Federal Direct Loan Program for Students
In the Direct Loan Program, you work with the Office of Financial Aid at the University of Michigan-Dearborn and the Direct Loan Program of the U.S. Department of Education.
8 Tips to Stay on Top of Your Loans While You Are in School--a quick read to help you manage your loans.
What are Direct Loans and the difference between subsidized and unsubsidized loans?
The Direct Loan Program provides students with the means to borrow funds for college without a cosigner or credit check. There are two components of the Direct Loan Program: subsidized and unsubsidized loans.
- Subsidized loans are awarded on the basis of financial need. No interest will accrue during half-time enrollment or authorized periods of deferment. You can help to remember the term by thinking of the Federal government subsidizing interest during these periods. Subsidized loan are available to only to undergraduate students.
- Unsubsidized loans are not awarded on the basis of financial need. Interest will accrue from the time of disbursement until the loan is paid in full. While you are not required to make monthly payments during half-time enrollment or authorized periods of deferment, interest will accrue on the loan. Each quarter, unpaid interest will capitalize (interest will become additional loan principal). If you make quarterly interest payments on your unsubsidized loan during periods when no repayment is required, you will reduce the amount that you repay over the life of the loan.
Who is eligible and how do I apply?
You must meet the general eligibility requirements for all Federal student aid programs. To view these requirements, please review the student status eligibility from the Federal Student Aid website. You apply by completing the Free Application for Federal Student Aid (FAFSA) at www.fafsa.gov.
First time borrowers in the Direct Loan Program are also required to complete Entrance Loan Counseling and a Master Promissory Note (MPN) at studentloans.gov. Your FAFSA PIN is required to access the secured Web site.
How much I can borrow?
Loan limits are determined by grade level and dependency status.
Annual and Aggregate (Total) Loan Limits for Direct Loans
$5,500 (only $3,500 can be in subsidized loans)
$9,500 (only $3,500 can be in subsidized loans)
Up to $20,500 in unsubsidized loans
$6,500 (only $4,500 can be in subsidized loans)
$10,500 (only $4,500 can be in subsidized loans)
Juniors and Seniors
(55 credits and above)
$7,500 (only $5,500 can be in subsidized loans)
$12,500 (only $5,500 can be in subsidized loans)
Maximum Total Debt From Stafford Loans Upon Graduation
$31,000 (only $23,000 can be in subsidized loans)
$57,500 (only $23,000 can be in subsidized loans)
$138,500 (only $65,500 can be in subsidized loans) Graduate loan debt will also include all Stafford Loans received as an undergraduate
How are loan funds disbursed?
After accepting your loans online at UM-Dearborn Connect and the federal requirements of loan counseling and the Master Promissory Note, loan funds will be applied to your tuition account electronically as early as ten days prior to the start of the semester. Aid is disbursed on a semester-by-semester basis.
If your financial aid exceeds the amount of your tuition, you are eligible for a refund. Enroll in the direct deposit program at the Cashiers/Student Accounts website.
Can I cancel or reduce my loan after accepting it?
If your loan has not disbursed, you can complete a new Student Decision Form or e-mail your request to email@example.com. Although students can accept their loans online at the UM-Dearborn Connect, changes cannot be made online.
If your loan has disbursed, you will receive e-mail notification of disbursement from the Office of Financial Aid. You must contact the Office of Financial Aid in writing (post or email) within 14 days of disbursement to cancel or reduce your loan. Canceled loan funds will be remitted to the Direct Loan Program.
It is important to remember that the cancellation or reduction of a loan does not change a tuition obligation at the University. If your other forms of financial aid do not cover all of your tuition, you will be responsible for meeting any outstanding tuition obligation.
How much interest is charged and are there loan fees?
- The interest rate for Subsidized and Unsubsidized Direct Loans is a variable fixed rate of 4.66% for for undergraduates 2014-2015 loans
- The interest rate for Unsubsidized Direct Loans is a variable fixed rate of 6.21% for graduate students loans in 2014-2015
- The interest rate for Parent PLUS Loan is a variable fixed rate of 7.21% for 2014-2015
- The interest rate for the Graduate PLUS is a variable fixed rate of 7.21% for 2014-2015
- The Direct Loan Program charges a nominal fee that is deducted from the loan proceeds of each disbursement.
If you have subsidized loans, you wonít be charged any interest as long as you are enrolled at least half-time (6 credits undergraduate and 4 credits graduate) or during authorized periods of deferment.
If you have unsubsidized loans, you will be charged interest from the day the loan disbursed until it is repaid. You are able to pay interest on a quarterly basis even if you are not required to make monthly loan payments. If you do not pay the interest while in school, grace or authorized deferment periods, your interest will capitalize (your unpaid interest becomes additional loan principal).
When do I repay my loans and what are the terms?
After you graduate, withdraw or drop below half-time enrollment status, you will have 6 months before you begin monthly repayment. This is called your grace period. During the grace period for all Direct Loans (subsidized and unsubsidized) disbursed after July 1, 2012, interest will accrue.
Before graduation, you will be required to participate in Exit Loan Counseling online. This process will be helpful in making a decision about your repayment plan.
The Direct Loan Program offers you a choice of repayment plans. You may also change your repayment plan.
- The Standard Repayment Plan requires a fixed payment each month of no less than $50 for up to ten years. The length of our repayment plan and the monthly amount will depend on how much you have borrowed.
- The Extended Repayment Plan allows students with high loan amounts to repay federal loans over 12-30 years.
- The Graduated Repayment Plan allows your monthly repayment to be artificially low at first but increasing at least every two years. The repayment length will range from 12 to 30 years.
- The Income Based Repayment Plan creates an affordable monthly payment based on income and family size. Loan principal is forgiven after 25 years of repayment.
- The Income Contingent Repayment Plans bases your monthly payment on income, family size, interest rate and loan amount. Loan principal is forgiven after 25 years of repayment.
Additional details on Direct Loan repayment loans is available at the Federal Student Aid website.
Can loan payments be postponed or loans forgiven?
Under certain conditions, you can receive a deferment or a forbearance as long as your loan is not in default. A deferment allows the temporary postponement of payment. One of the most important parts of your Entrance Loan Counseling and your Exit Loan Counseling discusses the situations in which these options would apply. You may wish to visit the Federal Student Aid website for information and forms on deferments , forbearances, and other special circumstances for borrowers, including cancellation and discharge of loans.
What happens if I donít repay my loan?
Failure to repay a loan according to the terms agreed to when you signed promissory notes will result in a status called default. In many cases, default can be avoided by submitting a request for deferment, forbearance or cancellation and by providing the required documentation before you reach the point of default.
The consequences of default are severe. Action may be taken to recover the money, including notifying national credit bureaus of your default. This will affect your credit rating for a long time. For example, you may find it very difficult to borrow money from a bank to buy a house or a car. In addition, if your account is turned over to the U.S. Department of Education for collection, the Internal Revenue Service (IRS) might withhold any U.S. individual income tax refund and apply it to the amount that you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. In addition, you are responsible for the expenses in collecting the loan. If you decide to return to school, you will not be eligible for any additional Federal student aid until your loan has been repaid or you have made satisfactory payment arrangements (and kept them.) You may even face legal action.