Office of Student Financial Aid

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Federal Direct Loan Information

What is a Direct Federal Loan?

Direct 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:

  • 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 (except for loans disbursed between July 1, 2012 and July 1, 2014) and during all eligible periods of deferment.
    The fixed interest rate for Undergraduate Direct Subsidized loan effective July 1, 2017 is 4.45% for the 2017-18 year.

    Important federal loan information:

    Effective July 1, 2013, the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Public Law 112-141) was enacted. MAP-21 added a new provision to the Direct Loan statutory requirements that limits a first-time borrower's eligibility for Direct Subsidized Loans to a period not to exceed 150 percent of the length of the borrower's educational program. Under certain conditions, the provision also causes first-time borrowers who have exceeded the 150 percent limit to lose the interest subsidy on their Direct Subsidized Loans. Only "first-time" borrowers on or after July 1, 2013 are subject to the new provision. Your loan maximums are based on the published length of your program. You should check with your department regarding the length of your particular program.
    Example One: if you are enrolled in a four-year undergraduate program, the maximum period for which you can receive Direct Subsidized Loans is six years (150 percent of 4 years = 6 years).
    Example Two: if you are enrolled in a two-year associate degree program or a two year academic certificate program, the maximum period for which you can receive Direct Subsidized Loans is three years (150 percent of 2 years = 3 years). Visit this website for more information regarding the conditions by which a student can lose the subsidized loan subsidy or how the 150% subsidized loan maximum is calculated.

  • Unsubsidized Direct Loans

  • The unsubsidized direct loan is a loan 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 fixed interest rate effective July 1, 2017 is 4.45% for Undergraduate students

    and 6.00% for Graduate students


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

    For More information About Federal Direct loans

    Direct Loan Origination fees:

    The loan origination fee is an expense of borrowing Direct Subsidized/Unsubsidized Loans. The Direct Loan origination fee effective October 1, 2016 will be 1.069%. This calculation reduces the total loan amount paid to you by 1.069% percent. By law, these fees will be subtracted proportionately from each loan disbursement. (You will learn more about Direct loans during your on-line entrance counseling session)

    Eligibility Requirements:

    To be eligible to receive a Direct Subsidized/Unsubsidized Loan, you must:

    1. Accept your financial aid offer

    2. Complete a Direct Subsidized/Unsubsidized Master Promissory Note.

    3. Complete Entrance Loan Counseling, if this will be your first federal Direct student loan.

    4. Be accepted for enrollment in a degree program at SF 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 CURRENTLY in default on a federal student loan. Examples: GSL, Perkins, Direct or FFEL Stafford loans.

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

    8. Make Satisfactory Academic Progress.

    Direct Loan "Proration" for Graduating Borrowers

    Generally, an 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 Direct 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.

    This proration affects graduating seniors and second baccalaureate students.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 Direct Loan Funds

    • Once we have received your Financial Aid Offer acceptance and acknowledgement of 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.

    • Your disbursement balance will be directly deposited to your account (if you have signed up for this option) or mailed to you in a check.

    • You have the right to cancel all or a portion of the student loan(s) or federal Teach grant disbursed to you. To avoid paying the administrative fee on your disbursed Direct loan(s) or accrued interest on a converted federal teach grant, you must return the loan or teach grant funds to the Bursar's office located in the Student Services building, One Stop within 100 days of the original check date. (Do Not Void the original check) You should use a money order or cashier's check, if the original check has been elf deposited or direct deposited in your account.

    Additional Unsubsidized Direct Loan for Dependent Students:

    If a dependent student's parents are denied a parent Direct 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. The loan awards cannot be more than the annual maximum based on the student's class level. Interested students should speak with a financial aid counselor.


    *Conservative borrowing is encouraged. You should never borrow more than you can afford to repay.*

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