Updated: Apr 21, 2021
If you have federal student loans, there is a good chance that some of them are Direct Loans, previously referred to as Direct Stafford Loans — the most common type of federal student loans.
Direct Loans are offered by the US Department of Education. They are available to undergraduate, graduate and professional students enrolled at least half-time in school. Direct loans have a six-month grace period from the time the borrower leaves school or drops below half-time enrollment until they are required to begin repayment. Interest rates on Direct Loans are fixed for the life of the loan. Direct Loans do include loan fees that are a percentage of the total loan amount. The fee is deducted from each disbursement so that means, your loan disbursement is less than the requested amount you borrow. Loan fees change every October and current fees can be found at studentaid.gov.
There are two main types of Direct Loans: Subsidized and Unsubsidized.
Direct Subsidized Loans are available to only undergraduate students and are based on financial need. The government covers the interest payments while you are enrolled in school at least half-time, during the six-month grace period and during periods of deferment.
However, subsidized loans are limited both in the amount you can borrow per year and by the number of academic years you can receive them. Students can borrow:
Direct Unsubsidized Loans are available to undergraduate and graduate students and are not based on financial need. Interest on unsubsidized loans is added to your loan balance while you are in school, during the six-month grace period and during periods of deferment. However, you can choose to pay the interest instead of letting it accrue, which will reduce the amount of interest you'll pay over the life of the loan.
Unsubsidized loans are limited in the amount you can borrow per year and in total. Dependent students can borrow:
Independent students can borrow up to:
If the total amount borrowed over the course of your education reaches the aggregate loan limit, you cannot borrow additional Direct Loans. However, if you repay some of the loans to bring the outstanding balance below the aggregate limit, you can borrow again up to the loan limit.
To apply for subsidized and unsubsidized loans, you must complete a Free Application for Federal Student Aid (FAFSA®). Your school will use the FAFSA to determine your eligibility for financial aid, which includes federal loans.
FAFSA® is a registered trademark of the US Department of Education and is not affiliated with Discover Student Loans.