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Financial Aid 101

Overview of Federal Student Loans

University of Denver Financial Aid

An education is one of the best long-term investments you can make in your future, and borrowing is one way to fund that investment. With careful planning, a loan can be a smart decision for you and your family, as many educational loans have more favorable terms than other types of consumer financing (such as car loans or credit cards). However, since all loans must be repaid, you should only borrow what you need, explore other financial aid options and earn as much as you can through employment.

All students who submit a FAFSA will see at least one federal student loan listed in their financial aid offer. This email will give you an overview of each type of loan so you can make informed decisions about borrowing for your education.

Federal Direct Subsidized and Unsubsidized Loans:

What are Federal Direct Subsidized and Unsubsidized loans?
Federal Direct loans are made available by the U.S. Department of Education and are the most widely-used loans for undergraduate students.

Who is eligible for Federal Direct loans?
Students who submit the FAFSA, meet the eligibility requirements for all types of federal student aid and are enrolled at least half-time (6 credits or more) can borrow these loans.

What is the difference between Subsidized and Unsubsidized loans?

  • Subsidized loans are available to students who demonstrate financial need (which is determined by the FAFSA). The U.S. Department of Education pays the interest on these loans while you are enrolled at least half time. This means that until you graduate, they're interest-free.
  • Unsubsidized loans are available to all students, even if they do not demonstrate financial need. Interest begins accruing on these loans immediately after they're disbursed (sent to DU).

What are the terms of Federal Direct loans?

Federal Direct Loan Terms
Maximum Loan Amount: Depends on your dependency status and grade level (see chart below).
Interest Rate: 3.73% fixed for the 2021-22 academic year (rates for 2022-23 will be announced in May).
Fees: A 1.057% origination fee is proportionately deducted at the disbursement of each installment of the loan.
Requirements to Receive Funds: Complete both a Master Promissory Note and Entrance Counseling online at and be enrolled at least half time.
Repayment Terms
Grace Period: 6 months
Repayment Length:  Between 10 and 25 years, depending on total borrowing and chosen repayment plan.
Payment Due: Monthly
Payment Amount: Depends on the chosen repayment plan, but not less than $50 per month.

No payments are required while you are enrolled at DU. After you graduate or drop below half-time enrollment, you will have a six-month grace period before repayment begins.

How much can I borrow? 
As mentioned above, the total amount of Direct loans you can borrow depends on your dependency status and year in school (you are considered to be an independent student if you are married, have children, are at least 24 years old, a graduate student, a veteran, a member of the armed forces, or an orphan, ward of the court or homeless—otherwise, you are considered to be a dependent student). Here are the maximum annual and lifetime loan limits:

Year in School Dependent Students* Independent Students
1st Year:  $5,500 (no more than $3,500 may be in subsidized loans) $9,500 (no more than $3,500 may be in subsidized loans)
2nd Year:  $6,500 (no more than $4,500 may be in subsidized loans) $10,500 (no more than $4,500 may be in subsidized loans)
3rd & 4th Years:  $7,500 (no more than $5,500 may be in subsidized loans) $12,500 (no more than $5,500 may be in subsidized loans)
Maximum Total Loan Debt:  $31,000 (no more than $23,000 may be in subsidized loans) $57,500 (no more than $23,000 may be in subsidized loans)

*Dependent students whose parents are unable to borrow a PLUS loan are eligible for an additional $4,000 in unsubsidized loans during the 1st and 2nd years, and an additional $5,000 in unsubsidized loans during the 3rd year and beyond.

Is there a time limit on how long I can receive loans?
Yes, but only for Direct Subsidized loans. You cannot receive these loans for more than 150% of the length of your program. So, for a four-year bachelor's degree program, the maximum period you can receive Direct Subsidized loans is six years (150% of 4 years = 6 years).

Additional Information:

How will I receive my loan money?
As with all other types of financial aid, your loan(s) will first be sent to the Bursar's Office at DU (who is responsible for the collection and billing of tuition-related charges) and then applied directly to your University bill. The total amount of your loan will be disbursed evenly over three separate installments—one each for fall, winter, and spring quarters.

How much should I borrow?
Only borrow what you absolutely need, and remember to plan for all four years! Utilize our estimated billing worksheet to help you determine what you will still owe DU after all your financial aid has been applied to your account. We also recommend utilizing the Federal Loan Simulator before borrowing any loans to see what your estimated monthly payments will be after graduation.

For a student loan burden to be manageable, the total amount you owe should be less than your starting salary. If your total loan debt is less than your annual income, you should be able to repay that debt in about 10 years.

Want even more information?
There are many additional resources available:

We know there is a lot of information about federal student loans here, so if you still have questions, please don't hesitate to contact us! 

Want to review past Financial Aid 101 emails? Check out the archives!

Up next week: Overview of the Parent PLUS Loan


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or call us at (303) 871-4020

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