William D. Ford Federal Direct Loan Program

Direct Student Loan Changes

Direct Subsidized loans will not be eligible for an interest subsidy during the six-month grace period.

• Subsidized loans are loans for which the borrower is not responsible for the interest while the student is enrolled in college on at least a half-time basis, when the loan is in the six-month grace period after the student is no longer enrolled at least half time, or if the loan is in a deferment status. This provision eliminates the interest subsidy provided during the six-month grace period for subsidized loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014. If you receive a subsidized loan during this timeframe, you will be responsible for the interest that accrues while your loan is in the grace period. You do not have to make payments during the grace period (unless you choose to) but the interest will be added (capitalized) to the principal amount of your loan when the grace period ends. This provision does not eliminate the interest subsidy while the borrower is in school or during eligible periods of deferment.

• Subsidized loans for which the first disbursement is on or after July 1, 2016, will have a 3.76% fixed interest rate for the 2016-2017 school year.

Graduate and professional students are no longer eligible to receive subsidized loans.

• Effective for loans made for payment periods that begin on or after July 1, 2012, graduate and professional students are no longer eligible to receive subsidized loans. However, if you are a graduate or professional student, you may still qualify for up to $20,500 in unsubsidized loans each year. The interest rate for graduate and professional students is 5.31% for the 2016-2017 school year. The interest rate for Direct Plus Loans is 6.31% for 2016-2017 school year.

The U.S. Department of Education can no longer offer borrowers repayment incentives.
• Effective for loans first disbursed on or after July 1, 2012, the Department of Education is prohibited from offering any repayment incentives to Direct Loan borrowers, except interest rate reductions to borrowers who agree to have payments automatically electronically debited from their bank account).