The Federal FFELP and Direct (Subsidized and Unsubsidized) Loan has interest rates well below average and special repayment schedules. The money you borrow must be used for school costs including tuition, fees, books, supplies, and room and board.
Subsidized Loans
Federal subsidized loans are low-interest loans made to students who demonstrate financial need. Undergraduates may borrow up to $3,500 for the first year, $4,500 for the second year and $5,500 for each remaining undergraduate year. Undergraduate students may borrow an aggregate limit of $23,000 in subsidized loans. Independent students may have additional eligibility under the unsubsidized loan.
Graduate and professional students may borrow up to $20,500 a year for a total of $138,500 (this includes undergraduate subsidized and unsubsidized loans). The interest rate is fixed if the loan is disbursed after July 1, 2006. Interest on subsidized loans is paid by the federal government while the borrower is enrolled in school at least half-time. Repayment begins six months after the student graduates, withdraws from school, or drops below half-time status. Repayment may take as long as 25 years based on the total outstanding balance.
Unsubsidized Loans
Students with unsubsidized loans are responsible for paying the interest on their unsubsidized loans while enrolled in school and during any grace period or deferment. This loan is not based on financial need. A student may opt to have the interest deferred and accrued or choose to pay the interest payments while enrolled. Students may borrow a combination of subsidized and unsubsidized loans but may not exceed the annual or maximum loan limits. Repayment terms are the same as for the federal subsidized loan.
Until July 1, 2008, the interest rate for unsubsidized loans was the same as for the subsidized loan. On or after July 1, 2008, subsidized loans for undergraduate students have a slightly lower rate than the unsubsidized.