Subsidized vs. Unsubsidized Federal Direct Loans
There are two types of federal Direct student loans: subsidized and unsubsidized.
The Office of Financial Aid will determine if the federal Direct loan is subsidized or unsubsidized or if the loan will be partially subsidized and unsubsidized. We use a calculation to determine the type of loan: Cost of Attendance (COA) less the Expected Family Contribution (EFC) found on your valid Student Aid Report less the amount of your other financial aid, not including other loans (grants, scholarships, work study award). The result of this calculation will determine the type of federal Direct loan. A first year student may borrow up to the $3,500 maximum in a subsidized loan, a second year student may borrow up to the $4,500 maximum, and a third and fourth year student may borrow the maximum subsidized loan up to $5,500. Students who qualify for a subsidized federal Direct loan are not charged interest while enrolled in college during the six-month grace period, and during deferments. Students must demonstrate need for this loan by completing the Free Application for Federal Student Aid (FAFSA).
NOTE: For federal Direct subsidized student loans borrowed on or after July 1, 2012 and before July 1, 2014, the interest subsidy will not be available during the six-month grace period. This means that interest WILL be charged during the grace period for subsidized loans borrowed during this time period.
The unsubsidized federal Direct loan is available to students who do not qualify for the subsidized federal Direct loan as described above. Students apply for the non-need based unsubsidized federal Direct loan by completing the Free Application for Federal Student Aid (FAFSA). This loan is available to all students regardless of need. Annual loan limits are the same, less any subsidized Direct loans borrowed.
Interest is charged on an unsubsidized federal Direct loan from the time Springfield College receives the funds. Only payments on the principal are deferred until six months after the student ceases to be enrolled at least half-time. Students receive an interest-only bill every six months; students may pay all, some, or none of the accumulated interest. Any unpaid interest will be added to the amount borrowed (interest capitalization). This capitalization will result in higher monthly payments later. We recommend that students pay the interest while enrolled, if possible.
If a parent is denied a federal PLUS loan, the student borrower becomes eligible for an additional federal loan in the form of an unsubsidized federal Direct loan. The additional unsubsidized loan is in the student's name only. First- and second-year students may borrow up to an additional $4,000 for the year; others may borrow up to an additional $5,000 for the year. Students would need to request this additional loan by sending an email to the Office of Financial Aid from their Springfield College email accounts.
