The Federal Direct Loan is a long-term, low-interest loan available to all students.
How to apply for the Federal Direct Loan
- Complete the Free Application for Federal Student Aid (FAFSA).
- Complete the Master Promissory Note (MPN). If you have borrowed previously at USD you do not need a new MPN.
- Complete the online Entrance Counseling Session (All first-time borrowers at USD must complete this session before funds will be available).
Subsidized vs. Unsubsidized Loans
Your Federal Direct Loan award may be subsidized, unsubsidized or the combination of the two.
- Subsidized Federal Direct Loan
- The Subsidized Federal Direct Loan is awarded for the academic year based on your financial need and academic grade level.
- Financial need is determined by your cost of attendance minus your Estimated Family Contribution (EFC) from the FAFSA and any other aid you will receive.
- The federal government subsidizes or pays the interest on the loan while you are enrolled at least half-time.
- Unsubsidized Federal Direct Loan
- The Unsubsidized Federal Direct Loan is awarded based on your cost of attendance minus any other aid you will receive and your academic grade level.
- You are responsible for the interest on this loan from the time the loan is disbursed until is it paid in full. The federal government DOES NOT subsidize the interest on this loan.
- You may choose to defer the interest during enrollment and deferment periods, but it will be capitalized (added to the principal amount).
Is there a time limit on how long I can receive loans?
If you are a first-time borrower on or after July 1, 2013, there is a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. This time limit does not apply to Direct Unsubsidized Loans or Direct PLUS Loans.
If this limit applies to you, you may not receive Direct Subsidized Loans for more than 150 percent of the published length of your program. This is called your "maximum eligibility period." Your maximum eligibility period is based on the published length of your current program. You can usually find the published length of any program of study in the USD catalog.
For example, if you are enrolled in a four-year bachelor's degree program, the maximum period for which you can receive Direct Subsidized Loans is six years (150 percent of 4 years = 6 years). If you are enrolled in a two-year associate degree program, the maximum period for which you can receive Direct Subsidized Loans is three years (150 percent of 2 years = 3 years).
Because your maximum eligibility period is based on the length of your current program of study, your maximum eligibility period can change if you change to a program that has a different length. Also, if you receive Direct Subsidized Loans for one program and then change to another program, the Direct Subsidized Loans you received for the earlier program will generally count toward your new maximum eligibility period.
Certain types of enrollment may cause you to become responsible for the interest that accrues on your Direct Subsidized Loans when the U.S. Department of Education usually would have paid it. These enrollment patterns are described below:
|Do I become responsible for paying the interest that accrues on my Direct Subsidized Loans because...||Yes||No|
|I am no longer eligible for Direct Subsidized Loans and I stay enrolled in my current program?||X|
|I am no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate program that is the same length or shorter than my prior program?||X|
|I transferred into the shorter program and lost eligibility for Direct Subsidized Loans because I have received Direct Subsidized Loans for a period that equals or exceeds my new, lower maximum eligibility period, which is based on the length of the new program?||X|
|I was no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate program that is longer than my prior program?||X|
|I lose eligibility for Direct Subsidized Loans and immediately withdraw from my program?||X|
|I graduated from my prior program prior to or upon meeting the 150 percent limit, and enroll in an undergraduate program that is the same length or shorter than my prior program?||X|
|I enroll in a graduate or professional program?||X|
|I enroll in preparatory coursework that I am required to complete to enroll in a graduate or professional program?||X|
|I enroll in a teacher certification program (where my school does not award an academic credential)?||X|
- The Federal Direct Loan interest rate for undergraduate subsidized/unsubsidized is a fixed 2.75% as of July 1, 2020.
- The Federal Direct Loan interest rate for graduate unsubsidized is a fixed 4.30% as of July 1, 2020.
Effective October 1, 2020, a loan fee of 1.057% of the principal amount of each loan a student receives will apply. The fees are deducted from your loan prior to disbursement.