How to Apply for Federal Direct Subsidized/Unsubsidized Loans
Eligibility
To be eligible for Direct Subsidized/Unsibsidized Loans, you must meet Federal and Penn State Financial Aid Eligibility Requirements. In order to be eligible, you must:
- Be enrolled in a degree-seeking program
- Be enrolled half time (6 credits for undergraduates and 5 for graduates)
- Meet the minimum requirements for Satisfactory Academic Progress
- Not be in default on previous federal direct loans
How to Apply
You will automatically be considered for Direct Subsidized and Unsubsidized Loans if you submit the Free Application for Federal Student Aid (FAFSA). The loans will be added to your student aid Financial Aid Offer in LionPATH once awarding begins for the academic year (April for first time students and July for returning students).
First-time borrowers also need to complete Entrance Counseling and a Master Promissory Note at studentaid.gov. In most cases, you will only need to complete these items once during your college career.
Your Subsidized/Unsubsidized loans will appear as a credit on your tuition bill after you complete these requirements.
- Complete your loan counseling requirement by logging onto studentaid.gov and open "Complete Counseling"
- Sign a MPN* by logging onto studentaid.gov and choose the Direct Loan MPN you want to preview or complete.
*If you have technical difficulty signing the MPN, please contact the U.S. Department of Education's Student Loan Support Center at 800-557-7394.
Comparison of Direct Subsidized and Unsubsidized Loans
Direct Subsidized Loan | Direct Unsubsidized Loan |
| Based on financial need | Not based on financial need |
| The federal government pays the interest on the loan while you are enrolled in school at least half-time. | Interest begins accumulating as soon as funds are disbursed until the loan is paid in full. Accrued interest will be added to the balance of the loan. (You are not required to pay the interest while you are in school, but we recommend that you do, if possible.) |
Interest Rates
Due to the Bipartisan Student Loan Certainty Act of 2013, Direct Loans interest rates will be tied to the financial market. Under the new interest rate structure, rates will be determined each June for new loans and will be fixed for the life of the loan. The rates are calculated using a 10-year Treasury Note Index plus an add-on amount for each loan program and include interest rate caps. Learn more about how interest is calculated from the U.S Department of Education.
The following fixed interest rates are for Direct Loans first disbursed on or after July 1, 2022 and prior to July 1, 2023.
| Direct Subsidized Loan for undergraduate students | 4.99% |
| Direct Unsubsidized Loan for undergraduate students | 4.99% |
| Direct Unsubsidized Loan for graduate students | 6.54% |
The following fixed interest rates are for Direct Loans first disbursed on or after July 1, 2023 and prior to July 1, 2024.
| Direct Subsidized Loan for undergraduate students | 5.50% |
| Direct Unsubsidized Loan for undergraduate students | 5.50% |
| Direct Unsubsidized Loan for graduate students | 7.05% |
Origination Fees
The loan origination fee is a fee charged by your lender upon entering into a loan agreement to cover the cost of processing the loan. This agreement will be made when you sign the Master Promissory Note (MPN) at studentaid.gov. The fee will be taken out of the gross amount of your loan when the funds are disbursed to the school. See examples of net vs gross amounts below.
| The origination fee for Direct Subsidized/Unsubsidized loans first disbursed on/after Oct 1, 2019 and before Oct 1, 2020 | 1.059% |
| The origination fee for Direct Subsidized/Unsubsidized loans first disbursed on/after Oct 1, 2020 and before Oct 1, 2023 | 1.057% |
Net vs. Gross Amount of Loan
Your Direct Subsidized or Unsubsidized Loan will appear on both the Financial Aid Offer and Bursar Tuition Bills section on LionPATH; however, the loan amounts will be different.
The loan amount on the Student Financial Aid Offer is the gross amount.
The Bursar Tuition Bills section will reflect the net amount after the loan origination fees have been deducted.
Once you have accepted your loan, the funds will automatically disburse to your student account after classes begin.
Example 1
You are offered a $2,750 Direct Subsidized Loan for one semester:
- $2,750 is your gross loan amount.
- $2,721 is your net loan amount that will disburse to your student account (gross amount minus the origination fee).
Example 2
You are offered a $1,000 Direct Unsubsidized Loan for one semester:
- $1,000 is your gross loan amount.
- $990 is your net loan amount that will disburse to your student account (gross amount minus the origination fee).