Office of Student Aid : Loans : Federal Direct Stafford Loan
Federal Direct Stafford Loan(s)
A Federal Direct Subsidized Loan is available to help meet financial need after other resources are subtracted or to the annual maximum loan limit, whichever is lower. It is the U.S. Department of Education's major form of self-help aid and is available through the William D. Ford Federal Direct Loan Program. The interest rate for Federal Direct Subsidized loans disbursed on or after July 1, 2008 until June 30, 2009 is fixed at 6.0%. Beginning July 1, 2009, Federal Direct Subsidized loans for undergraduate students only will have a fixed interest rate of 5.6%. Federal Direct Subsidized loans for graduate students will remain at 6.8%. The federal government pays interest on the loan until you begin repayment.
Federal Direct Unsubsidized Stafford Loans
A Federal Direct Unsubsidized Loan is not based on your financial need. It is available to you through the William D. Ford Federal Direct Loan Program, if your Estimated Cost of Attendance (COA) is greater than your financial aid and you have not reached your annual maximum loan limit through the Federal Direct Subsidized Loan. The interest rate for Federal Direct Unsubsidized loans disbursed on or after July 1, 2006 is fixed at 6.8%. You are charged interest on this loan from the time the loan is disbursed until it is paid in full. If the interest is allowed to accumulate, the interest will be added to the principal amount of the loan and increase the amount to be repaid.
Apply for a Federal Direct Stafford (Subsidized or Unsubsidized) Loan
To apply for a Federal Direct Stafford (Subsidized or Unsubsidized) Loan, you must complete the FAFSA. To be eligible, you must be enrolled for at least six hours per semester and be maintaining Penn State’s Satisfactory Academic Progress Standards. If you are eligible for a Federal Direct Stafford (Subsidized or Unsubsidized) Loan, it will be included on your financial aid notification.
E-sign Your Federal Direct Stafford (Subsidized or Unsubsidized) Loan Master Promissory Note
If you are a first-time borrower of the Federal Direct Stafford Loan, you will be required to complete a Master Promissory Note (MPN) before the loan funds will be disbursed. In most cases, you will only be required to complete one MPN during your college career. You can sign your Federal Direct Stafford Loan MPN on the U.S. Department of Education Web site using your Federal Student Aid PIN by selecting the Complete New MPN for Student Loans option and then select Subsidized/Unsubsidized.
Technical Difficulty
If you are experiencing technical difficulty signing the Master Promissory Note online at www.dlenote.ed.gov, please contact the Department of Education's customer service center for borrowers toll free at 800-557-7394.
0.5% fees will be deducted from the gross amount of loan borrowed, so students need to take that into consideration when determining the amount to borrow. By law, after July 1, 2009 the total origination fee is 1.5%; however, Direct Loans offer a 1.0% rebate on this origination fee. If you fail to make 12 on-time monthly payments, a charge for the difference between the 0.5% origination fee and the 1.5% origination fee will be added to the outstanding balance of the loan.
Loan Entrance Counseling
Before the Office of Student Aid can disburse your loan funds, you are required to complete “Loan Entrance Counseling”. This counseling session provides you with information that will help you understand your rights and responsibilities as a loan borrower, as well as other tools to assist you with managing your loans.
***Please note that this requirement is separate from your signing the loan application.***
For your convenience, this counseling session is available by selecting Loan Entrance Counseling from the Students menu on eLion.
Receiving Federal Direct Stafford Loan Funds
It is important to know that loan funds will automatically credit to your student account if the Direct Loan Processor has a valid MPN on file for you and you have completed "Loan Entrance Counseling".
Reduce or Decline a Federal Direct Stafford (Subsidized or Unsubsidized) Loan
If you do not need your loan funds and wish to reduce or cancel your loan(s), please select Loan Decrease from the Students menu on eLion.
*If you are experiencing technical difficulty signing the Direct Loan MPN online, you may request a paper MPN from our office. Please note: a paper MPN will take four to six weeks to process--more than double the time it takes to process the online MPN--so it is always best to sign the MPN online if possible.