The U.S. Department of Education offers two main types of loans to help eligible students cover the cost of higher education.
- Direct Subsidized Loans are loans made available to eligible undergraduate students who demonstrate financial need. The interest on this loan is subsidized (paid for) by the Federal Government while the student is enrolled at least a half time status.
- Direct Unsubsidized Loans are loans made available to undergraduate, graduate, and professional students who complete a FAFSA. The loan's interest is not subsidized (not paid for) by the Federal Government and will accrue while the student is enrolled. Eligibility is determined by the FAFSA and the Office of Financial Aid.
Federal student loans are an investment in your future. You should not be afraid to take out federal student loans, but you should be smart about it.
Federal student loans offer many benefits compared to other options you may consider when paying for college:
- The interest rate on federal student loans is fixed and usually lower than that on high interest rate credit cards.
- You don’t need a credit check or a cosigner to get most federal student loans.
- You don’t have to begin repaying your federal student loans until after you leave college or drop below half-time.
- Federal student loans offer flexible repayment plans and options to postpone your loan payments if you’re having trouble making payments.
- If you work in certain jobs, you may be eligible to have a portion of your federal student loans forgiven if you meet certain conditions.
- Loans will be excused in the event of a student’s death or total and permanent disability.
Prior to the loans being disbursed the Federal Government deducts a 1% origination fee from the loan funds.
The current interest rate for both the Direct Subsidized and Unsubsidized loans for the 2024-25 award year is fixed at 6.533%.
All aid awards, including Direct Loans will be disbursed in two equal disbursements minus the origination fee during the academic year. The first disbursement will be on the first day of the fall semester; the second disbursement will be on the first day of the spring semester.
Students are not required to make monthly payments while they are enrolled at any institution at least at a half-time enrollment status. For Muhlenberg College this means students will need to be registered for at least 2 units. Once a student graduates or leaves they will be given a six-month grace period where they are not required to make monthly payments. During this time the assigned loan lender will contact the student with details regarding their repayment.
