Federal Direct Student Loans: 2014-15 Interest Rates

The Federal Direct Student Loans are loans available to students that are at least taking a part-time course load. Most parents don’t know that, regardless of their family’s income and assets, these are loans that are available to their students. For this reason, while most people don’t believe they will qualify for ANY financial aid, there is usually always at least one form of financial aid available to students, albeit a loan option. These loans are in the student’s name and they are not based on credit. However, you are required to complete a FAFSA for the current financial-aid year to be eligible for a Federal Direct Student Loan.

Each year, interest rates for Federal Direct Student Loans are established. The interest rate established for the loan is fixed and applies for the life of the loan. The established interest rates are in effect from July 1 of the current year until June 30 of the following year.

The Federal Direct Student Loans come in two forms; subsidized and unsubsidized. These loans do not go into repayment until the sooner of six-months after the student graduates or drops below part-time status. There is no penalty for paying these loans off early. These loans will remain in deferment into post-baccalaureate schooling, assuming the student remains taking at least a part-time course load.

For subsidized Federal Direct Student Loans, the government covers the cost of the interest during eligible deferment periods, which include periods in which the student is taking at least a part-time course load as well as periods of financial hardship. That is not the case with the unsubsidized Federal Direct Student Loans, though students are not required to make payments on the interest while they are in school or during their six-month grace period following graduation or dropping below part-time status.

Graduate and Professional level students are only eligible to receive unsubsidized loans.

Below are the interest rates for the Federal Direct Student Loans for the 2014-15 aid year:

Borrower Type Loan Type Fixed Interest Rate
Undergraduate Students Direct Subsidized and Unsubsidized Loans 4.66%
Graduate/Professional Students Direct Unsubsidized Loans 6.21%
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