Direct Loans
Federal Direct Loan Program
The William D. Ford Federal Direct Loan Program is a guaranteed federal student loan, which may be subsidized, unsubsidized, or a combination of both subsidized and unsubsidized. Under the Federal Direct Loan Program, you (the student) will apply for and receive your loan funds directly from the U.S. Department of Education, not through a private lender or bank. Interest rates differ depending on whether you are an undergraduate or graduate/professional student and the time frame that you borrow the loan. The federal government sets interest rates for the Direct Loan each July 1st for the upcoming academic year. The Direct Loan has a loan origination fee that is deducted from each loan disbursement you receive. See the chart for origination fee amounts.
New borrowers under the federal Direct Loan program must complete loan entrance counseling and a Master Promissory Note (MPN). Once your financial aid application is complete, we will prepare and notify you of your official award notification. When you are notified (by email) to Review and Respond to Award Notification, you may then apply for your federal Direct Loan. All students must request their loan amount through e-Services which requires the student's Star ID and password to login.
If you are borrowing a loan that accrues interest while you are in school, we highly encourage you to make interest payments while you are in school in order to avoid capitalization of the interest (adding interest to the principal amount of the loan).
Loan Limits and Loan Proration
| Annual Direct Loan Limits per Grade Level | Dependent Student | Independent Student |
| Grade level 1 (0-29 semester credits completed) | $5,500 | $9,500 |
| Grade level 2 (30-59 semester credits completed) | $6,500 | $10,500 |
| Grade levels 3 or 4 and 5 (post-baccalaureate) | $7,500 | $12,500 |
| Grade levels 6 or 7 (graduate student) | $20,500 |
The maximum aggregate Direct Loan limits are specified by federal law. Federal regulations also stipulate that a student cannot receive financial aid in excess of the student's cost of attendance. Therefore, some students are not able to borrow the full aggregate amounts listed below.
- Dependent Undergraduate: $31,000 (only $23,000 subsidized)
- Independent Undergraduate: $57,500 (only $23,000 subsidized)
- Graduate and Professional Students: $138,500
Loan Proration: The annual Direct Loan maximum for undergraduate students must be prorated when the student is enrolled in a program shorter than a full academic year, or is enrolled in an academic year but the student's remaining period of study is shorter than a full academic year. That means if you are graduating during the current academic year and attending less than a full academic year, your subsidized and unsubsidized Direct Loan amounts must be prorated. Contact the Financial Aid Office for more information regarding Direct Loan proration.
Grace Period and Loan Servicer
Grace Period: The grace period is a set period of time after you graduate, leave school, or drop below half-time (6 credits) enrollment before you must begin repayment on your loan. The grace period gives you time to get financially settled and to select your repayment plan.
Not all federal student loans have a grace period. Note that for most loans, interest will accrue during your grace period. We recommend that you work with your loan servicer to make payments on interest while you're in school (maybe even a little on the principal) to keep your debt load down.
Loan Servicer: The U.S. Department of Education (your lender) automatically assigns your loan to a federal loan servicer. Your loan servicer handles the billing, repayment, and other aspects of your federal student loan. Your loan servicer will contact you at the time your loan is disbursed and before you enter repayment on your student loan.
Set up your account with your loan servicer as soon as you've borrowed a federal loan. To find your federal loan servicer, use your FSA ID (what you used for your FAFSA) to log in to the Federal Student Aid website. On your dashboard, select "My Aid" to view your loan servicer details.
Exit Counseling, Repayment and Forgiveness
If you graduate, withdraw, or enroll less than half-time (6 credits), you must complete loan exit counseling. The loan exit counseling takes approximately 25 minutes and will help you understand your loan repayment terms and options. This Next Steps for Loan Borrowers checklist provides information on loan forgiveness, repayment plans, and loan consolidation.
When you borrow under the federal loan program, your loan is automatically assigned to a federal loan servicer. Work with the loan servicer to make payments on interest while you're in school (maybe even a little on the principal) to keep your debt load down. During repayment, you'll make monthly payments to your servicer. A Loan Repayment Calculator can help you determine how much interest you will pay. Your monthly payments will be based on the total amount that you borrowed.
You may be eligible to have a portion of your federal student loans forgiven, depending on the career you enter.
- Public Service Loan Forgiveness Program: Under this program, you may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 loan payments, under certain repayment plans, while employed full time by certain public service employers.
- Teacher Loan Forgiveness Program: If you are a teacher serving in a low-income school or subject-matter shortage area, you may be eligible to cancel or defer your student loans. The Teacher Cancellation Low Income Directory lists low-income schools by state.
At times, personal situations may make it difficult for you to repay your student loan. In such cases, you may want to consider changing your repayment plan or loan consolidation to possibly reduce your monthly loan payments. Or you may be eligible to postpone repayment for a specific period of time. To find out about changing your repayment plan, loan consolidation, or postponing repayment options, contact your loan servicer regarding eligibility and required forms. You can find your loan servicer on the Federal Student Aid website under "My Aid" on your dashboard. You will need your FSA ID to login.
If you've borrowed and are having trouble repaying the loan or feeling overwhelmed by the process, be sure to contact your federal loan servicer or the LSS Financial Counseling Center for free assistance. The LSS Financial Counseling Center has partnered with Minnesota State schools to help students with loan counseling. In-person appointments are available at many locations across the state, by phone, or via Skype. You'll work with a Financial Counselor with National Foundation for Credit Counseling (NFCC) who will pull your credit report and review your borrowing history with you to get a full picture of all your student loans and personal financial situation. Your loan servicer or the LSS Financial Counselor will walk through your repayment options, help you understand pros and cons of each option, and work with you to develop a plan that best meets your personal situation to help you avoid default or get back on track if you're already in default. Financial counselors will also work with you to develop a budget and spending plan for your financial success.