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Federal Direct Student Loan Programs

What are Federal Direct Loans?
Rutgers University participates in the William D. Ford Federal Direct Loan Program. Students borrow directly from the federal government. No separate application from a bank or other lender is needed to receive Direct Stafford Loans. Please disregard any separate mailings you receive to apply for Stafford Loans.

Applying for a Federal Direct Loan
When you complete the Free Application for Federal Student Aid or the Renewal Free Application for Federal Student Aid, you are applying for all of the aid programs for which you may be eligible, including direct loans.

If a William D. Ford Federal Direct Stafford Loan (subsidized or unsubsidized) has been offered to you as part of your aid package it will appear on your Financial Aid Award Letter. You can accept or decline these loans just as you would any other aid program assistance offered to you. Additionally, if you are accepting all or part of the loan, you are required to complete and sign a Master Promissory Note and return it to the Office of Financial Aid.

Federal Direct Student Loan Limits
The following criteria have been established for determining the amount of subsidized money to be distributed to a student in the Federal Direct Student Loan Program:
  • Students who have not completed their first year may borrow up to $3,500 per year.
  • Students who have completed their first year but have not completed their sophomore year, are eligible to borrow up to $4,500 per year.
  • Students who have completed their sophomore year but have not completed their senior year may borrow up to $5,500 per year.
  • Graduate students may borrow up to $8,500 per year.
The annual maximum amount may be awarded to you as a combination of subsidized and unsubsidized William D. Ford Federal Direct Stafford Loan. You must pay the interest on the portion that is unsubsidized while in school, and during any grace or in-school deferment periods, unless you elect to have the interest added to the principal. This is called capitalization. Having the interest capitalized will mean larger payments when you begin repayment.

Independent students may borrow additional funds beyond the annual limit of the subsidized Federal Direct Student Loan. Additional unsubsidized Federal Direct Student Loan limits for independent students are as follows:
  • Undergraduate independent students who have not completed their sophomore year may borrow up to $4,000.
  • Undergraduate independent students who have completed their sophomore year but have not completed their senior year may borrow up to $5,000.
  • Graduate students may borrow up to $12,000 per academic year.
  • The aggregate amount for Federal Direct Student Loan for undergraduate students is $23,000 (subsidized or unsubsidized) plus $23,000 additional unsubsidized for independent undergraduate students.
  • The Federal Direct Student Loan subsidized aggregate amount for graduate students is $65,500, including amounts borrowed as an undergraduate. The aggregate amount of additional unsubsidized Federal Direct Student Loan for graduate students is $73,000, including amounts borrowed as an undergraduate.
  • Dependent undergraduate students may not borrow the additional amount under the unsubsidized Federal Direct Student Loan because of the availability of the Federal PLUS Loan for parents. Exceptions may be made by a financial aid counselor if the parent is denied a PLUS Loan.
Consistent with federal regulations, Federal Direct Student Loans have an origination fee of 1% that is deducted from the amount borrowed. This is called the origination fee.

Federal Direct PLUS Loan
The Federal Direct PLUS Loan is available to parents of dependent students. The maximum amount that may be borrowed is calculated by subtracting other aid from the cost of attendance. PLUS Loan borrowers are subject to a credit check to determine credit worthiness. A 2.5% origination fee is deducted from the loan amount. A separate application must be requested from the Financial Aid Office.

Interest Rates
1. Loans, disbursed under the William D. Ford Federal Direct Loan Program, have either a fixed or a variable interest rate, depending on when the loan was first disbursed.

2. All Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans first disbursed on or after July 1, 2006 have a fixed interest rate for the life of the loan.
  1. The fixed interest rate for Direct Subsidized and Unsubsidized Loans first disbursed on or after July 1, 2006 is 6.8%.
  2. The fixed interest rate for Direct PLUS loans first disbursed on or after July 1, 2006 is 7.9%.
3. All Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans first disbursed before July 1, 2006 have a variable interest rate. The interest rate on these variable rate loans is changed on July 1st of each year. Effective July 1, 2007, The following rates apply:

Stafford Loan (During Deferment or Grace Period):      6.62%
Stafford Loan (During Repayment):   7.22%
Plus Loan:   8.02%
  1. The interest rate on Direct Subsidized and Direct Unsubsidized Loans is determined using the 91-day Treasury bill rate that was auctioned before June 1st and adding a certain fixed percentage to it.
  2. The interest rate on Direct PLUS Loans is determined by using either the weekly average of the 1-year constant maturity yield published by the Federal Reserve on or before June 26 or the 91-day Treasury bill rate that was auctioned before June 1st.
    1. Direct PLUS Loans that were disbursed before July 1, 1998 use the weekly average of the 1-year constant maturity yield.
    2. Direct PLUS Loans that were disbursed on or after July 1, 1998 use the 91-day Treasury bill rate.
4. Consolidation Loans disbursed under the Direct Loan Program can have either a fixed or variable interest rate depending on when the application was received.

5. The amount of interest that accrues on your loan from month to month is determined using what is called the Simple Daily Interest formula. This method is a simple formula that multiplies your loan balance by the number of days since the last payment times the Interest Rate Factor. The Interest Rate Factor is determined by dividing your interest rate by the number of days in a year (365.25).

General Requirements
Once you are awarded a Federal Direct Student Loan, you must fulfill certain conditions before loan funds can be credited to your account. These include, but may not be limited to:

Completion of a Loan Entrance Interview An Entrance Interview is actually a counseling session which is designed to help you better understand your obligation as a borrower and provides other useful information on the loan process. Entrance Interviews are required for all of first time, first-year borrowers. You will be notified if you are required to complete an entrance interview.

Signing the Master Promissory Note The Direct Stafford Loan borrowers who wish these funds to credit to their term bill, must complete a Master Promissory Note (MPN) at http://dlenote.ed.gov using your federal Personal Identification Number (PIN). The same PIN used to complete your online FAFSA is used to sign your MPN. To obtain a PIN, visit www.pin.ed.gov.

Using Your Loan to Pay Your Term Bill
Your Federal Direct Student Loan will show as a financial aid credit on your University term bill. Term bills are sent out in July for the Fall term, and in November for the Spring term. This credit, as well as any other financial aid credits, can be applied against the charges itemized on the bill.

Please note that even if your aid credits are greater than the amount of your bill, you must still submit the term bill to the Cashiers' Office in order to become registered.

Refund Checks
If your financial aid, including your Student Loan, exceeds your charges for the term, you will be issued the difference in the form of a refund check.

However, to qualify for a refund, you must have taken all steps necessary to complete your aid. This means that you have completed a properly signed Promissory Note to the Financial Aid Office, as well as any and all other information we may have requested. When all documents have been received and reviewed, your financial aid is credited to your individual student account and, if you are entitled, a refund check is issued.

Refunds are generally available after the second week of classes to those whose aid is complete. If your aid is credited to your account after the second week of class, refunds are usually available within three or four days of the completion date.

Declining a Direct Loan
If making changes to awards or updating information on the DCF, promptly sign and return the form. Unless you notify us otherwise, Direct Loan funds automatically credit to your student account when all required documents have been processed and you have a signed Master Promissory Note on file for your Direct Loans. If the information on the DCF is correct and does not require updating, do not return the form.

Loan Repayment
Students who borrow a Federal Direct Student Loan and have borrowed a Federal Stafford Loan in the past, can have their loans consolidated so that they will be making only one payment. Loan consolidation will be made at the request of the student when entering repayment. The university will provide more information to you regarding this option as you approach graduation.

Loan repayment begins six months after you leave school or cease to be enrolled an at least a half-time basis. These six months are referred to as a grace period.

The federal government offers various loan repayment options listed below.
  • The standard loan repayment plan requires fixed monthly repayment amount paid over a fixed period of time.
  • The extended repayment plan assumes a fixed annual repayment amount paid over an extended period of time.
  • The graduated repayment plan establishes annual repayment amounts at two or more levels. Repayments are paid over a fixed or extended period of time.
  • The income contingent repayment plan calls for varying annual repayment amounts based on the Adjusted Gross Income (AGI) of the borrower over an extended period of time, as determined by the U.S. Department of Education.
On June 16, 1999 the U.S. Department of Education announced a package of three discounts for all students who borrow under the Direct Loan program. The package of discounts includes: 1) a 1% point reduction in the up-front loan origination fee; from four percent to three percent, 2) a .25% point interest rate deduction for borrowers paying off loans electronically and 3) a .6% point interest rate deduction for borrowers who consolidate their loans while they are in school, or during the six month grace period before they enter repayment.

While you are enrolled in school, no payments are due on the subsidized Federal Direct Student Loan, and no interest accrues (unless you are repaying a previous loan and are enrolled less than full time). The Federal Government pays the interest for you during this time.

The grace period for the unsubsidized Federal Direct Student Loan is the same as the subsidized, but you are responsible for the interest on the loan while in the grace period. Repayment on the Federal Direct PLUS Loan begins shortly after the loan is fully disbursed.

Other Resource:

Additional Information
The information in this fact sheet is subject to change without notice. The information was accurate at the time it was printed. Further changes to laws or regulations may make some of the information incomplete or inaccurate.

 
 
Page last updated on: Thursday, January 03, 2008 3:15:58 PM