Federal Direct Student Loans

Federal Direct Student Loans are loans made available to college students and are to be used for educationally related expenses to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. government or may be unsubsidized depending on the student’s financial need.

Nearly all students are eligible to receive them (regardless of credit score or other financial issues).

Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education directly and both types offer a grace period of six months, which means that no payments are due until six months after you graduate, leave school, or drop below half-time enrollment.

Both types have a fairly modest annual limit. The limit for the academic year is $3,500 per year for freshman undergraduate students, $4,500 for sophomore undergrads, and $5,500 per year for junior and senior undergrads. An increase in undergraduate loan limits due to new legislation H.R. 5715 “Ensuring Continued Access to Student Loans Act of 2008” raises the annual unsubsidized Direct Loan amount by an additional $2,000.

If you are an independent student as determined by the FAFSA, or a dependent undergraduate whose parents are unable to borrow under the Federal Direct Parent Loan for Undergraduate Students (PLUS) program, you may be eligible to borrow additional amounts under the unsubsidized Federal Direct Student Loan program.

The aggregate amount you can borrow for all undergraduate study for dependent students whose parents have not been denied a PLUS loan, is $31,000. Changes under H.R. 5715 are effective July 1, 2008. Contact the Office of Admissions and Financial Aid for additional information.

Subsidized Loans

Subsidized federal student loans are offered to students with a demonstrated financial need. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe only the principal amount of $10,000 when they leave school.

Unsubsidized Loans

Unsubsidized federal student loans are also guaranteed by the U.S. government, but the government does not pay interest for the student, rather the interest accrues during college. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation.

For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Upon graduation, interest will begin accruing on the $12,000. The accrued interest will be “capitalized” into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college.

Interest Rates and Origination Fees


The interest rate for new Federal Direct Subsidized and Unsubsidized loans first disbursed on or after July 1, 2021, and prior to July 1, 2022, is a fixed rate of 3.73%.


For loans disbursed on or after October 1, 2020 and before October 1, 2022, the origination fee will be 1.057%.

To apply for a Direct Student Loan at New College, you must:

  • Complete a FAFSA and submit it to New College using the code 039574.
  • Complete and submit verification paperwork and supporting documents if selected.
  • Complete the online Entrance Interview here if you have never borrowed a Direct Loan before.
  • E-sign a Master Promissory Note (MPN) here with the U.S. Department of Education.
  • Once you have registered and completed the requirements listed above, accept your loan offer on your student NEWcleis account. Loans are generally available to accept online starting one month prior to the beginning of the fall semester.

Newcleis Loan Instructions
Direct Loan Information Sheet

Student Loan Consolidation

Your federal student loans from previous years should remain in deferment as long as you are enrolled at least half time. You are responsible for notifying your lender if your enrollment status changes. Many Federal Family Education Loan (FFEL) Program lenders have sold their loan portfolios to the Department of Education for servicing.

You will have the option of making separate payments to each agency/loan servicing company or you can also opt to consolidate all loans into one loan. You can find information about the servicers of federal loans at www.studentaid.gov. You will need your Federal Student Aid ID from the FAFSA to access this site.