Types of Direct Student Loans

There are two types of Direct Student Loans: subsidized and unsubsidized.  The Federal government pays the interest on subsidized Direct Student Loans while the student is in school and enrolled for at least 6 credits or in a deferment period. With unsubsidized Direct Student Loans, the student is responsible to either pay or capitalize the interest while in school or during a deferment period.

Borrowing Limits

The amount of Direct Student Loan a student may borrow is determined by grade level, cost of attendance, family contribution and other aid. The loan limits for subsidized and unsubsidized Direct Student Loans combined are:

Grade Level Limits Dependent Independent
1st Year (0-23 earned credits) Subsidized/Unsubsidized $ 3,500 $ 3,500
Additional Unsubsidized $ 2,000
Additional Unsubsidized $ 4,000* $ 6,000*
2nd Year (24-53 earned credits) Subsidized/Unsubsidized $ 4,500 $ 4,500
Additional Unsubsidized $ 2,000
Additional Unsubsidized $ 4,000* $ 6,000*
3rd & 4th Year (54 or more earned credits) Subsidized/Unsubsidized $ 5,500 $ 5,500
Additional Unsubsidized $ 2,000
Additional Unsubsidized $ 5,000* $ 7,000*

*Students considered independent for financial aid purposes, and dependent students whose parents have been denied a PLUS loan, may be eligible to borrow additional unsubsidized Direct Student Loan funds beyond the regular limits. Unsubsidized Direct Student Loan limits for independent students are increased by $4,000 for freshmen and sophomores, and $5,000 for juniors and seniors.


Origination fees totaling up to 1.057% are deducted from each disbursement made after October 1st 2020. These are collected by the Federal government and the guarantee agency to offset the cost of the loan program and loan defaults.

Interest Rate

The interest rate for subsidized and unsubsidized Direct Student Loans is variable and capped at 8.25%. The interest rate is set annually by the Federal government after June 30.

Other Requirements

Loan Counseling: First time Federal Direct Student Loan borrowers must receive loan counseling, the purpose of which is to explain the Stafford Loan program and student rights and responsibilities. Students will be instructed how to satisfy this requirement with their award notice.

Completing the Master Promissory Note (MPN):First time Federal Direct Student Loan borrowers must complete a Master Promissory Note which can be done online.  Click on the link above and follow the instructions.  The MPN provides the convenience of completing one promissory note for all the Federal Direct Student Loans you will borrow for up to 10 years.

Loan Disbursement

Federal Direct Student Loan funds generally are divided equally between semesters and are disbursed (paid) to a student by Electronic Funds Transfer (EFT). With EFT, loan funds are electronically transmitted from the Department of Education directly to the student’s account with the Merrill Center.  Credit balances resulting from loan disbursements are refunded to the student (according to dates established by the Merrill Center), or the student may authorize the credit balance to remain on her/his account to be applied toward future charges within the same academic year.

Direct Student Loan Cancellation: If you receive a Direct Student Loan, your account will be credited with your loan proceeds. The Finances Section of your MaineStreet Student Center will show the transaction(s) as soon as it occurs. You may cancel all or a portion of your loan if you inform us within 14 days after the date that your loan proceeds are credited to your account, or by the first day of the payment period (first day of the semester), whichever is later. To cancel your loan, you must submit a signed written request to the Merrill Center.

For more information about this program, please visit the U.S. Department of Education website.