As you plan out how to pay for college or graduate school, you may be exploring your options for student loans. One type of student loan is the Direct Unsubsidized Loan from the Department of Education. This federal student loan comes with a fixed interest rate and flexible repayment plans. Plus, it’s available to both undergraduate and graduate students, regardless of financial need.
Unlike its subsidized loan counterpart, the Direct Unsubsidized Loan requires you to pay all the interest that accrues from the beginning. Read on for a closer look at federal Direct Unsubsidized Loans and how they compare to Direct Subsidized Loans.
What is a federal Direct Unsubsidized Loan?
Direct Unsubsidized Loans are a type of federal student loan provided by Federal Student Aid, the financial aid office of the U.S. Department of Education. Unsubsidized loans are available to both undergraduate and graduate students who qualify for federal financial aid. They come with fixed interest rates and are eligible for various federal benefits, including income-driven repayment plans, deferment, forbearance, and loan forgiveness programs.
Unlike Direct Subsidized Loans, you don’t have to meet a financial need requirement to get a Direct Unsubsidized Loan. However, these loans don’t come with an interest subsidy from the government. In other words, you’re responsible for paying all the interest that accrues on an unsubsidized loan. Interest starts adding up from the date your loan is disbursed.
Unsubsidized vs. subsidized student loans
Here’s a closer look at how Direct Unsubsidized Loans compare to Direct Subsidized Loans.
How to qualify for a Direct Unsubsidized Loan
To qualify for a Direct Unsubsidized Loan, you must be enrolled at least half-time in a school that’s part of the Direct Loan program. You’ll also need to meet the general requirements for federal financial aid, which include:
- Be a U.S. citizen or eligible noncitizen
- Have a valid Social Security number (with some exceptions)
- Be enrolled or accepted into a degree or certificate program
- Make satisfactory academic progress while you’re in school
- Qualify to pursue higher education by having a high school diploma or equivalent
- Not be in default on a federal student loan or owe money on a federal student grant
How much can I borrow?
Direct Unsubsidized Loans come with borrowing limits that vary depending on your year in school and dependency status, as well as whether you’re an undergraduate or graduate student. Here’s the maximum you can borrow as an undergraduate:
Here’s how much you can borrow as a graduate student:
- Annual loan limit: $20,500
- Aggregate loan limit: $138,500
Note:
The aggregate loan limit for graduate students includes any federal loans received for undergraduate study.
Fees and interest rates
Direct Unsubsidized Loans come with fixed interest rates that will stay the same over the life of your loan. These are the current rates for loans disbursed on or after July 1, 2023 and before July 1, 2024:
- Interest rate for undergraduate borrowers: 5.50%
- Interest rate for graduate or professional students: 7.05%
Direct Unsubsidized Loans also come with a loan fee that’s deducted from your loan disbursement. For loans disbursed on or after Oct. 1, 2020 and before Oct. 1, 2024, the loan fee is 1.057% of your loan amount.
Repaying unsubsidized loans
When you borrow Direct Unsubsidized Loans, you can choose to defer payments while you're enrolled in school at least half-time and for six months after you graduate. Since interest will accrue during this time, though, making in-school payments could help you cut down on costs.
Once you’re ready to start full repayment, you have several options for repayment plans. including:
- Standard repayment: This plan involves fixed monthly payments over a period of 10 years.
- Graduated repayment: You can also choose to make graduated payments over 10 years, which start out lower and increase over time. Note that this approach can cost you more in interest than the standard plan.
- Extended repayment: On this plan, you’ll make fixed or graduated payments over a 25-year term.
- Income-driven repayment: Income-driven repayment plans adjust your monthly payments based on a percentage of your discretionary income. Options include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and the new Saving on a Valuable Education (SAVE) plan. For many borrowers, the SAVE plan will offer the most affordable payments and the most generous interest subsidy.
If you’re eager to pay off your student loans quickly, and you have the financial means to do so, you can also make extra payments on your balance without penalty.
How to apply for a Direct Unsubsidized Loan
To apply for a Direct Unsubsidized Loan, you’ll need to submit the Free Application for Federal Student Aid (FAFSA). You’ll register for the FAFSA every year that you’re enrolled in school and want to receive federal student loans and other financial aid.
The FAFSA collects your personal and financial information, as well as that of your parents if you’re a dependent student. You can submit this form online at StudentAid.gov. Along with granting you access to Direct Unsubsidized Loans, the FAFSA may also qualify you for Direct Subsidized Loans, federal grants, and work-study awards.
After you submit the FAFSA, your school’s financial aid office will review your information and put together your financial aid package. Your financial aid award will detail how much you’re eligible to borrow in Direct Unsubsidized Loans, as well as any other financial aid you can receive.
Note that you’re not required to accept all (or any) of the student loans offered to you. If you can get by with less, you could choose to borrow a lower amount and reduce the amount of debt you’ll have to pay back after graduation.
Read More: How To Take Out a Student Loan
What if I need more funding?
Federal student loans are the first choice for many students, since they come with relatively low interest rates and a variety of repayment plans and other benefits. However, federal student loans also come with borrowing limits, and you may need additional money for school.
If you have a gap in funding, private student loans could be a solution. Private student loans come from private lenders, such as banks, credit unions, and online lenders. Unlike federal student loans, you’ll need to meet a lender’s requirements for credit and income to qualify.
Since private student loans can be more expensive and less flexible than federal ones, it’s often a good idea to exhaust your eligibility for federal financial aid first. If you need more money for school, though, exploring private lenders may make sense for your situation.
If you’re interested in a private student loan, make sure to shop around with multiple lenders to find the most affordable offer.
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Fixed (APR)
4.07% - 15.48%
Loan Amounts
$1,000 up to 100% of the school-certified cost of attendance
Min. Credit Score
680
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4.09% - 15.71%
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$2,001* to $400,000
Min. Credit Score
680
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4.43% - 14.04%
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$1,000 to $99,999 annually ($180,000 aggregate limit)
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660
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4.48% - 13.29%
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$1,000 to $350,000 (depending on degree)
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720
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Fixed (APR)
4.50% - 15.49%
Loan Amounts
$1,000 up to 100% of school-certified cost of attendance
Min. Credit Score
660
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4.56% - 8.34%
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$1,001 up to 100% of school certified cost of attendance
Min. Credit Score
670
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Fixed (APR)
5.35% - 7.95%
Loan Amounts
$1,500 up to school’s certified cost of attendance less aid
Min. Credit Score
670
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Fixed (APR)
8.42% - 13.01%
Loan Amounts
$1,000 up to cost of attendance
Min. Credit Score
680
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