Federal Direct Loan

When you complete the Free Application for Federal Student Aid (FAFSA), you are applying for all aid programs for which you may be eligible, including direct loans. Direct loans are funded by the U.S. Department of Education. Repayment of Direct Loan funds begins six months after the student graduates or ceases enrollment at least half-time.

There are two types of Direct Loans offered at SF State University:

Subsidized Direct Loans

  • Subsidized loans are loans that the government will not charge you interest on prior to repayment. The federal government pays the interest while the student remains enrolled in school at least half-time, during the 6-month grace period (except for loans disbursed between July 1, 2012 and July 1, 2014) and during all eligible periods of deferment.
  • The fixed interest rate for Undergraduate Direct Subsidized loan for Loans first disbursed on or after July 1, 2021 and before July 1, 2022 is 3.73%.

Subsidized Usage Limit Applies (SULA)

  • SULA limits a borrower's eligibility for Direct Subsidized Loans to a period not to exceed 150 percent of the length of the borrower's educational program.
  • Students who have exceeded the 150 percent limit will lose the interest subsidy on their Direct Subsidized Loans.
  • Only "first-time" borrowers on or after July 1, 2013 are subject to the new provision.
  • Your loan maximums are based on the published length of your program. You should check with your department regarding the length of your particular program.
  • Subsidized loans accrued from previous academic programs will count toward your SULA eligibility in your present program. SULA calculations do not restart if you start a new program.

Examples of SULA:

  • Example One: if you are enrolled in a four-year undergraduate program, the maximum period for which you can receive Direct Subsidized Loans is six years (150% of 4 years = 6 years).
  • Example Two: if you are enrolled in a two-year associate degree program or a two year academic certificate program, the maximum period for which you can receive Direct Subsidized Loans is three years (150% of 2 years = 3 years).
    • Note: If you were previously enrolled in a 4-year or other program and have taken out subsidized loans, those previous loans will be part of the SULA calculation.
  • Visit the Federal Student Aid website for more information regarding the conditions by which a student can lose the subsidized loan subsidy or how the 150% subsidized loan maximum is calculated.

Unsubsidized Direct Loans

  • The unsubsidized direct loan is a loan that you are charged interest on from the day the loan funds are disbursed until you repay the loan in full.
  • The principal loan balance payments are deferred, if you are enrolled in a college or university at least a half-time. However, you must pay interest on the Unsubsidized loan while you are in school and during any grace or in-school deferment periods.
  • You may choose to have the interest deferred. This will result in the deferred interest being added to the principle loan amount borrowed at the time your repayment begins. This is called capitalization. Having the interest capitalized will mean a higher loan amount owed than originally borrowed.
  • For Undergraduate students, the fixed interest rate for Unsubsidized Loans first disbursed on or after July 1, 2021, and before July 1, 2022 is 3.73% 
  • For Graduate students, the fixed interest rate for Unsubsidized Loans first disbursed on or after July 1, 2021, and before July 1, 2022 is 5.28%

For more information about Federal Direct Loans, visit the Federal Student Aid Loans website.

Direct Loan Origination fees:

There are loan origination fees associated when borrowing a Direct Subsidized or Unsubsidized loan. The Direct Loan origination fee effective 10/1/2020 and before 10/1/2022 will be 1.057%. This calculation reduces the total loan amount paid to you by 1.057% percent. By law, these fees will be subtracted proportionately from each loan disbursement.

Eligibility Requirements:

To be eligible to receive a Direct Subsidized/Unsubsidized Loan, you must:

  1. Accept your financial aid offer
  2. Complete a Direct Subsidized/Unsubsidized Master Promissory Note on studentaid.gov
  3. Complete Entrance Loan Counseling, if this will be your first federal Direct student loan. 
  4. Be accepted for enrollment in a degree program at SF State University.
    (Unclassified graduates and some students enrolled through College of Extended Learning are not eligible)
  5. Be registered at least half-time: 6 units for Undergraduates, second bachelor and Credential students. 4 graduate units for master's degree students.
  6. Not currently in default on a federal student loan. Examples: GSL, Perkins, Direct or FFEL Stafford loans.
  7. Not owe a repayment on a federal or state grant. Examples: PELL, SUGP, SEOG, or Cal grant.
  8. Make Satisfactory Academic Progress.

Receiving Your Direct Loan Funds

  • Once we have received your Financial Aid Offer acceptance, completion of entrance loan counseling and acknowledgement of your signed master promissory note, we will subsequently process your loan request and authorize the disbursement of your loan.
  • All Federal Direct Loans for the academic year will be disbursed in two equal disbursements: one half in the fall semester and one half in the spring semester.
  • Loans will first apply toward any charges on the Student Center. Your remaining disbursement balance will be directly deposited to your account (if you have signed up for this option) or mailed to you in a check.
  • You have the right to cancel all or a portion of the student loan(s) or federal Teach grant disbursed to you. To avoid paying the administrative fee on your disbursed Direct loan(s) or accrued interest on a converted federal teach grant, you must return the loan or teach grant funds to the Bursar's office located in the Student Services building, One Stop within 100 days of the original check date. (Do Not Void the original check) You should use a money order or cashier's check, if the original check has been self deposited or direct deposited in your account.

Additional information on Federal Direct Loans:

Replacing Federal Work Study Award

A student may be able to replace the federal work study award amounts for a Direct Loan increase, if a student is awarded federal work study and does not plan to use the award for employment. The student must have remaining eligibility for the loan increase or loan award. The loan awards cannot be more than the annual maximum based on the student's class level. Interested students should speak with a financial aid counselor.

Additional Unsubsidized Direct Loan for Dependent Students

If a dependent student's parents are denied a parent Direct PLUS loan, the student may be eligible for an increase in unsubsidized Direct Loan. Interested students should speak with a financial aid counselor.

Proration amounts for Graduating Borrowers (Undergrad only)

If a student’s remaining period of study is shorter than an academic year, or a student’s academic program is shorter than an academic year, then students may request to be evaluated for a proration of student loans. Students may be eligible for proration of loans if they are enrolled in more than 12 units during their graduating semester.