What is the difference between Federal Subsidized Direct Loans and Federal Unsubsidized Direct Loans?

Applications for Federal Direct Loans are funded through the U.S. Department of Education.  Interest rates are variable and are established by the Federal Government. Usually the interest rates are very low. Three programs exist - Federal Subsidized Direct Loans, Federal Unsubsidized Direct Loans, and Federal Parent PLUS Loans.

Federal Direct Subsidized Loans
Federal Direct Subsidized Loans are awarded to students who demonstrate need and expressed an interest on the Free Application for Federal Student Aid (FAFSA).

Here's the breakdown:

Borrowers who have earned 0 - 30 credit hours may borrow $3,500 per year.
Borrowers who have earned 31 credit hours or more may borrow $4,500 per year.
All maximum loans must be split over two semesters and a seven month period. Federal Subsidized Direct Loans go into repayment six months after the student ceases to be enrolled at least half-time or graduates from TCC. After a seven month loan period, borrowers are eligible for a new loan. Interest is paid by the Federal Government until the borrower enters repayment.

Federal Direct Unsubsidized Loans
Federal Direct Unsubsidized Loans are awarded to students who don't demonstrate need, or who have other funds meeting need, but have not reached their estimated cost of attendance in financial aid funds and expressed an interest on the Free Application for Federal Student Aid (FAFSA). This loan can be used to replace the Expected Family Contribution (EFC).

The conditions of this loan are identical to the Federal Direct Subsidized Loan, except students are required to pay the interest while in school, or have the interest capitalized into the loan for repayment after graduation.

Federal Parent's Loan for Undergraduate Students (PLUS)
Parents who demonstrate appropriate credit worthiness are eligible to borrow a low interest loan, up to the cost of education less any financial aid received, for their student. TCC requires the student to complete the Free Application for Federal Student Aid (FAFSA) and have a valid ISIR or SAR on file with the Financial Aid Office in order to process a PLUS Loan. Tuition and fees are not deferred for students awarded PLUS loans.

Independent students or students whose parents are denied a PLUS loan
Independent students, or students whose parents are denied for the Parent's Loan for Undergraduate Students (PLUS), may be eligible to borrow up to an additional $6,000 per academic year in this program, split over two terms.

Students who are awarded a Direct Loan are not required to borrow. However, students who choose to accept the loan must complete the Master Promissory Note online at StudentAid.gov. The Master Promissory Note must be completed as funds cannot be used for deferment of tuition and fees and funds will not be forwarded to TCC until this step has been completed and verified by the Financial Aid Office. If a student chooses not to accept the Direct Loan(s), he/she must notify the Financial Aid Office so the loan can be cancelled.


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Article ID: 21166
Wed 12/7/16 2:48 PM
Wed 11/1/23 1:41 PM