What is a Direct Subsidized Loan?

A Direct Subsidized Loan is a federal student loan that is awarded on the basis of financial need. The US Department of Education pays the interest on these loans while the student is in school, during the grace period, and during periods of deferment.

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What is a Direct Subsidized Loan?

A Direct Subsidized Loan is a federal student loan that is awarded on the basis of financial need. To be eligible, you must be enrolled at least half-time in a degree or certificate program at a school that participates in the Direct Loan Program.

The U.S. Department of Education (ED) pays the interest on a Direct Subsidized Loan while you’re in school at least half-time, during your grace period, and during deferment periods. You’re not responsible for paying the interest that accrues during these periods. If you choose to pay the interest while you’re in school and during your grace period, you can lower the amount of interest that will accrue on your loan.

How to Apply for a Direct Subsidized Loan

If you’re a student with financial need, you may be able to get a Direct Subsidized Loan—often called a “Subsidized Stafford Loan”—to help pay for college or career school. With this type of loan, the U.S. Department of Education (the Department) pays the interest while you’re in school at least half-time, for the first six months after you leave school (referred to as your grace period*), and during a deferment (a postpone).

To get a Direct Subsidized Loan, you must first complete and submit a Free Application for Federal Student Aid (FAFSA®) form. Based on the information provided on your FAFSA form, your school will send you a financial aid offer, which may include Direct Subsidized Loans. Review your financial aid offer and accept or decline each type of aid based on how much money you need to help pay for school and whether you will be able to meet all the requirements associated with each type of aid before deciding which types of aid to accept.

If you decide to take out a Direct Subsidized Loan as part of your financial aid award at your school, then you will need to:
·Complete any additional forms required by your school
·Sign and return your promissory note—the legally binding contract between you and the Department that explains the terms and conditions of your loan

How to Get a Direct Subsidized Loan

To get a Direct Subsidized Loan, you must first file a Free Application for Federal Student Aid (FAFSA®) form.

After you and your school have determined that you’re eligible for a Direct Subsidized Loan, your school will give you information on how to complete the Master Promissory Note (MPN). You’ll also be asked to complete entrance counseling, which explains your responsibilities and rights as a borrower.

You’ll need to sign and return the completed MPN to your school.

What are the Benefits of a Direct Subsidized Loan?

The biggest benefit of a Direct Subsidized Loan is that the government will pay the interest while you are in school at least half-time, during your grace period, and during deferment periods. This can save you a lot of money over the life of your loan.

What are the Disadvantages of a Direct Subsidized Loan?

Direct Subsidized Loans do have some disadvantages. For one, the interest rate is not fixed – so it could potentially increase over time. Additionally, these loans are only available to undergraduate students – so if you’re a graduate or professional student, you won’t be able to take advantage of this type of loan.