Subsidized Federal Direct Loan /Unsubsidized Federal Direct Loan
Federal Direct Loans are low-interest loans for eligible students to help cover the cost of higher education.
- Subsidized Federal Direct Loans—Subsidized Federal Direct Loans are for students with
financial need. You are not charged interest while you’re in school at
least half-time and during grace periods and deferment periods.
- Unsubsidized Federal Direct Loans—You are not required to demonstrate
financial need to receive a Direct Unsubsidized Loan. Interest accrues
(accumulates) on an unsubsidized loan from the time it’s first paid out. You can
pay the interest while you are in school and during grace periods and deferment
or forbearance periods, or you can allow it to accrue and be capitalized (that
is, added to the principal amount of your loan). If you choose not to pay the
interest as it accrues, this will increase the total amount you have to repay
because you will be charged interest on a higher principal
PLUS Federal Direct Loans
Graduate PLUS Federal Direct Loan are for graduate and professional degree students to help cover education expenses beyond the Subsidized/Unsubsidized Direct Loan award.
Parent PLUS Federal Direct Loan are for parents of dependent students to help pay their child's education expenses. The loan is in the parent(s) name, but disbursed to the student.
Federal Direct Loan General Information
Beginning with the 2010 summer
session, the University of Wyoming
will participate exclusively in the Federal Direct Loan (FDL) program.
Students and parents will be required to use the Federal Direct Loan
program for all federal student and parent loans. While UW and the
Wyoming community colleges have long been strong advocates of the
Federal Family Educational Loan Program (FFELP), this decision was made
easier by the fact that legislation is currently before the Senate
(having already been passed by the House) to eliminate FFELP requiring
all colleges and universities to process only Federal Direct Loans
beginning July 1, 2010. This, of course, necessitated and accelerated
the decision to implement Federal Direct Loans prior to financial aid
awarding for the 2010-11 academic year, using the 2010 summer session to
test our processes before the start of the new academic year. In
addition, many lenders that UW students have selected for their loan
funding over the years have indicated that lessening profits and
increasing cash flow issues have forced them out of the student lending
The traditional Federal Family Educational Loan Program
(FFELP) loans (i.e., Stafford Loan, Parent PLUS Loan, and Grad PLUS
Loan) through banks, credit unions, and other student loan lending
companies will no longer be processed at UW, effective the end of the
2010 spring semester. The Federal Direct Loan program has been in
existence since the early 1990's. So, UW is joining an established loan
program. Nationally this past year Federal Direct Loans accounted for
about 40% of student borrowing with FFELP accounting for approximately
60% of the borrowing.
Federal Direct Loan Program Should Prove
Positive for UW Students
- Federal Direct Loans are fully
the Federal student aid delivery process. The Free Application for
Federal Student Aid (FAFSA) serves as the student loan application for
Federal Direct Loans, eliminating the FFELP bank loan delivery method.
Direct Loans eliminate the need for Preferred Lender Lists and the
resulting potential conflicts of interests that occurred in a few
instances in the FFELP bank loan program.
- Unlike the FFELP bank
loan program, the Federal Government is the single source of funds for
Federal Direct Loans which should reduce a source of confusion for
- Using a single point of service may lower
administrative costs for UW.
- As a Federal Direct Loan school,
the OSFA will not be subjected to marketing by lenders for the federal
- Borrowers are free to consolidate their loans
once they graduate.
Direct Loans offer an income contingent loan repayment option with loan
forgiveness after 25 years of repayment. Borrowers with an interest in
working in relatively low-paying, community service jobs can do so
without fear of defaulting on the repayment of their student loans.
Direct Loans have a Public Service Loan Forgiveness program that will
forgive remaining debt after 10 years of eligible employment and
qualifying loan payments for people working in key public service
professions such as teaching, government, social work, law enforcement,
and non-profit 501(c)(3) organizations
- Federal Direct Loans are
never sold by the Federal Government. Student borrowers always know who
holds their loans and what the terms are. FFELP loans are frequently
sold, with promised benefits not honored by the new loan holder(s). The
U.S. Department of Education states that in the last 4 years on average,
each FFELP loan was sold 2.5 times.
- View the Federal Direct Loan Comparison Chart designed to help
you understand the differences between the Federal Direct Loan Program
- For answers to the most commonly asked questions
concerning Federal Direct Loans, including the steps each borrower needs
to take in order to apply for a Direct Loan, click here.