Do you have to pay back a federal direct unsubsidized loan

Summary: Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans) are federal student loans borrowed through the Direct Loans program that offer undergraduate and graduate and professional students a low, fixed interest rate and flexible repayment terms. Demonstrated financial need is not required to qualify. Students are responsible for paying all of the interest that adds up, until the loan balance is paid off.

What is a Direct Unsubsidized Loan?

Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans) are low-cost, fixed-rate federal student loans available to both undergraduate and graduate students. Financial need is not required, so even students from wealthier families can borrow Direct Unsubsidized Loans.

Key Benefits:

Fixed interest rate of 4.99% for undergraduate students for the 2022 - 2023 academic year
Fixed interest rate of 6.54% for graduate and professional students for the 2022 - 2023 academic year
No payments while enrolled in school
Eligibility not based on demonstrated financial need or credit
Multiple repayment plans (including income-based) available

How to Apply for a Direct Unsubsidized Loan

Complete the Free Application for Federal Student Aid (FAFSA®) or Renewal FAFSA (for returning students) at StudentAid.gov.
Receive your financial aid award letter by mail or email from your school's financial aid office. This letter will summarize your available financial aid, including Direct Subsidized Loans (if eligible) and Direct Unsubsidized Loans.
Contact your financial aid office to accept the financial aid, including student loans.
Sign any associated paperwork, such as the Master Promissory Note (MPN).

Direct Unsubsidized Loan Eligibility

Most students who qualify for federal aid are eligible to take out a Direct Unsubsidized Loan.

Your family’s financial circumstances do not matter. Even wealthy families can qualify.

Required:

U.S. citizen, national, or eligible non-citizen
Have received a high school diploma or the equivalent (e.g., GED)
Enrolled at least half-time in an eligible degree or certificate program
Not in default on any existing federal student loans
Meet general eligibility requirements for federal student aid

Not Required:

Credit check
Cosigner
Separate loan application

Direct Unsubsidized Loan Interest Rates

The interest rates on Direct Unsubsidized Loans are fixed and do not change over the life of the loan.

Every year on July 1, interest rates reset for new loans first disbursed on or after July 1.

Private Student Loan Rates

Variable rates starting at:

2.49% APR

Fixed rates starting at:

3.75% APR

Lowest APRs shown for Private Student Loans are available for the most creditworthy applicants for undergraduate loans, and include a 0.25% interest rate reduction while enrolled in automatic payments. Interest rates as of September 15, 2022.

Federal Student Loan Rates

For loans first disbursed July 1, 2022 through June 30, 2023

The interest on a Direct Unsubsidized Loan starts to add up (accrue) from the date the loan is first disbursed. If you don’t pay the interest as it accrues, it will be capitalized (added to the loan balance) when you enter repayment, increasing the size of the loan.

Direct Unsubsidized Loan Fees

The current fee (Oct. 1, 2022 - Sept. 30, 2023) on Direct Loans is 1.057%. Fees are deducted from each loan disbursement. You can ask the college financial aid office to increase the loan amount to cover the fees, up to the annual loan limit.

Direct Loan Limits: How Much You Can Borrow

The amount you can borrow from the Direct Loans program is subject to annual and aggregate loan limits:

Annual limits specify how much you can borrow each academic year.
Aggregate limits (also called cumulative limits) specify how much you can borrow through the loan program.

The following graphic outlines the various loan limits for different types of students, and annual and aggregate limits for subsidized and unsubsidized loans.

I am a dependent undergraduate student. How can I get my loan limits increased?

Dependency Override

If you have unusual family circumstances (such as a parent in prison), contact your school’s financial aid office and ask for a dependency override to get independent student limits.

Parent PLUS Loan Denial

If your parent is denied for a Parent PLUS Loan, you become eligible for the same loan limits as independent students. Contact your school’s financial aid office for details.

Loan limits are also capped at the college’s annual cost of attendance.

The cost of attendance includes:

Tuition and fees
Room and board
Books
Supplies
Equipment
Transportation
Miscellaneous personal expenses

How Loan Funds are Distributed

If you are a first-time Direct Loans borrower, you will be required to attend entrance counseling before your loan funds are sent to your school (disbursed). Some schools require in-person counseling, but many offer online counseling. You will learn about the loan terms and requirements during the counseling session.

You will also be required to sign a Master Promissory Note (MPN) before the loans can be disbursed.

Instantly Compare Lenders

The Direct Loan program sends the funds to your school to be credited to your student account. In most cases, the loan will be sent (disbursed) in at least two installments.

Special reminder: There is typically a 30-day delay in disbursing student loans to first-time, first-year borrowers.

Loan funds are credited to your account in this order:

Tuition and fees
Room and board (if you are living in college-owned student housing)
Other school charges (with your permission)

If any loan funds remain in your account, the credit balance will be refunded to you by check, cash, debit card, or electronic funds transfer (EFT) to your bank account. Remember, the refund must be used to pay for your direct and indirect education expenses, such as textbooks, supplies, and equipment.

Read our blog on financial aid disbursement for more details.

In-School Deferment and Grace Period

While you are enrolled in school at least half-time, your Direct Loans will be placed into deferment, which means you don’t have to make any payments. In addition, you don’t have to make payments during the 6-month grace period after you graduate or drop below half-time enrollment status.

The interest on your Direct Unsubsidized Loans will start to accrue (add up) as soon as all of the loan funds are sent to your school. Even though you aren’t making any payments, interest is still adding up.

Repayment

The standard repayment term on Direct Loans is 10 years. However, you can qualify for a longer repayment term if you consolidate the loans or have more than $30,000 in federal student loans.

Direct Unsubsidized Loans are eligible for all of the different repayment plans offered by the U.S. Department of Education.

Eligible repayment plans:

Standard Repayment
Extended Repayment
Graduated Repayment
Revised Pay-As-You-Earn (REPAYE) Repayment
Pay-As-You-Earn (PAYE) Repayment
Income-Based Repayment (IBR)
Income-Contingent Repayment (ICR)
Income-Sensitive Repayment (ISR)

Recommendations

File the FAFSA every year to maintain eligibility for student aid.
Apply for grants and scholarships.
Borrow Direct Subsidized Loans (if eligible) first. Then, take out Direct Unsubsidized Loans. If you have borrowed the maximum and still can’t pay all of your costs, consider other funding options.
Compare the costs and benefits of Parent PLUS Loans and private student loans. If you have a creditworthy cosigner, you may get a lower interest rate with a private student loan.

Learn More About Federal Student Loans

Undergraduate Student Loans

Subsidized Student Loans

Comparing Subsidized and Unsubsidized Student Loans

Eligibility Requirements

Interest Rates

Loan Limits

Health Professions Student Loans

What does federal direct loan unsubsidized mean?

What happens if you don't pay unsubsidized loan?

Unfortunately, there can be many negative consequences of failing to make your student loan payments, including wage garnishment, a drop in your credit score or a suspension of your professional license.

Will federal unsubsidized loans be forgiven?

Nearly every type of federal student loan qualifies for forgiveness, including direct subsidized or unsubsidized loans and graduate or parent PLUS loans.

Do you have to pay unsubsidized loans while in college?

If you have a Direct Unsubsidized Loan, you have the option to pay interest while you are in school, or you can wait until you are no longer enrolled. Our office recommends that you pay the interest to minimize your loan debt.