Federal direct student loan (FDSL)

"Federal direct student loan (FDSL)" submitted by SchoolGrantsfor Editorial Team and last updated on Monday 9th January 2012

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The FDSL Program is similar to the Federal Family Education Loan (FFEL) Program. The funds for these loans are provided by the US government directly to students and their parents through their schools. The FDSLP includes the Federal Direct Stafford Loan (Subsidized and Unsubsidized) and the Federal Direct Parent Loan for Undergraduate Students (PLUS). Benefits of the program include a faster turnaround time and less bureaucracy than the bank loan program.


Most students are eligible for federal Stafford student loans through the William D. Ford Federal Direct Loan Program. Because Direct Loans come straight from the Department of Education, the student does not need an outside lender. Like all federal aid, Direct Loans require that the student complete the FAFSA.

The Federal Direct Student Loan (FDSL) is a low-interest loan designed to help meet the costs of postsecondary education. Students who are U.S. citizens or permanent residents and have filed a Free Application for Federal Student Aid (FAFSA) are eligible, including those who do not qualify for need-based aid. Students who do not qualify for need-based aid are ineligible for the interest subsidy from the federal government. Borrowers of unsubsidized Direct Loans can either pay the interest quarterly or choose to have the interest accrue while they are enrolled in college.

The U.S. Department of Education is the lender. Direct Loans are either subsidized or unsubsidized. A subsidized loan is awarded on the basis of financial need. Borrowers are not charged interest during full-time enrollment, grace periods, or authorized periods of deferment. The federal government "subsidizes" the interest during these periods.

Subsidized FDSL

Subsidized FDSL are awarded based on financial need. The school determines your financial need, in part, from the information you provide on your financial aid application. With a subsidized Direct Loan, the federal government does not charge you interest before you begin repayment or during authorized periods of deferment (postponement of repayment). Repayment of principal and interest begins six months after a student graduates or ceases being enrolled at least half time.

Unsubsidized FDSL

Unsubsidized FDSL are not awarded on the basis of need. If you are an eligible student, you may request an unsubsidized FDSL up to the maximum annual amount. The federal government charges you interest from the time the loan is paid out to you, until you pay the loan in full. However, there is an option to defer payment of interest during school. Please note that interest is capitalized at repayment, which means it is added to the principal.

The net FDSL amount will be credited in late August and again in late January.

Federal direct student loan (FDSL) Limits:

Student Grade Level Subsidized FDSL Additional Unsubsidized FDSL
1st year $3,500 $2,000
2nd year $4,500 $2,000
3rd year $5,500 $2,000
4th year $5,500 $2,000

FDSL Rebate Calculation:

2014 $3,500 $1,750 - 0.5% =$1,741 fall $1,750 - 0.5% =$1,741 spring
2013 $4,500 $2,250 - 0.5% = $2,238 per semester
2012 2011 $5,500 $2,750 - 0.5% = $2736 per semester

Note: The loan amount borrowed is subject to a 1.% origination fee at disbursement. This is offset by a 1.0% rebate for the first 12 on-time, consecutive payments made during repayment.

How is the Assessed Fee computed?

In addition to interest, all federal direct student loans have a 2.0% origination fee. But students receive a 1.5% rebate at the time of origination based on paying their first 12 monthly payments on time, so the assessed fee is only 0.5%. This fee reduces the amount that disburses to a students account. For example, if a student borrows $ 2,000, only $ 1,990 will disburse to the student's account.

Federal Direct Student Loan interest rates for 2010-2011:

Fee: 0.5% Assessed to Student

Know more about Federal Family Education Loan Program (FFEL) vs. Federal Direct Student Loan Program (FDSL)

Federal direct student loan (FDSL) Application Process

Students typically apply for Direct Loans during the summer, and must complete the following steps in order to obtain a loan:

Please note that for 2010-2011, all borrowers, even those with prior Stafford loans, must sign a new master promissory note with the Direct Loan program.

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