Office of Student Financial Aid

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What is a Direct Stafford/Ford Loan?

Direct Stafford/Ford loans are funded by the federal government. The federal government raises the loan funds through its regular Treasury bill auctions. Direct Loans are loans made with federal capital and owned by the federal government. Loan repayments are made to the government branch called the Department of Education. Repayment of Direct Loan funds begins six months after the student graduates or ceases enrollment at least half-time.


There are two types of Direct Loans offered at SF State University:

  1. Subsidized Direct Loans

    are loans that the government will not charge you interest on prior to repayment. The federal government pays the interest while the student remains enrolled in school at least half-time, during the 6-month grace period, and during all eligible periods of deferment. The current interest rate for Undergraduate Direct Subsidized loan is fixed at 5.6%

    2. Graduate Subsidized Direct loans have a 6.8% interest rate.


  2. Unsubsidized Direct Loans

    are loans that you are charged interest on from the day the loan funds are disbursed until you repay the loan in full. The principal loan balance payments are deferred, if you are enrolled in a college or university at least a half-time. However, you must pay interest on the Unsubsidized loan while you are in school and during any grace or in-school deferment periods. You may choose to have the interest deferred. This will result in the deferred interest being added to the principle loan amount borrowed at the time your repayment begins. This is called capitalization. Having the interest capitalized will mean a higher loan amount owed than originally borrowed. The current interest rate for a Direct Unsubsidized loan is fixed at 6.8%.



    3. Subsidized Loan - interest is paid by the government while you are in school.
    Unsubsidized Loan - YOU pay the monthly interest while you are in school.



    Direct Loan Origination fees:

    The loan origination fee is an expense of borrowing Direct Subsidized/Unsubsidized Loans. The Direct Loan origination fee effective July 1, 2009 will be 1.5% with a Direct Loan up-front interest rebate amount of 1.0%. The calculation of the combined fee/interest rebate amount reduces the total loan amount paid to you by 0.5% percent. By law, these fees will be subtracted proportionately from each loan disbursement. (You will learn more about the loan origination fee during your on-line entrance counseling session) www.dl.ed.gov


Eligibility Requirements:

To be eligible to receive a Direct Stafford loan, you must:

  1. Accept your financial aid offer

  2. Complete a Subsidized/Unsubsidized Master Promissory Note. http://dlenote.ed.gov

  3. Complete Stafford Entrance Loan Counseling, if this will be your first federal student loan. www.dl.ed.gov

  4. Be accepted for enrollment in a degree program at San Francisco State University.
    (Unclassified graduates and some students enrolled through College of Extended Learning are not eligible)

  5. Be registered at least half-time: 6 units for Undergraduates, second bachelor and Credential students.
    4 graduate units for master's degree students.

  6. Not be in default on a student loan. Examples: GSL, Perkins, Direct or FFEL Stafford loans.

  7. Not owe a repayment on a student grant. Examples: PELL, SUGP, SEOG, or Cal grant.

  8. Make Satisfactory Academic Progress.



Loan Proration for Graduating Borrowers

Generally, a dependent or independent undergraduate student may borrow up to the annual limit applicable to the student's year in school. However, the maximum amount an undergraduate student may borrow must be prorated, in certain situations.


We must prorate a Stafford Loan limit for an undergraduate student if:

  • The academic program is shorter than an academic year; or

  • The student's remaining period of study is shorter than an academic year.

Federal Direct Loan limits are not prorated for students enrolled in graduate, professional level programs or students taking preparatory coursework or coursework necessary for teacher certification.


Receiving Your Loan Funds

  • Once we have received your Financial Aid Offer acceptance and your signed master promissory note, we will subsequently process your loan request and authorize the disbursement of your loan.

  • All Federal Direct Loans for the academic year will be disbursed in two equal disbursements: one half in the fall semester and one half in the spring semester.


Additional Unsubsidized Direct Loan for Dependent Students:

If a dependent student's parents are denied a parent PLUS loan, the student may be eligible for an increase to the unsubsidized Direct Loan. Interested students should speak with a financial aid counselor.


Replacing Federal Work Study Award

A student may be able to replace the federal work study award with a Direct Loan, if a student is awarded federal work study and does not plan to use the award for employment. The student must have remaining eligibility for the loan increase or loan award. Interested students should speak with a financial aid counselor.



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