Questions About Federal Direct (Stafford) Loans

1. Disbursements

Most Federal Direct loans are sent in two disbursements. Typically one for the Fall semester and one for the Winter semester. One semester-only loans are currently sent in one disbursement at the beginning of the semester.

2. Interest Rate

• The Federal Direct loan interest rate is a fixed 6.8 percent for undergrad subsidized loans and 6.8 percent for undergrad unsubsidized loans. 
• Loans borrowed prior to July 1, 2006, have variable interest rates with a cap of 8.25 percent.

3. Loan Fees

Federal Direct loans require a 1.051 percent origination fee that students must pay at the time of disbursement. The net disbursement is 98.95 percent of the gross loan amount.

The Parent Plus Loan Program requires a 4.204 percent origination fee to be paid at the time of disbursement. The net disbursement is 95.79 percent of the gross loan amount.

4. Grace Period

Students have one 6-month grace period for every loan. If a student leaves school and returns, they can have their loans deferred again. However, a student only gets one grace period. Students should contact Direct Loans or go to www.StudentLoans.gov for more specific information. (See "Repayment" below.)

5. Enrollment Status

Students must be at least half-time (6 - 8 credits) to be eligible for a Federal Direct loan. If a student drops below half time before the funds are fully disbursed, the loan will be removed or reduced depending on the situation. There are no exceptions to this rule.

6. Repayment

The interest rate in repayment is capped at 8.25%. Typically, if students consolidate their Federal Stafford Loans, Direct Loans will take the average of all their interest rates and calculate one monthly loan payment based on that calculation. Therefore, because the in-school interest rate is lower, it is more beneficial to consolidate while in school or during the grace period. WARNING: Consolidating loans before the grace period or during the grace period can force a student to have a shorter grace period or lose the grace period all together. Students should contact Direct Loans or go to www.StudentLoans.gov for more specific information (on this site students can estimate their repayment amounts for all of their Direct Loans). Students can also log on to www.nslds.ed.gov/nslds_SA/ to view all the Federal Student Loans they have taken out and to determine their aggregate loan amount (total amount borrowed).

7. Loan Counseling

Students must complete entrance loan counseling before a loan is disbursed. This is available at www.StudentLoans.gov. Students typically need to complete this only one time at a school, but loan counseling may be required again if there has been a lapse in attendance.

8. Master Promissory Note

Students must complete a master promissory note before a loan will be processed and disbursed. Students typically need to complete this only one time at a school, but a new master promissory note may be required if there has been a lapse in attendance.

9. First-Time Borrowers

First-time borrowers must have a first-disbursement date 30 days after the semester begins. No excess loan funds can be disbursed until this time.

10. Loan Limits

Federal Direct loans are regulated by yearly and aggregate (total) loan limits. These are as follows: