Federal Direct Loans
Federal Direct Loans are low-interest loans for students and parents to help pay for the cost of a student’s college education. With Direct Loans, the student and/or parent borrows funds directly from the federal government and has a single contact, the loan servicer, for everything related to repayment even if the borrower receives Direct Loans at different schools. There are several different options for repayment plans designed to meet the needs of almost any borrower. Additional information is available at https://studentaid.gov/understand-aid/types/loans.
The Federal Direct Subsidized Loan (DLSUB)
The Federal Direct Subsidized Loan (DLSUB) is a need-based federal loan awarded only to students who demonstrate financial need. Undergraduate students who have unmet financial need can be considered for this loan up to the amount of the students’ borrowing limit. Borrowers must be U.S. citizens or eligible non-citizens, enrolled at least half time and meet all other eligibility requirements including Satisfactory Academic Progress.
The Federal Direct Unsubsidized Loan (DLUNS)
The Federal Direct Unsubsidized Loan (DLUNS) is a non-need based federal loan that cannot exceed the educational cost of attendance minus other financial aid. Undergraduate students who are not eligible for any Subsidized Direct Loan or are eligible for only a portion of the annual loan limit for the Subsidized Direct Loan may be eligible for the Unsubsidized Direct Loan. Borrowers must be U.S. citizens or eligible non-citizens, enrolled at least half time and meet all other eligibility requirements including Satisfactory Academic Progress.
Are There Any Fees For Federal Student Loans?
Most federal student loans have fees that are a percentage of the total loan amount. The loan fee is deducted from each loan disbursement you receive while enrolled in school. This means the money you receive will be less than the amount you actually borrow. You are responsible for repaying the entire borrowed amount and not just the amount you received.
Federal Loan Interest and Fees
The interest rate is fixed at 5.50% for Federal Direct Subsidized and Unsubsidized Loans first disbursed on or after July 1, 2023 and before July 1, 2024.
Origination fees are deducted from the gross amount of the loans before the disbursement of the loans. For 2022-2023, the origination fee is 1.057% for loans disbursed on or after October 1, 2022 and before October 1, 2023. This fee is subject to change. Origination fees are deducted from the gross amount of the loans before the disbursement of the loans.
Annual Federal Direct Loan Limits
(Maximum Combined Subsidized and Unsubsidized)
| Freshman and students in certificate programs | Sophomore in an Associate’s Degree program | Junior & Senior in Bachelors Degree Program | |
|---|---|---|---|
| Dependent Undergraduate | $5,500 (up to $3,500 may be subsidized) |
$6,500 (up to $4,500 may be subsidized) |
$7,500 (up to $5,500 may be subsidized) |
| Independent Undergraduate | $9,500 (up to $3,500 may be subsidized) |
$10,500 (up to $4,500 may be subsidized) |
$12,500 (up to $5,500 may be subsidized) |
- 0-30 credit hours must be completed for Freshman status
- 31-60 credit hours must be completed for Sophomore status
- 61-90 credit hours must be completed for Junior status
- 91-120 credit hours must be completed for Senior status
NOTE: The maximum annual amount a student may borrow under the Federal Direct Loan Program must be reduced if:
- The student is in a program of study less than an academic year (2 semesters)
- The student is in the final period of study, which is shorter than an academic year (2 semesters)
- The student has borrowed student loan funds from another institution within the academic year
- The student has reached their annual and/or aggregate loan limits.
- COTC’s policy is not to award more than ½ of the student’s annual loan limits in one semester.
Remember, planning for tomorrow is important, so please borrow conservatively. Keep track of how much money is borrowed and how much Federal Loan payments will be after graduation. Review your student loan debt at studentaid.gov. It is important to repay your loans. Allowing your student loan to become delinquent or to go into default can have negative consequences, such as:
- lose eligibility for additional federal student aid,
- lose eligibility for loan deferment, forbearance and repayment plans,
- not eligible for certain types of employment,
- denial of a professional license (medical, engineering, etc.),
- additional charges, late fees and collection costs if turned over to a collection agency,
- wage garnishment,
- federal and state income tax refunds withheld and applied to your debt,
- you credit scored will be damaged and you will have difficulty qualifying for credit cards, car loans, and mortgages,
- difficulty signing up for utilities, getting car or homeowner’s insurance, or getting a cell phone plan, and
- difficulty getting approval to rent an apartment.
Federal Loan Repayment
For details, see the U.S. Department of Education’s Repayment Plans. You may access the loan simulator to help you make decisions about your student loans.
The Federal Direct Parent Loan for Undergraduate Students (PLUS)
The Federal Direct Parent Loan for Undergraduate Students (PLUS) Parents may borrow funds to cover educational costs for dependent students. Borrowers must be U.S. citizens or eligible non-citizens. Students must be enrolled at least half time and maintaining Satisfactory Academic Progress for financial aid eligibility. Parents can begin repayment when the loan is fully disbursed, with the first payment generally due within 60 days, or they can choose to begin repayment six months after the student is no longer enrolled at least half time or graduates. There is no financial need required to be eligible; however, total financial aid cannot exceed cost of attendance. The applicant’s credit history will be evaluated in determining loan eligibility.
In order for COTC to certify a PLUS loan, the student must have a FAFSA on file and be file complete. The parent may apply for a PLUS loan by going to https://studentloans.gov and completing the Parent PLUS application. Parents will use their FSA ID (same FSA ID used to sign the FAFSA) to login and request the Parent PLUS Loan and sign the MPN. Once the parent’s loan has been approved, COTC will receive notification and originate the PLUS loan. Maximum eligibility for the PLUS loan is the Cost of Attendance minus any estimated financial assistance.
The interest rate is fixed at 8.05% for Federal Direct PLUS Loans first disbursed on or after July 1, 2023 and before July 1, 2024. For 2023-2024, the origination fee is 4.228% for loans disbursed on or after October 1, 2022 and before October 1, 2023. This fee is subject to change. Origination fees are deducted from the gross amount of the loans before the disbursement of the loans.
Scheduled Disbursements for Federal Direct Loans
Students receiving either a Federal Direct Subsidized/Unsubsidized or Federal Direct PLUS Loan should be aware of their scheduled disbursement dates and amounts that are stated on the disclosure statements which the lender will mail once the loan has been guaranteed. (The scheduled disbursement dates are not the same as the COTC refund dates.)
A student with a loan for only one semester will receive the loan funds in two disbursements within the semester. The first half at the regular disbursement date and the second half of the loan will be disbursed half-way through the semester. The student must maintain half time enrollment to be eligible for each disbursement.