Direct Subsidized Loan Eligibility

Important Change to Eligibility Beginning July 2013

Federal Student Aid, Time Limitation on Direct Subsidized Loan Eligibility for first time borrowers on or after July 1, 2013

Beginning July 1, 2013, the maximum period of time (measured in academic years) that students may be eligible to receive Direct Subsidized Loans is six years. The maximum eligibility is based on the published length of your current program, which means that your maximum eligibility period may change if you change programs. Also, if you receive Direct Subsidized Loans for one program, then change to another program, the Direct Subsidized Loans you received for the earlier program will generally count against your new maximum eligibility period. 

When eligibility is lost for Direct Subsidized Loans, borrowers become responsible for interest on Direct Subsidized Loans taken out on or after July 1, 2013.

When a student receives Direct Subsidized Loans for six years (maximum eligibility period), eligibility is lost for additional Direct Subsidized Loans. Borrowers may continue to receive Unsubsidized Loans as long as aggregate limits have not been met. 

In addition, if a student continues to be enrolled in any undergraduate program after reaching the maximum eligibility (six years), the Department of Education will no longer pay the interest that accrues on a Direct Subsidized Loan. 

When does a borrower becomes responsible for paying the interest that accrues on a Direct Subsidized Loan?

Do I become responsible for paying the interest that accrues on my Direct Subsidized Loans because... YesNo
I am no longer eligible for Direct Subsidized Loans and I stay enrolled in my current program? X
I am no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate program that is the same length or shorter that my prior program? X
I transferred into the shorter program and lost eligibility for Direct Subsidized Loans because I have received Direct Subsidized Loans for a period that equals or exceeds my new, lower maximum eligibility period, which is based on the length of the new program? X
I was no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate program that is longer than my prior program? X
I lose eligibility for Direct Subsidized Loans and immediately withdraw from my program? X
I graduated from my prior program prior to or upon meeting the 150% limit, and enroll in an undergraduate program that is the same length or shorter than my prior program? X
I enroll in a graduate or professional program?  X
I enroll in preparatory coursework that I am required to complete to enroll in a graduate or professional program? X
I enroll in a teacher certification program (where my school does not award an academic credential)? X
During what period am I responsible for paying the interest on my Direct Subsidized Loans... Before meeting the 150% limit?After meeting the 150% limit?
While enrolled in school at least half-time NoYes
During my grace period on loans first disbursed (paid out) July 1, 2013 through June 30, 2014 YesYes
During my grace period on loans first disbused (paid out) July 1, 2014 or after No Yes
During deferment periods NoYes
During certain period of epayment under the Income-Based Repayment or Pay As You Earn Plan No Yes
During forbearance periods YesYes
During all other periods of repayment YesYes

If you become responsible for the interest that accrues on your Direct Subsidized Loans, any interest that you do not pay will be capitalized (added to your loan principal balance) at the end of the grace, deferment or other periods. Capitalized interst increases your loan principal, increases your monthly payment amount under most Direct Loan repayment plans, and causes you to pay more interst over the life of your loan.

Your federal loan servicer will notify you if you become responsible for paying the interest on your Direct Subsidized Loans.