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Federal Direct Loan for Undergraduate Students

What You Need to Know

These loan funds are made available by the U.S. Department of Education to students who apply for federal aid consideration. The University of Dayton’s Office of Financial Aid will determine your eligibility for the funds after a careful review of your FAFSA results.

The program offers students the chance to borrow while enrolled at least half-time at an eligible institution. The student is the borrower on a Direct Subsidized or Unsubsidized Loan. The maximum annual amount that you may borrow under the Federal Direct Loan program depends on your degree program, class level and dependency status.

maximum Annual Amount
Class Level: Credit
First Year 0-29 $5,5001 $9,5001
Second Year 30-59 $6,5002 $10,5002
Third Year 60-89 $7,5003 $12,5003
Fourth Year+ 90+ $7,5003 $12,5003

1maximum of $3,500 subsidized
2maximum of $4,500 subsidized
3maximum of $5,500 subsidized

Federal Direct Loans for undergraduates will have a fixed interest rate. The interest on a subsidized loan will be paid for by the federal government until the loan enters the grace period. Unsubsidized loan interest will begin to accrue upon disbursement and will be capitalized onto the principal balance at repayment unless paid by the borrower during the in-school and grace period. Find current rates on

The U.S. Department of Education will retain an origination fee on any loan disbursement, which is a percentage of the principal loan amount. Therefore, be sure to account for this when determining the amount to borrow. Find current fees on

Repayment begins six (6) months after the student graduates, leaves school, or drops below half-time status. The amount of each payment depends on the size of your debt and on the length of your repayment period (usually ten-years). You can estimate your repayment using the repayment calculator at

Generally, the total combined debt you can have outstanding from all Direct Subsidized and Unsubsidized loans is:

  • $31,000 as a dependent, undergraduate student (of which no more than $23,000 can be subsidized)
  • $57,500 as an independent, undergraduate student or certification student (of which no more than $23,000 can be subsidized)

As a result of legislation enacted in July 2012, eligibility for the interest subsidy will be limited for new borrowers on or after July 1, 2013. The law restricts the period of time for which a borrower may receive subsidized loans, in the aggregate, to 150 percent of the published length of the student’s current educational program. Once the student reaches that limit, he or she may borrow only unsubsidized loans, and interest begins to accrue on the student’s outstanding subsidized loan.

In order for your loan to be originated, you must first officially accept your loan offer online or by calling the office. We recommend you do this before the end of June so the loan(s) appear on your first billing statement as anticipated aid. You may also choose to reduce or decline your loan by making the appropriate changes online or by calling the office. Only those loans which have been accepted will be originated.

  • If you have no prior borrowing history:
    Once your loan has been originated, first-time borrowers will be notified via email to complete the online Master Promissory Note (MPN) process and the federally mandated student loan Entrance Counseling session. Once these items are complete, the Department will disburse the loan funds directly to the university at the start of each term.
  • If you have borrowed before under the DL program, but are new to UD:
    Once your loan has been originated, first-time borrowers will be notified via email to complete federally mandated student loan Entrance Counseling session. Once this is complete, the Department will disburse the loan funds directly to the university at the start of each term.
  • All borrowers (current or new):
    Complete an Annual Student Loan Acknowledgment each year you accept a federal student loan.
    If this is your first time accepting a federal student loan, you are acknowledging that you understand your responsibility to repay your loan.
    If you have existing federal student loans, you are acknowledging that you understand how much you owe and how much more you can borrow.

The Master Promissory Note (MPN) is a legal document that, when completed, acknowledges your promise to repay your loan(s) and any accrued interest and fees to the Department. It also explains the terms and conditions of your loan(s). All first-time borrowers in the DL program must complete an MPN.

To complete an MPN online, you will be required to use your Federal Student Aid ID (used to file the FAFSA). In most cases, once you've submitted the MPN and it's been accepted, you won't have to fill out a new MPN for future loans you receive. You can borrow additional Direct Loans on a single MPN for up to 10 years. You'll receive a disclosure statement that gives you specific information about any loan that the school plans to disburse under your MPN, including the loan amount, fees, and the expected disbursement dates and amounts.

When you sign a promissory note, you are agreeing to repay the loan according to the terms of the note. The note is a binding legal document and states that (except in cases of discharge) you must repay the loan — even if you do not complete your education, aren’t able to get a job after you complete the program, or are dissatisfied with, or don’t receive, the education for which you paid.

If you apply for deferment or forbearance, you still must continue to make payments until you are notified that the request has been granted. If you do not, you may end up in default. You should keep a copy of any request form you submit, and you should document all contacts with the organization that holds your loan.

You must notify the appropriate representative (school, agency, lender) that manages your loan when you graduate, withdraw from school, or drop below half-time status; change your name, address, or social security number; or transfer to another school. Additionally, you must complete Exit Counseling before you leave the school. This counseling session will be completed online and will provide you with important information about your loan and repayment responsibilities.

For More Information

More Federal Direct Loan information, including repayment, can be found at


Office of Recruitment and Admission

Albert Emanuel Hall
300 College Park
Dayton, Ohio 45469 - 1602