The largest source of low-interest loans administered by the U.S. Department of Education is the Federal Direct Loan program. Federal Direct Loan funding is available to all undergraduate students who have completed the FAFSA, enrolled as a matriculated student in an eligible degree program, registered for at least six credit hours per term, are U.S. citizens or resident aliens, and who are not in default on a prior student loan. Creditworthiness is not a requirement for the Direct loan.
Direct loans are either subsidized (e.g., the loan does not accrue interest while the student is enrolled in at least six credit hours) or unsubsidized. Subsidized loans are awarded on the basis of financial need as determined by the financial data provided by the student on the FAFSA and in conjunction with other forms of financial aid awarded to the student. Unsubsidized loans are available to students who may not have “need,” as described previously, but who would benefit from having access to a low-interest student loan program. Unlike the subsidized loan, the government does not pay the interest that accrues for unsubsidized loan borrowers, even while they are enrolled in at least six credit hours in an eligible program of study.
Through either subsidized or unsubsidized loans, students can borrow the following maximum annual amounts:
- $5,500 for undergraduate students who have completed fewer than 30 credits, with no more than $3,500 in the subsidized loan
- $6,500 for undergraduate students who have completed 30 to 59 credits, with no more than $4,500 in the subsidized loan
- $7,500 for undergraduate students who have completed more than 60 credits, with no more than $5,500 in the subsidized loan
In addition to the Federal Direct Loan limits listed above, independent students (or dependent students whose parents are unable to borrow a Federal Direct PLUS Loan) may borrow additional amounts under the unsubsidized Federal Direct Loan program, as follows:
- $4,000 per year for undergraduate students who have completed fewer than 60 credits
- $5,000 per year for undergraduate students who have completed more than 60 credits
In addition to annual borrowing limits, students are also limited in the total amount they can borrow from the Federal Direct Loan program during their undergraduate and graduate academic careers. These limits are referred to as aggregate loan maximums and will vary depending on the student’s dependency status and degree being sought. The aggregate amount a dependent undergraduate student may borrow from the subsidized and unsubsidized loan programs combined is $31,000 (with no more than $23,000 in the subsidized loan.) Independent undergraduate students or dependent students whose parents are unable to borrow a Federal Direct PLUS Loan may borrow a total of $57,500 (with no more than $23,000 in the subsidized loan.) On average, students who graduated from Monmouth University in 2019 borrowed approximately $26,012 in Direct loans with an expected monthly payment of $268.
The University’s Financial Aid Office will notify the student when to sign their Master Promissory Note (MPN) for their Direct loans. The student need not seek a loan application from a private banking institution.
Monmouth University is responsible for delivering the funds to the student; funds will be transferred electronically to the student’s account. All first-time Federal Direct Loan borrowers must participate in a loan counseling session before receiving the first disbursement of their loan proceeds. For your convenience, you are able to complete this session online. Begin the entrance counseling session.
The interest rate for both the Subsidized and Unsubsidized loans for 2021-22 is fixed at 3.73%.
Borrowers are charged, by the federal government, an upfront origination fee of 1.057% of the principal amount of the loan.
For students who borrow under the unsubsidized loan program, the interest must be paid by the borrower. This can be done in one of two ways. While the student is enrolled, the borrower can pay the interest as it accrues. Alternatively, rather than pay the interest during periods of enrollment, borrowers can have that interest capitalized, which means adding it to the principal amount borrowed. All capitalized interest must be repaid. The important thing to note here is that capitalized interest becomes principal in this process. Thus, students who use this second option end up paying interest on accrued (and then capitalized) interest.
For all Direct loan borrowers, repayment of principal and interest begins six months after graduation or termination of enrollment on at least a half-time basis. The federal government requires that students complete an exit counseling session when they graduate, withdraw, or drop below half-time attendance (i.e., less than six credits). For your convenience, you are able to complete this session online. Please use this link to begin the exit counseling session. To get an idea as to what your repayment amounts may look like, please take a look at the standard repayment table.