Federal Direct Loans are low-interest loans for students and parents to help pay for the cost of a student’s college education. With Direct Loans, the student and/or parent borrows funds directly from the federal government and has a single contact, the loan servicer, for everything related to repayment even if the borrower receives Direct Loans at different schools. There are several different options for repayment plans designed to meet the needs of almost any borrower. Additional information is available at https://studentloans.gov/myDirectLoan.
The Federal Direct Subsidized Loan (DLSUB)
The Federal Direct Subsidized Loan (DLSUB) is a need-based federal loan awarded only to students who demonstrate financial need. Undergraduate students who have unmet financial need can be considered for this loan up to the amount of the students’ borrowing limit. Borrowers must be U.S. citizens or eligible non-citizens, enrolled at least half time and meet all other eligibility requirements including Satisfactory Academic Progress.
150% Direct Subsidized Loan Limit
In 2013, the Department of Education implemented the Moving Ahead for Progress in the 21st Century Act (MAP-21) which added a new provision to the Direct Loan statutory requirements that limits a first-time borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150 percent of the length of the borrower’s educational program. Depending on the situation, this provision could also cause first-time borrowers who have exceeded the 150 percent limit to lose the interest subsidy on their Direct Subsidized Loans. A first-time borrower is defined as any student who has no outstanding balance on a FFEL or Direct Loan when receiving a Federal Direct Loan on or after July 1, 2013. The Maximum Eligibility Period is based on the length of the student’s current academic program and is equal to 150% of the hours needed to graduate. Contact Student Financial Services if you have additional questions.
The Federal Direct Unsubsidized Loan (DLUNS)
The Federal Direct Unsubsidized Loan (DLUNS) is a non-need based federal loan that cannot exceed the educational cost of attendance minus other financial aid. Undergraduate students who are not eligible for any Subsidized Direct Loan or are eligible for only a portion of the annual loan limit for the Subsidized Direct Loan may be eligible for the Unsubsidized Direct Loan. Borrowers must be U.S. citizens or eligible non-citizens, enrolled at least half time and meet all other eligibility requirements including Satisfactory Academic Progress.
Federal Loan Interest and Fees
The interest rate is fixed at 2.75% for Federal Direct Subsidized and Unsubsidized Loans first disbursed on or after July 1, 2020 and before July 1, 2021.
Origination fees are deducted from the gross amount of the loans before the disbursement of the loans. For 2020-2021, the origination fee is 1.057% for loans disbursed prior to October 1, 2021. This fee is subject to change. Origination fees are deducted from the gross amount of the loans before the disbursement of the loans.
Annual Federal Direct Loan Limits
(Maximum Combined Subsidized and Unsubsidized)
|Freshman and students in certificate programs||Sophomore* in an Associate’s Degree program|
(up to $3,500 may be subsidized)
(up to $4,500 may be subsidized)
(up to $3,500 may be subsidized)
(up to $4,500 may be subsidized)
*31 or more semester credit hours must be completed for sophomore status.
NOTE: The maximum annual amount a student may borrow under the Federal Direct Loan Program must be reduced if:
- The student is in a program of study less than an academic year (2 semesters)
- The student is in the final period of study, which is shorter than an academic year (2 semesters)
- The student has borrowed student loan funds from another institution within the academic year
- The student has reached his annual and/or aggregate loan limits.
- COTC’s policy is not to award more than ½ of the student’s annual loan limits in one semester.
Remember, planning for tomorrow is important, so please borrow conservatively. Keep track of how much money is borrowed and how much Federal Loan payments will be after graduation. Review your student loan debt at studentaid.gov. It is important to repay your loans. Allowing your student loan to become delinquent or to go into default can have negative consequences, such as:
- lose eligibility for additional federal student aid,
- lose eligibility for loan deferment, forbearance and repayment plans,
- not eligible for certain types of employment,
- denial of a professional license (medical, engineering, etc.),
- additional charges, late fees and collection costs if turned over to a collection agency,
- wage garnishment,
- federal and state income tax refunds withheld and applied to your debt,
- you credit scored will be damaged and you will have difficulty qualifying for credit cards, car loans, and mortgages,
- difficulty signing up for utilities, getting car or homeowner’s insurance, or getting a cell phone plan, and
- difficulty getting approval to rent an apartment.
Federal Loan Repayment
Examples of Typical Standard Federal Direct Loan Repayments at 5.6% Interest*
|Principal to Repay||Monthly Payments||Total Interest Charge||Total Repayment|
The Federal Direct Parent Loan for Undergraduate Students (PLUS)
The Federal Direct Parent Loan for Undergraduate Students (PLUS) Parents may borrow funds to cover educational costs for dependent students. Borrowers must be U.S. citizens or eligible non-citizens. Students must be enrolled at least half time and maintaining Satisfactory Academic Progress for financial aid eligibility. Parents can begin repayment when the loan is fully disbursed, with the first payment generally due within 60 days, or they can choose to begin repayment six months after the student is no longer enrolled at least half time or graduates. There is no financial need required to be eligible; however, total financial aid cannot exceed cost of attendance. The applicant’s credit history will be evaluated in determining loan eligibility.
In order for COTC to certify a PLUS loan, the student must have a FAFSA on file and be file complete. The parent may apply for a PLUS loan by going to https://studentloans.gov and completing the Parent PLUS application. Parents will use their FSA ID (same FSA ID used to sign the FAFSA) to login and request the Parent PLUS Loan and sign the MPN. Once the parent’s loan has been approved, COTC will receive notification and originate the PLUS loan. Maximum eligibility for the PLUS loan is the Cost of Attendance minus any estimated financial assistance.
The interest rate is fixed at 5.30% for Federal Direct PLUS Loans first disbursed on or after July 1, 2020 and before July 1, 2021. For 2020-2021, the origination fee is 4.228% for loans disbursed prior to October 1, 2021. This fee is subject to change. Origination fees are deducted from the gross amount of the loans before the disbursement of the loans.
Scheduled Disbursements for Federal Direct Loans
Students receiving either a Federal Direct Subsidized/Unsubsidized or Federal Direct PLUS Loan should be aware of their scheduled disbursement dates and amounts that are stated on the disclosure statements which the lender will mail once the loan has been guaranteed. (The scheduled disbursement dates are not the same as the COTC refund dates.)
A student with a loan for only one semester will receive the loan funds in two disbursements within the semester. The first half at the regular disbursement date and the second half of the loan will be disbursed half-way through the semester. The student must maintain half time enrollment to be eligible for each disbursement.