Federal Direct Subsidized and Unsubsidized Loans

Eligibility

To be eligible for Direct Subsidized/Unsubsidized Loans, you must meet Federal and Penn State Financial Aid Eligibility Requirements. In order to be eligible, you must:

• Be enrolled in a degree-seeking program

• Be enrolled half-time (6 credits for undergraduates and 5 for graduates)

• Meet the minimum requirements for Satisfactory Academic Progress

• Not be in default on previous federal direct loans

You will automatically be considered for Direct Subsidized and Unsubsidized Loans if you submit the Free Application for Federal Student Aid (FAFSA). The loans will be added to your student aid Financial Aid Offer in LionPATH once awarding begins for the academic year (April for first-time students and July for returning students).

First-time borrowers also need to complete Entrance Counseling and a Master Promissory Note at studentaid.gov. In most cases, you will only need to complete these items once during your college career. Your Subsidized/Unsubsidized loans will appear as a credit on your tuition bill after you complete these requirements.

*If you have technical difficulty signing the MPN, please contact the U.S. Department of

Origination Fees

The loan origination fee is a fee charged by your lender upon entering into a loan agreement to cover the cost of processing the loan. This agreement will be made when you sign the Master Promissory Note (MPN) at studentaid.gov. The fee will be taken out of the gross amount of your loan when the funds are disbursed to the school. See examples of net vs gross amounts below.

Net vs. Gross Amount of Loan

Your Direct Subsidized or Unsubsidized Loan will appear on both the Financial Aid Offer and Bursar Tuition Bills section on LionPATH; however, the loan amounts will be different.The loan amount on the Student Financial Aid Offer is the gross amount.The Bursar Tuition Bills section will reflect the net amount after the loan origination fees have been deducted.Once you have accepted your loan, the funds will automatically disburse to your student account after classes begin.

Example 1

You are offered a $2,750 Direct Subsidized Loan for one semester:

• $2,750 is your gross loan amount.

• $2,721 is your net loan amount that will disburse to your student account (gross amount minus the origination fee).

Example 2

You are offered a $1,000 Direct Unsubsidized Loan for one semester:

• $1,000 is your gross loan amount.

• $990 is your net loan amount that will disburse to your student account (gross amount minus the origination fee).

Annual loan amounts may be limited based on other financial aid received and your cost of attendance while enrolled. Your total student aid, including loans, may not exceed your Cost of Attendance, even if you have not reached the annual loan maximum.

* If the parent borrower is denied a Direct Parent PLUS loan, the dependent student may be eligible for an additional Direct Unsubsidized Loan. However, if the parent borrower is later approved for the Direct PLUS loan, or another parent borrower is later approved, the dependent student will no longer be eligible for the additional Direct Unsubsidized Loan.

Direct Subsidized and Unsubsidized Direct Loan maximum eligibility for Teacher Certification is $12,500 for the academic year. Due to federal statute, eligibility is based on fifth-year undergraduate loan limits, even though you are required to have a bachelor's degree and your admission is administered by the Penn State Graduate School.

Graduating undergraduate students with a one-semester loan may not be eligible to receive the maximum annual loan limit. Your eligibility will depend on your degree and the number of credits for which you are enrolled. Federal regulations require that the Direct Loan amount be prorated for a student who is enrolled for only one semester in an academic year, and will be graduating during that semester.

Loans at Another School

The U.S Department of Education requires Penn State to confirm whether or not students have taken credits and used Federal Pell Grant or Subsidized/Unsubsidized Loan funds at another institution during the most recent academic year. This will prevent us from awarding a Pell Grant and/or Subsidized/Unsubsidized loan in excess of your allowable yearly limits.

To indicate that we are collecting this information, holds will be placed on ALL student records prior to the beginning of each semester to check for federal grants and loans that may have been used at another institution. It is a requirement that we check all students to prevent over-certification of federal funds.

Timeline

The transfer monitoring hold will be placed on your student account and will expire in approximately 8-10 business days. This hold will be placed prior to the beginning of each semester so that we can upload the most current federal grant and loan information from the National Student Loan Database System (NSLDS). This will allow us to see if you have any pending or disbursed federal aid at another school for the current academic year prior to the upcoming semester disbursement(s) at Penn State.

Per federal guidelines, the transfer monitoring hold will be placed on ALL STUDENT accounts, not just transfer students. The hold cannot be removed prior to the 8-10 day review period.

Required Actions

If you are a Penn State student who has never attended another school:

When the updated NSLDS data loads into LionPATH, the hold will be removed from your record. No actions are required on your part.

If you are a Penn State student who has recently transferred from another school:

• If it is determined that you have no pending aid at your previous school, and your financial aid amounts for both schools do not exceed your yearly limit(s), the hold will be removed once your record has been reviewed.

• If it is determined that you have pending aid at your previous school, and your financial aid amounts for both schools exceed your yearly limit(s), the hold will remain on your record until your financial aid at Penn State has been adjusted. Please also review the Transfer Students section for additional actions required.

Transfer Students

If you are a student who has transferred to Penn State for the current academic year, then please take note of the following:

• If you have already filled out a FAFSA, please make sure to add Penn State’s school code:

  003329

• Cancel all pending aid at your previous institution. Your aid does not travel with you from one school to another.

• Keep in mind that your financial aid eligibility may be limited depending on what aid you have received at your previous institution and your financial aid at Penn State may be reduced or cancelled accordingly.

If you have a Direct Unsubsidized Loan, you have the option to pay interest while you are in school, or you can wait until you are no longer enrolled. Our office recommends that you pay the interest to minimize your loan debt. If you do not pay the interest, it will capitalize and be added to your total repayment amount. The example below illustrates the benefits of paying the interest while you are in school.

* Making loan interest payments benefits borrowers in the long run. For example, in this comparison, the monthly installment is $55.24 less and the total repayment at the end of the life of the loan is a savings of $1,828.41 in interest.

Federal regulations require schools to prorate the Direct Loan amounts for graduating undergraduate students when their final period of enrollment is less than a full academic year (fall-only, spring-only, or summer-only). The loan limit proration determines the maximum loan amount that a student may borrow for the final term of study based on the degree they are earning.

Graduating undergraduate students who are only attending one semester of the academic year will have their Direct Loans prorated based on the number of credit hours they are enrolled.

Note: Graduate and professional students are excluded from the loan proration requirement