Federal Direct Loans

Direct Loans are low-interest loans for students and parents to help pay for the cost of a student's education after high school. The lender is the U.S. Department of Education (the Department), though the entity you deal with, your loan servicer, can be a private business. A 1.05% origination fee applies to the Federal Direct Subsidized and Federal Direct Unsubsidized loans at the time of disbursement.

With Direct Loans, you:

• Borrow directly from the federal government and have a single contact—your loan servicer—for everything related to repayment, even if you receive Direct Loans at different schools.
• Have online access to your Direct Loan account information via your servicer's website.
• Can choose from several repayment plans that are designed to meet the needs of almost any borrower, and you can switch repayment plans if your needs change.

As with all federal student aid, you apply for Direct Loans by filling out the Free Application for Federal Student Aid (FAFSA). The 2012-2013 FAFSA is used to borrow funds for the 2012-2013 academic year and summer 2013. The 2013-2014 FAFSA is required to borrow Stafford loan funds for enrollment beginning with the Fall 2013 semester through Summer 2014. The UWM school code is 003896. If you have not already completed a FAFSA for the appropriate year, please do so as soon as possible at http://www.fafsa.gov.

The Direct Loan Program offers the following types of loans:  

• Subsidized: for students with demonstrated financial need, as determined by federal regulations. No interest is charged while a student is in school at least half-time, during the grace period, and during deferment periods.  Graduate and professional students are not eligible to receive Direct Subsidized loans for loan periods beginning on or after July 1, 2012. 
  
• Unsubsidized: not based on financial need; interest is charged during all periods, even during the time a student is in school and during grace and deferment periods.
• PLUS: unsubsidized loans for the parents of dependent students and for graduate/professional students. PLUS loans help pay for education expenses up to the cost of attendance minus all other financial assistance. Interest is charged during all periods.
• Consolidation: Eligible federal student loans can be combined into one Direct Consolidation Loan.

Student borrowers are not required to begin making payments until after they drop below half-time attendance. However, interest only payments are encouraged to help reduce the cost of borrowing.

Direct Loans are awarded as part of a larger "award package," which may contain other types of aid as well, to help you meet the costs of going to college. The school (not FAFSA) will tell you how much you may borrow and the types of loans you are eligible to receive. You should evaluate the aid offer carefully. In the case of loans, keep in mind that whatever amount you borrow must be paid back with interest. If your living expenses are lower than the amount used by us for your estimated cost of attendance, you may not have to borrow as much as the amount in the award letter.

For an estimate of your monthly loan payments after you graduate, take a look at the Department of Education’s repayment calculator, http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html

Stafford Loan Eligibility Chart

The chart below shows the annual and aggregate loan limits for a Federal Direct Stafford loan. These limits are based on grade level. A dependent undergraduate student whose parent is denied a Direct Parent PLUS loan becomes eligible for independent undergraduate student loan limits. This means a dependent undergraduate student becomes eligible for an additional unsubsidized Stafford loan of up to $4000 for a freshman/sophomore or $5000 for a junior/senior if a parent is denied a PLUS loan.

Effective with the 2012-2013 academic year, subsidized loans are no longer available for Graduate level study.  The annual loan limit for graduate and professional students remains unchanged at $20,500, but this amount will now be limited to Direct Unsubsidized Loans, as shown in graduate/Professional Student Eligibility Chart.

Additional Requirements and Information for Federal Loans can be found at:

1. Entrance Counseling
2. The Master Promissory Note