Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans) are low-cost, fixed-rate federal student loans available to graduate students, not just undergraduate students. Direct Unsubsidized Loans are the most common — and among the lowest-cost — ways to pay for graduate school and professional school.
Key loan benefits for students attending graduate school or professional school:
You need to file the FAFSA (Free Application for Federal Student Aid) before you can take out federal student loans from the Direct Loans program.
Direct Unsubsidized Loans are available to students attending graduate school and professional school.
Degree programs and common examples:
Loan eligibility and the loan limits are not based on demonstrated financial need. Even wealthy students can borrow through the program.
The interest rates on Direct Unsubsidized Loans for graduate students are fixed and do not change over the life of the loan. The interest rate for the 2015-2016 academic year is 5.31%. This is less expensive than the 6.31% interest rate on Grad PLUS Loans.
Every year on July 1, interest rates are reset based on current market rates. The interest rates are based on the 10-year Treasury rate (determined each year by the final auction prior to June 1) plus a fix margin (see table).
|Loan Program||Interest Rate Formula||Interest Rate Cap||Current Interest Rate (2016-2017)|
|Direct Unsubsidized Loan (for Graduate Students)||10-Year Treasury + 3.6%||9.5%||5.31%|
The interest on a Direct Unsubsidized Loan starts to add up (accrue) from the date the loan is first disbursed. If you don’t pay the interest as it accrues, it will be capitalized (added to the loan balance), increasing the size of the loan.
Interest rates: Fixed, 2006-2007 to present
|Academic Year||Graduate School and
Interest rates: Variable, prior to 2006-2007
Before 2006-2007, interest rates on Stafford Loans (now known as Direct Loans) were variable, with different rates, depending on whether the borrower was in school, in the 6-month grace period after leaving school, or in the repayment period. (In 1993-1994 and earlier award years, the interest rates were the same for the in-school, grace, and repayment periods.) Interest rates during the repayment period were 0.60% higher (see table).
At that time, borrowers could lock in their interest rate (rounded to the nearest 1/8th of a percentage point) by consolidating the loans. Rates were the same for undergraduate, graduate, and professional students. Interest rates were also the same for subsidized and unsubsidized Stafford Loans.
|Academic Year||In-School and Grace Periods||Repayment Period|
Fees on Direct Unsubsidized Loans
The current fee on the Direct Unsubsidized Loan for graduate students is 1.068%. This is less expensive than the 4.272% fee on Grad PLUS Loans.
||Total Loan Fees|
|2015-2016 (10/1/15 - 9/30/16)||1.068%|
|2014-2015 (10/1/14 - 9/30/15)||1.073%|
|2014-2015 (7/1/14 - 9/30/14)||1.072%|
|2013-2014 (12/1/13 - 6/30/14)||1.072%|
|2013-2014 (7/1/13 - 11/30/13)||1.051%|
|2005-2006 and before||4.0%|
How fees affect the total loan cost
Loan fees are basically a form of up-front interest. For example, if your loan has a 10-year repayment term, a 4% fee is the about the same as an increase of about .875% to 1% in the interest rate. If your loan has a 30-year repayment term, a 4% fee is the same as an increase of about .334% to .5% in the interest rate.
Students attending graduate school or professional school can borrow up to $20,500 per year in Direct Unsubsidized Loans. The aggregate (cumulative) loan limit is $138,500, including undergraduate debt (and no more than $65,500 in Direct Subsidized Loans).
Medical school and health professions students may borrow up to $40,500 per year and have an aggregate loan limit of up to $224,000. (Learn more about the borrowing limits for various medical fields of study.)
Direct Unsubsidized Loans for Graduate Students — Borrowing Limits
Students attending graduate school or professional school who have exhausted eligibility for the Direct Unsubsidized Loan can take out a Grad PLUS Loan, another low-cost, fixed-rate federal student loan.
The U.S. Department of Education sends the Direct Loan funds to your school to be credited to your account. In most cases, the loan will be sent (disbursed) in at least two installments.
Loan funds are credited to your account in this order:
If any loan funds remain in your account, the credit balance will be refunded to you by check, cash, debit card, or electronic funds transfer (EFT) to your bank account. Remember, the refund must be used to pay for your education expenses, such as textbooks, supplies, and equipment.
While you are enrolled in school at least half-time, your Direct Loan will be placed into deferment, which means you don’t have to make any payments. In addition, you don’t have to make payments during the 6-month grace period after you graduate or drop below half-time enrollment status. Just remember that interest on your loan will start to accrue (add up) as soon as all of the loan funds are sent to your school. Even though you aren’t making any payments, interest is still adding up.
The standard repayment term on Direct Loans is 10 years. However, you can qualify for a longer repayment term if you consolidate the loans or have more than $30,000 in federal student loans with a single lender.
Graduate students who borrow Direct Unsubsidized Loans are generally eligible for all of the different repayment plans offered by the U.S. Department of Education.
Eligible repayment plans:
Grad PLUS Loan
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