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Federal Direct Loan Information

What is the Federal Direct Loan Program? 

The Federal Direct Loan Program provides students the opportunity to be offered Subsidized and Unsubsidized loan funds.  The Department of Education acts as the lender, providing funds for the Direct Loan Program and transferring those dollars to SMSU to be applied toward your account.

To accept Subsidized or Unsubsidized Federal Direct Loans that you have been awarded every student must:

#1  - Complete and submit your loan request via e-services.

First Time Direct Loan Borrowers must:

#2 - Complete a Master Promissory Note with the Federal Direct Loan Program. The website address for this link is  You will need to know your Department of Education Federal Student Aid ID (FSA ID) to complete this process.

First Time Loan Borrowers must also:

#3 - Complete Entrance Counseling before your Federal Direct Loan will be certified by the SMSU Financial Aid Office.  Access the counseling session at:  You will need to know your Department of Education Federal Student Aid ID (FSA ID ) to complete this process.

The Federal Direct Loan Program consists of two slightly different loan programs – Subsidized and Unsubsidized.

Subsidized Federal Direct Loans are need-based, long-term loans. Interest and principal on subsidized loans are deferred as long as the student carries at least a half time credit load.  The interest rate is 5.5%.

Unsubsidized Federal Direct Loans are similar to Subsidized Federal Direct Loans except that only the principal is deferred while the borrower is enrolled in school. The interest must either be paid during the in-school period or the interest will accrue and be added to the principal balance.  The interest rate is 5.5% for undergraduate students and 7.05% for graduate students.

A Federal Direct Loan is a loan, not a grant. This loan must be repaid. Before you borrow, determine your budget. Do you need loan funds to meet your educational costs? How much do you need? Don’t just borrow because the funds are available – Remember, you will have to repay these funds.

Fees: A loan fee of 1.057% of the principal amount will be deducted from the loan disbursement.  The fee helps reduce the cost of making these low-interest loans.  The loan amount you receive will be less than the amount you have to repay.

Borrowing Limits for Federal Direct Loans are determined by the federal government and are the same at all educational institutions. The combined Subsidized and Unsubsidized Federal Direct Loan limits per year per grade level are:

  • Freshmen - $5,500
  • Sophomore - $6,500
  • Junior or Senior - $7,500
  • Graduate Student - $20,500

Independent students may borrow additional funds under the Unsubsidized Federal Direct Loan program.

Aggregate Federal Direct Loan Limits: The Federal government limits the total amount of loan funds a student is allowed to borrow throughout their educational career. These limits are a combination of Subsidized and Unsubsidized Federal Direct Loans.

  • Dependent Undergraduate Student - $31,000
  • Independent Undergraduate Student - $57,500
  • Graduate Student - $138,500

Repayment of Principle: When a student graduates or ceases to be enrolled at least half time, a six-month grace period begins. During the grace period, interest begins to accrue. Repayment begins on principal and interest during month seven.

Last Modified: 5/25/23 10:19 AM | Website Feedback