eligibility period to receive Federal Direct Subsidized Loans

There is a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. In general, you may not receive Direct Subsidized Loans for more than 150% of the published length of your program. This is called your “maximum eligibility period”. You can usually find the published length of any program of study in your school’s catalog.

For a Student enrolled in a 4-year bachelor’s degree program, the maximum period for which he/she can receive Direct Subsidized Loans is 6 years (150% of 4 years = 6 years).

A student’s maximum eligibility period is based on the published length of your current program. This means that your maximum eligibility period can change if you change programs. Also, if you receive Direct Subsidized Loans for one program and then change to another program, the Direct Subsidized Loans you received for the earlier program will generally count against your new maximum eligibility period.

Periods that count against your maximum eligibility period

The periods of time that count against a student’s maximum eligibility period are periods of enrollment (also known as “loan periods”) for which he/she received Direct Subsidized Loans.

For example, if a full-time student receives a Direct Subsidized Loan that covers the fall and spring semesters (a full academic year), this will count as one year against the maximum eligibility period.

If a student receives a Direct Subsidized Loan for a period of enrollment that is shorter than a full academic year, the period that counts against his/her maximum usage period will generally be reduced accordingly.

For example, if a student is a full-time student and receives a Direct Subsidized Loan that covers the fall semester but not the spring semester, this will count as one-half of a year against his/her maximum eligibility period.

Loss of eligibility for additional Direct Subsidized Loans and becoming responsible for paying interest on Direct Subsidized Loans

After a student has received Direct Subsidized Loans for his/her maximum eligibility period, the student is no longer eligible to receive additional Direct Subsidized Loans. However, a student may continue to receive Direct Unsubsidized Loans.

In addition, if a student continues to be enrolled in any undergraduate program after he/she has received Direct Subsidized Loans for his/her maximum eligibility period, the Department of Education will no longer (with certain exceptions) pay the interest that accrues on your Direct Subsidized Loans for periods when they would normally would have done so.

The chart below provides examples of these circumstances.

Do I become responsible for paying the interest that accrues on my Direct Subsidized Loans because . . . Yes No
I am no longer eligible for Direct Subsidized Loans and I stay enrolled in my current program? X
I am no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate program that is the same length or shorter than my prior program? X
I transferred into the shorter program and lost eligibility for Direct Subsidized Loans because I have received Direct Subsidized loans for a period that equals or exceeds my new, lower maximum eligibility period, which is based on the length of the new program? X
I was no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate program that is longer than my prior program? X
I lose eligibility for Direct Subsidized Loans and immediately withdraw from my program? X
I graduated from my prior program prior to or upon meeting the 150% limit, and enroll in an undergraduate program that is the same length or shorter than my prior program? X
I enroll in a graduate or professional program? X
I enroll in preparatory coursework that I am required to complete to enroll in a graduate or professional program? X
I enroll in a teacher certification program (where my school does not award an academic credential)? X

How do I apply?

  • Fill out a FAFSA and indicate you are interested in a Direct Student Loan. Your FAFSA is your loan application.
  • Once Drew receives your FAFSA and any other required financial aid forms, your eligibility for Direct loan funds will be determined.
  • You will be sent an email indicating that your Financial Aid Awards can be viewed on your Treehouse Account. Log on and accept your awards.
  • Once you have accepted your awards, a link to studentloans.gov will appear on your Treehouse Account. This website will provide you with instructions on how to electronically fill out your Master Promissory Note and Entrance Interview. Students only need to fill this form out once in ten years, so they will not be required to complete it again while at Drew. After you have filled out a Master Promissory Note, in subsequent years, you only need to continue filling out the FAFSA form and accepting your awards on Treehouse to receive Federal Direct loan funds.
  • The Department of Education will transmit your funds electronically to Drew’s business office, who will then credit the funds to your account.
  • If you have a credit on your account after receiving loan funds, and are not on any payment plan, the Business Office can usually mail you a check for the credit on your account 7-10 days after you call them with your request (973-408-3114).