Interest Rate Reductions
Over a four-year period beginning July 1, 2008, the interest rate on Federal Direct Subsidized Loans made to undergraduate students will be reduced. The applicable interest rates for loans made during this period are as follows:
| First disbursement of a loan: |
Interest rate on the unpaid
balance |
| Made on or after |
And made before |
| July 1, 2009 |
July 1, 2010 |
5.6 percent |
| July 1, 2010 |
July 1, 2011 |
4.5 percent |
| July 1, 2011 |
July 1, 2012 |
3.4 percent |
These changes apply to Federal Direct Subsidized Loans first disbursed on or after July 1 of each year through June 30 of the next year. This change does not affect any prior loans made to borrowers; the terms and interest rates of those loans remain the same. These reduced interest rates apply only to subsidized loans; any Federal Direct Unsubsidized Loans for the same undergraduate borrower would continue to be made at the current fixed interest rate of 6.8 percent.
Other than interest, is there a charge for this loan?
For Direct Subsidized Loans and Direct Unsubsidized Loans first disbursed between July 1, 2010 and June 30, 2011, there is a loan origination fee of 1.0 percent of the loan, deducted proportionately from each loan disbursement. The fee goes to the government to help reduce the cost of the loans. Also, if you don't make your loan payments when scheduled, you may be charged collection costs and late fees.
New interest rate cap for Military Members
Interest rate on a borrower's loan may be changed to six percent during the borrower's active duty military service. This applies to both FFEL and Direct loans. Additionally, this law applies to borrowers in military service as of August 14, 2008.
Borrower must contact the creditor (loan holder) in writing to request the interest rate adjustment and provide a copy of the borrower's military orders.
In addition, no interest accrues (for a period of no more than 60 months) on Direct Loans disbursed on or after October 1, 2008, for eligible military borrowers while serving on active duty or performing qualifying National Guard duty during a war or other military operation or other emergency, and serving in an area of hostilities qualifying for special pay.