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Federal Direct Loan Information

Federal Direct Loans 

Federal Direct Loans are obtained through the U.S. Department of Education after a student is determined to be eligible. Students who are not eligible for interest benefits may receive a Federal Direct Unsubsidized Loan. Repayment for a Federal Direct Loan begins six months after the recipient graduates or drops to less than half-time enrollment. The interest rate is 5.045% for subsidized loans and unsubsidized loans disbursed after July 1, 2018. 

Subsidized vs. Unsubsidized Loans

Subsidized loans do not accrue interest until six months after graduation or once the student is enrolled in less than six hours. During this time, the government pays your interest. Unsubsidized loans begin accruing interest from their first disbursement.

Federal Direct Plus (Parent) Loans

The Parent Loan for Undergraduate Students (PLUS) is available for parents of dependent students. The 7.595% interest rate is fixed for PLUS loans disbursed after July 1, 2018. Repayment begins within 60 days after the last disbursement for the current term unless parents request in-school deferment. Parents can apply for a PLUS loan at the Federal Direct Loan website.

Annual Loan Limits

The amount you can borrow each year for Federal Direct subsidized and/or unsubsidized loans depends on your grade level and whether you are a dependent or independent student (see chart below). Loan amounts are also limited by additional financial aid you may receive (scholarships, grants, etc.), the cost of attendance and (in the case of subsidized loans) your Expected Family Contribution (EFC).


Dependent student

Independent student*

Freshman Undergraduate
(0-29 credit hours)

$5,500 per school year
(up to $3,500 of which may be subsidized)

$9,500 per school year
(up to $3,500 of which may be subsidized)

Sophomore Undergraduate
(30 or more credit hours)

$6,500 per school year
(up to $4,500 of which may be subsidized)

$10,500 per school year
(up to $4,500 of which may be subsidized)

Aggregate (total) loan limits for all subsidized and unsubsidized Federal Loans, whether solely from the Direct Loan Program or in combination with a previous Federal Family Education Loan Program (FFELP), are:

  • $31,000 for a dependent undergraduate student (no more than $23,000 may be subsidized)
  • $57,500 for an independent undergraduate student* (no more than $23,000 may be subsidized)

*This includes dependent students whose parents are unable to borrow a PLUS loan.

A Federal Direct Plus loan allows the parent of a dependent undergraduate student to borrow on behalf of the student. The maximum loan amount may not exceed the student's cost of attendance minus other financial aid the student receives.

Accepting Your Federal Loan

If you want to accept a Federal Direct Loan listed on your award letter, you may do so via your Pipeline account. Once accepted via your Pipeline account, you are required to complete online loan entrance counseling and/or a Federal Direct Loan Master Promissory Note (MPN). You must be enrolled in at least six college credits at Butler and be making financial aid satisfactory academic progress in order for your loan to be processed.  It may be helpful to review the Steps for Processing Your Direct Loan.

Effective July 1, 2013 all NEW direct loan borrowers will have a 150% limit on the amount of time they can borrow subsidized loans based on their program of study. For students seeking a one-year certificate this time frame is 1.5 years. For students seeking an associate degree this time frame is three years. Once loan borrowers reach this 150% limitation, eligibility for interest subsidy ends for all subsidized loans that were disbursed on or after July 1, 2013.

Managing Your Repayment Options

The U.S. Department of Education has several repayment plans designed to meet your needs.

If you have previously borrowed federal student loans, you may set up an account with the National Student Loan Data System (NSLDS) to review your outstanding current loan debt before accepting further loans.