Posted Date: July 10, 2012

Author:  David Bergeron, Acting Assistant Secretary, Office of Postsecondary Education

Subject: Direct Loan Interest Rates and Changes to Student Eligibility for the Direct Subsidized Loans

On July 6, 2012, President Obama signed Public Law 112-141 that included a one-year extension of the 3.4 percent interest rate that has applied to Direct Subsidized Loans made to undergraduate students since July 1, 2011. With this action, the interest rate on any Direct Subsidized Loan first disbursed on or after July 1, 2012 and before July 1, 2013 will be 3.4 percent.

The 3.4 percent interest rate applies only to Direct Subsidized Loans made to undergraduate students. The interest rate on Direct Unsubsidized Loans made to both undergraduate and to graduate or professional students remains at 6.8 percent.  As explained in DCL GEN-11-16, graduate and professional students are not eligible for Direct Subsidized Loans for loan periods beginning on or after July 1, 2012.

Public Law 112-141 also includes a new limit on eligibility for Direct Subsidized Loans for new borrowers on or after July 1, 2013.  A new borrower on or after July 1, 2013  will not be eligible for new Direct Subsidized Loans if the period during which the borrower has received such loans  exceeds 150 percent  of the published length of the borrower’s educational program. The law also provides that a borrower reaching the 150 percent limit becomes ineligible for interest subsidy benefits on all Direct Subsidized loans first disbursed to that borrower on or after July 1, 2013.  We will provide further information on this provision of the law at a later date.

   

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