A Federal Direct Subsidized Loan is a low interest need-based loan made to students enrolled at least half-time who have completed the FAFSA for the appropriate academic year. The federal government pays loan interest while the student is in school, and loan repayment begins six months after the student graduates or drops below half-time enrollment. Eligible students are automatically considered also for the Federal Direct Unsubsidized Loan (described below).
NOTICE: U.S. Congress has enacted a number of legislative changes affecting the federal loan programs beginning summer semester 2012. The Budget Control Act of 2011, signed into federal law in August 2011, includes the following:
Elimination of Loan Interest Subsidy: Effective July 1, 2012 the Subsidized Loan is no longer available to graduate and professional students for loan periods beginning on or after July 1, 2012. The graduate loan program becomes entirely unsubsidized, which means that the borrowed amount will accrue interest while the student is in school. The annual and aggregate borrowing limits are not affected (the maximum amount a student can borrow in the Direct Loan program will remain at $20,500 per academic year), and all students are automatically evaluated for loan eligibility.
Elimination of Loan Fees Rebate: Previously, one-half of the 1% origination fee was refunded to the borrower at the time of disbursement. Effective July 1, 2012 the rebate is eliminated and the full fee will be charged to students.
Elimination of Grace Period Interest Subsidy: Effective July 1, 2012, for new Subsidized Loans, the interest subsidy during the six-month grace period is eliminated for students who fall below half-time status.