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Understanding the Federal Program Descriptions

Content provided by the Catalog of Federal Domestic Assistance
84.268 Federal Direct Student Loans


Higher Education Act of 1965, as amended, Title IV, Part D.
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To provide loan capital directly from the Federal government (rather than through private lenders) to vocational, undergraduate, and graduate postsecondary school students and their parents.


Direct Loans
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To help defray costs of education at a participating school. Repayment on Federal Stafford loans begins six months after the student ceases to carry at least one-half the normal full-time academic workload. Repayment of principal and interest on PLUS loans generally begins within 60 days of disbursement of the last installment; repayment of a Consolidation loan begins within 60 days after the proceeds of the loan have been used to discharge the liability of the borrower on the loans selected for consolidation. Deferments and forbearance of payment may be granted for certain authorized periods.


Applicant Eligibility:   The applicant must be a U.S. citizen, national, or person in the United States for other than a temporary purpose. A student borrower must be enrolled or accepted for enrollment in a degree or certificate program on at least a half-time basis as an undergraduate, graduate, or professional student at a participating postsecondary school. An otherwise eligible student is eligible for loans during a single twelve-month period in which the student is enrolled in a non-degree/non-certificate course of study that the school has determined is necessary in order for the student to enroll in a program leading to a degree or certificate. Under the Direct PLUS program, parents may borrow for dependent students. Also, graduate and professional students are eligible to borrow PLUS Loans. Direct Unsubsidized and PLUS loans are non-need based programs. In order to receive a Direct Subsidized Loan, all borrowers must undergo a financial need analysis to determine eligibility for Federal interest. A student that is presently enrolled at a participating institution must be maintaining satisfactory academic progress in the course of study that they are pursuing. The borrower may not owe a refund on any Title IV grant or be in default on any Title IV loan received for attendance at any school. The borrower must also file a Statement of Registration compliance (Selective Service). Borrowers that are unable to obtain consolidation loans from lenders under FFEL or who are unable to obtain a consolidation loan with income sensitive repayment terms acceptable to the borrower from a lender, shall be eligible for a Direct Consolidation Loan. Married couples may consolidate eligible loans.

Beneficiary Eligibility:   Vocational, undergraduate, and graduate postsecondary school students and their parents.

Credentials/Documentation:   The borrower will need certification of eligibility from the school and may be required to supply documentation to verify the accuracy of data used in the Direct Subsidized loan need analysis. This program is excluded from coverage under OMB Circular No. A-87.

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Pre-application Coordination:   Preapplication coordination is not applicable. Environmental impact information is not required for this program. This program is excluded from coverage under E.O. 12372.

Application Procedure:   This program is excluded from coverage under OMB Circular No. A-102. This program is excluded from coverage under OMB Circular No. A-110. Applications for the Direct Subsidized and Unsubsidized loans are obtained from the school. Direct consolidation loan applications are obtained from the Department of Education. To obtain a Direct Subsidized or Unsubsidized loan, a student shall complete and submit a Free Application for Federal Student Aid (FAFSA). All applications (with the exception of PLUS) for Direct Loans are processed by the Central Processor System (CPS) in the initial step to determine a student's Title IV eligibility. Schools will receive official output from the CPS, and then will be able to assemble a financial aid award package. A school participating in the Direct Loan program may award Direct Loans as part of the financial aid package. If a Direct Loan is not included in the aid package, a student may contact the school to request loan information.

Award Procedure:   Schools participate in the Direct Loan program either by originating loans or by using an alternative originator to originate loans. The school must certify the borrower's eligibility to receive the funds. To obtain a Direct PLUS Loan, the parent completes an application and authorizes a credit check. If the parent does not have an adverse credit history the loan maybe disbursed. Schools may disburse funds by crediting them directly to the student's account at the school, issuing a check or cash, or by initiating an electronic fund transfer.

Deadlines:   Contact the headquarters or regional office, as appropriate, for application deadlines.

Range of Approval/Disapproval Time:   

Not Applicable.


Not Applicable.


Not Applicable.

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Formula and Matching Requirements:   

This program has no statutory formula.
This program has no matching requirements.
This program does not have MOE requirements.

Length and Time Phasing of Assistance:   

Applicants may apply for a loan for any year of school. The interest rate on new Stafford and Unsubsidized Stafford Loans starting July 1, 2006 is fixed at 6.8 percent. The College Cost Reduction and Access Act (CCRAA) of 2007 authorized phased reductions to the interest rates for Subsidized Stafford loans borrowed by undergraduates with the rate cut in half to 3.4 percent on July 1, 2011. There are four repayment plans that are available for Direct Loan borrowers:

(1) A standard repayment plan with a fixed monthly payment amount over a period of up to 10 years;

(2) an extended repayment plan with a fixed monthly payment amount paid over a period of 12 to 30 years, depending on the amount owed;

(3) a graduated repayment plan with a monthly payment that will increase generally every 2 years. The repayment period varies from 12 to 30 years, depending on the amount owed; and

(4) except for Direct PLUS Loan borrowers, an income contingent repayment (ICR) plan with a monthly payment that is adjusted annually based on the income of the borrower and paid over a extended period of time not to exceed 25 years. Any unpaid balance remaining after 25 years in the ICR plan is forgiven by the Secretary of Education. However, under current IRS rules, the amount written off is considered taxable income to the borrower in the year it is written off. A legislative change removing this taxable treatment has been sought. CCRAA created a new income-based repayment plan for those borrowers meeting a standard of "partial financial hardship" based on their annual repayment amount in relation to their adjusted gross income. Generally a borrower would not have to repay on a monthly basis more than 15 percent of their discretionary income. Any outstanding balance would be forgiven after 25 years of repayment in the income-based repayment option. CCRAA also created a new loan forgiveness program for Direct Loan borrowers who work in public service during a 10-year period while they are repaying their loans. If these borrowers during repayment have an outstanding loan balance after 10 years of working in public service, the Federal Government will forgive the remaining balance on behalf of the borrower. Public service may include a variety of public disciplines such as education, health, law, military service and public safety. See the following for information on how assistance is awarded/released: Electronic transfer.


Reports:   The Department will produce a variety of management information system accounting, and financial management reports. Schools must submit all reports required by 34 CFR 685 and 34 CFR 668. Cash reports are not applicable. Progress reports are not applicable. Expenditure reports are not applicable. Performance monitoring is not applicable.

Audits:   This program is excluded from coverage under OMB Circular No. A-133. Schools are subject to examination and program review by the Department of Education. Program reviews are performed on a fiscal year basis.

Records:   Schools must maintain proper administrative and fiscal procedures and all necessary records as set forth in the regulations in 34 CFR 685 and 34 CFR 668. Schools must keep all records involved in any loan, claim, or expenditure questioned by a Federal audit until resolution of any audit questions. In addition to records required by 34 CFR 668, for each Direct Loan received under 34 CFR 685 by or on behalf of this student, a school shall maintain a copy of the loan application and data electronically submitted to the Secretary.


Account Identification:  


Obligations:   (Direct Loans) FY 08 $24,895,000,000; FY 09 est $24,619,000,000; FY 10 est $61,776,000,000 - (Figures represent Gross Loan volume, without Consolidations). (Direct Loans) FY 08 $8,280,000,000; FY 09 est $16,556,000,000; FY 10 est $19,715,000,000 - Figures represent DL Gross Consolidation volume.

Range and Average of Financial Assistance:  


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Fiscal Year 2015: Funding provided loans to approximately 9.7 million borrowers. Fiscal Year 2016: Funding is expected to provide loans to approximately 9.7 million borrowers. Fiscal Year 2017: Funding is expected to provide loans to approximately 9.9 million borrowers.


Student Loan Reform Act of 1993, Public Law 103-66, 34 CFR 685.


Regional or Local Office:   See Regional Agency Offices. See the list of Regional Offices listed in Appendix 5 of the FFEL Catalog.

Headquarters Office:   Federal Student Aid Information Center Federal Student Aid (FSA), Department of Education, P.O. Box 84, Washington, District of Columbia 20044-0084 Phone: 800-433-3243

Web Site Address:


Not Applicable.


Not Applicable.

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