Franklin & Marshall College Franklin & Marshall College

Federal Direct Loan for Students

What are Federal Direct Subsidized and Unsubsidized Loans?

A Direct Subsidized or Unsubsidized Loan is a student loan in the student’s name for educational purposes. The loan funds come from the federal government. It is categorized as either “subsidized” or “unsubsidized.” Loan repayment is deferred while the student is enrolled in school at least half-time and during the 6-month grace period after the student either graduates or drops below half-time. When the grace period is finished, the student starts repayment on the loan. However, if the student decides to go to graduate school, the loan will go back into deferment providing they are enrolled at least half time.

What is the difference between a “Subsidized” and an “Unsubsidized” Direct Loan?

Federal Direct Subsidized loans are available to undergraduate students with financial as as determined by the FAFSA.  The U.S. Department of Education pays the interest on the subsidized loan while a student is enrolled at least half time.  “subsidizes” the interest of the loan, i.e. pays the interest, while the student is enrolled at least half-time. Once the student drops below half time enrollment or graduates, the interest would begin to be charged.  Repayment of the loan begins 6 months after graduating or dropping below half time enrollment.  

An unsubsidized loan is not awarded based on financial need. The student will be charged interest on the loan from the time it disburses until it is paid in full. The student has two options: To defer interest payments until graduation in which case the interest will be added to the principal amount of the loan or to pay the interest while in school and not have it accrue.

How much can the student borrow in Direct Subsidized and Unsubsidized Loans?

Dependent undergraduates have a Direct Loan maximum amount that they can borrow per academic year: The limits are as follows:

  • $3500 for freshmen
  • $4500 for sophomores
  • $5500 for juniors
  • $5500 for seniors 

*** In addition to the above amounts, students may be eligible to borrow  an additional $2,000 in Direct Unsubsidized Loan.

NOTE:  If you have not been awarded $2,000 in unsubsidized loan and you wish to borrow the maximum amount for your grade level, the STUDENT must send an email to to request the additional loan amount. 

Independent undergraduates and students whose parent is denied the Direct PLUS loan for parents can borrow the same amounts as above, plus an additional $4000 of Direct Unsubsidized Loan for freshmen and sophomores, and $5000 for juniors and seniors.

What is the interest rate?

The interest rate for the 2014-2015 academic year:

     Direct Subsidized and Unsubsidized Loans have a variable/fixed interest rate of 4.66% for loans disbursing after July 1, 2014.   (Index rate based on 10-year Treasurey Note plus add-on of 2.05% capped at 8.25%)

For both types, there is an origination fee of 1.072%. This amount is deducted from the loan at disbursement. Please take this into consideration when calculating your bill.

Note:  Federal Direct Subsidized and Unsubsidized loans with a FIRST disbursement date of Oct 1, 2014 or later will be charged 1.073% in fees.

How does the student apply?

  1. Complete the FAFSA.
  2. Complete any documents requested by the Financial Aid Office.
  3. The student must accept loans online on MyAid this gives the Financial Aid Office permission to transmit information to the Department of Education.
  4. First-time borrowers must complete Loan Entrance Counseling
  5. First-time borrowers must complete a master promissory note (MPN).

Where do I go to complete entrance counseling and sign the MPN?

The Department of Education has a website called which it has established for students to manage their Direct Loans. (Beware--there is also a site which is NOT the government site).  The student should SIGN IN with their name, social security number, date of birth and FAFSA PIN.  Remember the Federal Direct loan are in the STUDENT’S name.

 You will need to use your FAFSA PIN to access the site and to sign the MPN. If you do not have a PIN, you may obtain one at PIN web site.

IMPORTANT:On the website, there is important information about browser requirements under "What You Need". If you do not have a compatible browser, various features will not work.