Your Guide to Responsible Borrowing: Part Three) 12/27/2011 <p>Welcome to part 3 of Your Guide to Responsible Borrowing. Today, we&rsquo;re looking at Direct Lo

Your Guide to Responsible Borrowing: Part Three

Welcome to part 3 of Your Guide to Responsible Borrowing. Today, we’re looking at Direct Loans.

What are direct loans?

Direct Loans are monies that must be paid back with interest. To qualify for these funds, you must be enrolled at least half time.

Direct Loans for undergraduate students come in two forms: Subsidized and Unsubsidized. In both cases, you do not have to make payments while you are attending school at least half time and during your six month grace period after you graduate or drop below half time. Unsubsidized loans are traditional loans that accrue interest from the date they are certified by your school, while subsidized loans do not accrue interest while you are in school and during your grace period.

Direct Subsidized Loans

  • For students with financial need.
  • No interest is charged while you are in school at least half time, during your grace period, and during deferment periods.

Direct Unsubsidized Loans

  • Not based on financial need.
  • Interest is charged during all periods.


  Dependent Students Independent Students
1st-year undergraduate $5,000 $9,500
2nd-year undergraduate $6,500 $10,500

Aggregate (or lifetime) Loan Limits for Subsidized Loans and Unsubsidized Loans


  • Dependent undergraduates: $31,000
  • Independent undergraduates: $57,500

When considering the use of federal loans, we must also consider the cost of paying back these loans and ask ourselves, “What other means do I have for financing my education?” “Do I have other sources that could subsidize the difference between my other benefits and the cost of my education?” So, remember to access every source before taking out loans that have to be paid back.

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