Direct Loan (William D. Ford Federal Direct Loan)
Unsubsidized Direct Stafford Loan
The Federal Direct Student Loan Program (FDSLP) provides low-interest loans to students to help pay their costs of postsecondary education. The Direct Loan is a federally funded loan. UCI is the loan originator. The U.S. Department of Education is the lender. Direct Loans are either subsidized or unsubsidized.
A subsidized loan is awarded on the basis of financial need. Borrowers are not charged interest during full-time enrollment, grace periods, or authorized periods of deferment. The federal government "subsidizes" the interest during these periods.
An unsubsidized loan is not awarded on the basis of need. Borrowers are charged interest from the time the loan is disbursed until it is paid in full. If the interest is allowed to accumulate, it will be capitalized; that is, the interest will be added to the principal amount of the loan and additional interest will be based upon the higher amount. This increases the amount to repay. A borrower who chooses to pay the interest as it accumulates will repay less in the long run.
Loan limits: Maximum loan limits for full-time students are:
Undergraduate students
$2,625 - first full academic year
$3,500 - second full academic year
$5,500 - per full academic year, after completion of the second year
Graduate and professional students
$8,500 - per full academic year
Independent undergraduate students
$4,000 - per full academic year, first and second years
$5,000 - per full academic year, after completion of the second year
Graduate and professional students
$10,000 - per full academic year
Aggregate loan limits: The aggregate unpaid principal amount of all Direct Loans and loans received under the Federal Family Educational Loan Program (FFELP) may not exceed:
$23,000 - dependent undergraduate students
$46,000 - independent undergraduate students (only $23,000 of this amount may be subsidized loans)
$138,500 graduate and professional students (only $65,500 of this amount may be subsidized loans), including undergraduate loans
Total origination or insurance fee: 4% of the principal amount of the loan
Interest rate:
91-day T-bill + 3.10%The interest rate will vary annually. Rates are adjusted each July 1, based on the final auction of the 91-day Treasury bill held prior to June 1, plus 3.10%. New interest rates for Federal Direct Subsidized, Unsubsidized, and PLUS loans are available at the Department of Education's web site.
The annual interest rate is capped at 8.25%
Prepayment:
No penalty for early repaymentInitial grace period:
6 monthsDuring the grace period on a subsidized loan, no principal and no interest is charged. During the grace period on an unsubsidized loan, no principal is due, but interest accrues; borrowers may either pay the interest or allow it to be capitalized.
Repayment period begins: Six months after graduating, leaving school, or dropping below half-time enrollment.
Repayment plan(s):
There are four repayment plans for Direct Loans. Borrowers may select a plan before beginning repayment and can switch repayment plans at any time by notifying the loan servicer.Standard plan - up to 10 years to repay
Extended plan - varies 12 to 30 years to repay
Graduated plan - varies 12 - 30 years and payment increase every two years
Income contingent plan - up to 25 years and the payment amount is based on your adjust gross income, total indebtedness, and the size of your family
Try the interactive calculator at the Department of Education's web site to explore the differences in monthly payments, total payments, and interest paid for the four different repayment plans.
Credit reporting:
The U.S. Department of Education may report the status of loans to national credit bureaus.Late charges:
6% of each installment or portion of an installment that is late.Late charges are assessed for failure to pay all or a portion of a required installment payment within ten days after it is due.
Deferments:
Upon approval of properly documented written requests, borrowers may defer making scheduled installment payments. You can download deferment forms in Portable Document Format (PDF) from the Department of Education. Alternatively, you can complete and even submit deferments online through the Direct Loan Servicer web site.For subsidized loans, interest is not charged during the deferment. For unsubsidized loans, interest accrues during the deferment and if the interest is not paid as it accrues, it is be capitalized. Deferment may be granted for these periods:
Student Deferment
Enrollment and attendance as a regular student in an approved graduate fellowship program.
Enrollment and attendance in an approved rehabilitation training program for individuals with disabilities.
Unemployment
Economic hardship
Post-deferment Grace Periods
Forbearance:
Upon properly documented written request, borrowers who are willing but unable to make scheduled payments may be entitled to temporary forbearance of principal payments or principal and interest payments, or to the reduction of payments under certain special circumstances. These circumstances may include poor health, medical or dental internship or residency, and serving in a national service position under the National and Community Service Trust Act of 1993. Forbearance is renewable at intervals up to12 months. The Secretary may grant forbearance, not to exceed three years, for other special circumstances such as excessive Title IV debt burden.Whether loans are subsidized or unsubsidized, interest is charged during periods of forbearance. If interest is not paid as it accrues, it is capitalized.
Death cancellation:
The total amount owed on the loan is canceled in the event of the death of the borrower.Permanent and total disability:
The total amount owed on the loan is canceled if the borrower becomes permanently and totally disabled after receiving the loan.Default:
Failure to make an installment payment when it is due or to comply with the other terms of the promissory note may result in the following: