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Federal Direct Loans

Federal Direct Loans are low-interest loans for eligible students to help cover educational costs, and are borrowed directly from the U.S. Department of Education. The Federal Direct Student Loan is the most common of all student loans. You must complete the Free Application for Federal Student Aid (FAFSA) to receive Federal Direct Loans.

Federal Direct loans are loans in the student's name, used for educational purposes. These loans from the government may be categorized as either subsidized or unsubsidized, depending on financial need and the amount of other aid received.

Subsidized Federal Direct Loans

Subsidized loans are based on financial need. Interest and principal payments are deferred until six months after the student graduates or drops below half-time enrollment.

Unsubsidized Federal Direct Loans

Unsubsidized loans are not based on financial need. Principal payments are deferred until six months after the student graduates or drops below half-time enrollment.

Interest accrues while the borrower is in college and during the grace period. Students have two options regarding interest on unsubsidized loans:

1. Defer interest payments until graduation, in which case the interest will be added to the principal of the loan, or;

2. Make interest-only payments and not have the interest accrued. Students should contact their servicer if they wish to arrange to make interest-only payments. Log into studentaid.gov to find out your servicer. (First-time borrowers should wait until after the first disbursement in late August to log into NSLDS for servicer information.)

Borrowing amounts

Here are the limits for each academic year for dependent undergraduate students:

$5,500 for first-year students (0 to 27 earned credits), of which a maximum of $3,500 may be subsidized.

$6,500 for sophomores (28 to 59 earned credits), of which a maximum of $4,500 may be subsidized.

$7,500 for juniors (60 to 89 earned credits), of which a maximum of $5,500 may be subsidized.

$7,500 for seniors (90-plus earned credits), of which a maximum of $5,500 may be subsidized.

Independent undergraduates may borrow the same amounts as above, plus an additional $4,000 of Direct Unsubsidized Loan for first-year and sophomores, and $5,000 for juniors and seniors.

Interest rates

The interest rate for subsidized and unsubsidized loans disbursed to undergraduates between July 1, 2024, and June 30, 2025, is 6.53 percent fixed. Interest rates on loans borrowed in previous academic years may vary. (Additional information on interest rates).

Additional fees

There is an additional origination fee for subsidized and unsubsidized loans. The fee is 1.057 percent for loans first disbursed between July 1, 2024, and June 30, 2025.

How to apply for Federal Direct Loans

1. Complete the Free Application for Federal Student Aid (FAFSA).

2. Complete all documents requested from the Office of Financial Aid.

3. Review and sign your award letter either accepting or rejecting each award. If you wish to borrow less than the loan amount listed on your award letter, cross through the amount listed and write in the amount that you wish to borrow. Return this to the Office of Financial Aid.

4. First-time borrowers must complete loan entrance counseling.

5. First-time borrowers must complete a Master Promissory Note (MPN).

How will students know the amount they can borrow?

The loan amount listed on your Award Notification is the maximum amount you are eligible to borrow through the subsidized and/or unsubsidized loans. These amounts may change if you receive additional aid.

Remember, to receive a Federal Direct Loan you MUST complete both loan entrance counseling and a Master Promissory Note (MPN). Both are required before a Federal Direct Loan can be disbursed to your student account.

Loan Entrance Counseling and Master Promissory Note (MPN)

Federal Direct Loans will not appear as a credit on the student account/tuition bill until both the MPN and entrance counseling have been completed.

1) Federal Direct Loan Master Promissory Note

First-time borrowers wishing to borrow a Federal Direct Loan for 2025-2026 must complete a Master Promissory Note (MPN). If you are a current Augustana student and have borrowed a Federal Direct Loan in the past, you do not need to complete the MPN again.

By selecting the link below, you will be redirected to the Direct Loans Master Promissory Note to complete your MPN. Select "Entrance Counseling" on the left-hand menu. The Office of Financial Aid will be notified once you have completed your MPN.

2) Federal Direct Loan Entrance Counseling

First-time borrowers also must complete Federal Direct Loan entrance counseling. If you are a current Augustana student and have borrowed a Federal Direct Loan in the past, you do not need to complete entrance counseling again.

By selecting the link below, you will be redirected to the Direct Loan Servicing website to complete entrance counseling. Select "Entrance Counseling" on the left-hand menu. The Office of Financial Aid will be notified when you have completed entrance counseling.

Exit counseling

If you leave Augustana, drop below half-time enrollment or graduate, you must complete exit counseling. The Office of Financial Aid will be notified when you have completed entrance counseling.

See our Graduates/Alumni page for information on how to obtain loan balance, servicer information, repayment options, deferment and forbearance options, delinquency and default information, and tax benefits available to student borrowers.

Time limit for receiving loans

If you are a first-time borrower on or after July 1, 2013, there is a limit on the maximum period of time (measured in academic years) that you can receive Federal Direct Subsidized Loans. This time limit does not apply to Direct Unsubsidized Loans or Direct PLUS Loans. If this limit applies to you, you may not receive Direct Subsidized Loans for more than 150 percent of the published length of your program. This is called your "maximum eligibility period." Your maximum eligibility period is generally based on the published length of your current program.

See Time Limitation on Direct Subsidized Loan Eligibility for additional information.