University of Southern Indiana
Student Financial Assistance
Federal Direct Loans (Student Loans): What You Should Know

Federal Direct Loans are low-interest student loans, offered through the U.S. Department of Education, that assist eligible students in covering the cost of higher education.

There are two types of Direct Loans: subsidized and unsubsidized. You must have financial need to receive a subsidized loan. With a subsidized Direct Loan, the federal government will pay the interest while you are enrolled at least half-time, during your grace period, and during deferment periods. Financial need is not a requirement to receive an unsubsidized loan. Interest accrues on an unsubsidized Direct Loan starting from the date the loan is first disbursed. The student borrower may pay interest quarterly on an unsubsidized loan.

Graduate students are not eligible for subsidized Direct Loans per federal regulation. Unsubsidized Direct Loans are still available.

Students must file the Free Application for Federal Student Aid (FAFSA) each year to be considered for Direct Loans.

Direct Loan Process

Step 1. Log on to myUSI at

Step 2. Accept, decline or reduce the amount of your Direct Loan on or after July 1. (myUSI Instructions).

Step 3. First-time Direct Loan borrowers must complete entrance counseling once the Direct Loan has been accepted. This process requires the borrower's Social Security Number or FAFSA PIN.

Step 4. Borrowers new to the Direct Loan program must sign a Master Promissory Note (MPN). This process requires the FAFSA PIN of the borrower.

Direct Loan Annual Limits

Classification Hours Earned Annual Maximum
Additional Unsubsidized
Annual Maximum
(Dependent Students)
Freshman 0 - 29 $3,500 $2,000 $5,500
Sophomore 30 - 59 $4,500 $2,000 $6,500
Junior 60 - 89 $5,500 $2,000 $7,500
Senior 90+ $5,500 $2,000 $7,500
  Unavailable $20,500
(Independent Student)

Direct Loan Annual Limits

Level Subsidized Total
Dependent Undergraduate $23,000 $31,000
Independent Undergraduate $23,000 $57,500
Graduate $65,500 (Beginning 2012-2013 Graduates are no longer eligible to borrow subsidized loans) $138,000

Enrollment Requirements

Students must be enrolled at least 1/2-time to receive Direct Loans.

  • 6 credit hours for undergraduate students
  • 4 credit hours for graduate students (graduate level courses)

Additional Eligibility

In addition to the amounts listed above. Independent students with less than 60 earned hours are eligible for an additional $4000 and those with greater than 60 earned hours are eligible for an additional $5000. A dependent student whose parent is denied a Parent PLUS Loan may be eligible to borrow additional funds under the Direct Loan Program. A Loan Adjustment Form and verification of the Parent PLUS Loan denial will be required by our office. A USI financial aid counselor can provide information on additional eligibility.

Interest rates for the Direct Loan Program:





First Disbursed Between 07/01/13 and 06/30/14

First Disbursed Between 07/01/14 and 06/30/15


Subsidized Loans





Unsubsidized Loans








PLUS Loans

Parent and Grad Student




Processing Fees

The U.S. Department of Education charges loan fee of 1.073% of the principal amount of each Direct Student Loan for loans disbursed on or after 10/1/14 and before 10/1/15. For loans disbursed on or after 12/1/13 and before 10/1/14 the loan fee was 1.072 %. This fee is deducted proportionately from each loan disbursement.


Repayment of Direct Loans begins 6 months after graduating, dropping below 1/2 time, or leaving school.

Visit for more information about repayment.

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