Understanding Direct Subsidized Loans

A Federal Direct Subsidized Loan is a federal student loan for eligible undergraduate students who demonstrate financial need.

This loan can help cover college costs, but it must be repaid. What makes it different from other federal loans is that the U.S. Department of Education pays the interest while you are enrolled at least half-time, during your grace period and during periods of deferment.

For students who need to borrow, a Direct Subsidized Loan may be a lower-cost option than a Direct Unsubsidized Loan.
 

An Overview of Direct Subsidized Loans

Direct Subsidized Loans can help eligible undergraduate students pay for college expenses, including tuition, fees, housing, meals, books, supplies and other education-related costs.

Your eligibility is determined by the information you provide on the Free Application for Federal Student Aid (FAFSA). If you are eligible, the loan may appear in your financial aid offer.

Direct Subsidized Loan eligibility is determined by various factors:

• Your FAFSA information
• Your financial need
• Your year in school
• Your enrollment status
• Your cost of attendance
• Other financial aid you receive
• Your annual and lifetime federal loan limits

Note: A Direct Subsidized Loan is still a loan. You are responsible for repaying the amount you borrow, plus any interest that accrues when the federal government is not paying the interest for you.
 

Who Is Eligible for a Direct Subsidized Loan?

Direct Subsidized Loans are available to eligible undergraduate students who demonstrate financial need.

To be considered for a Direct Subsidized Loan at UAlbany, you must complete the FAFSA and list UAlbany using the Federal School Code 002835.

Undergraduate students must be enrolled in at least six credits to be eligible for federal Direct Loans. Direct Subsidized Loans have slightly better terms than Direct Unsubsidized Loans because they are designed to help students with financial need.

Note: Graduate and professional students are not eligible for Direct Subsidized Loans. They may be eligible for Direct Unsubsidized Loans and other federal loan options.

Direct Subsidized Loans vs. Direct Unsubsidized Loans

The main difference between a Direct Subsidized Loan and a Direct Unsubsidized Loan is how interest is handled.

With a Direct Subsidized Loan, the federal government pays the interest while you are enrolled at least half-time, during your six-month grace period and during deferment.

With a Direct Unsubsidized Loan, interest starts accumulating when the loan is first disbursed. You are responsible for that interest while you are in school, during your grace period and during periods of deferment or forbearance.

Note: If you are offered both subsidized and unsubsidized loans, consider using the subsidized loan first because it is more likely to cost less over time.

How Much Can I Borrow?

The amount you can borrow depends on your year in school, financial need, cost of attendance, other financial aid and federal annual and lifetime borrowing limits.

For loan purposes, UAlbany determines undergraduate grade level based on the number of credits you have completed:

• A freshman has completed less than 24 credits.
• A sophomore has completed 24 to 55 credits.
• A junior has completed 56 to 87 credits.
• A senior has completed 88 or more credits.

Students who progress to the next grade level after earning credits in a prior semester may be eligible for a loan increase for the academic year. If you believe you are eligible for a loan increase based on grade level progression, submit a ticket through the Financial Aid Self-Service Portal.

Note: You are not required to borrow the full amount offered. Borrow only what you need.

What Are the Interest Rates and Fees?

Federal Direct Loans have fixed interest rates and origination fees.

For loans first disbursed on or after July 1, 2026, and before July 1, 2027, the fixed interest rate for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students is 6.52%.

Direct Subsidized Loans and Direct Unsubsidized Loans also have a loan fee. For loans first disbursed on or after Oct. 1, 2020, and before Oct. 1, 2027, the fee is 1.057%. The fee is deducted from the loan before the funds are disbursed.

Note: Interest rates and loan fees are set by the federal government and may change for new loans. Visit the Federal Student Aid website for current rates and fees.

How Do I Apply for a Direct Subsidized Loan?

To be considered for a Direct Subsidized Loan, complete the FAFSA for the academic year you plan to attend UAlbany.

UAlbany will use your FAFSA information to determine whether you have financial need and whether a subsidized loan can be included in your financial aid offer.

When completing the FAFSA, enter UAlbany’s Federal School Code: 002835.

After your FAFSA is processed, check your MyUAlbany portal for Tasks. Missing information can delay your financial aid offer or prevent your loan from being finalized.

Note: Direct Subsidized Loans are only available to eligible undergraduate students. Graduate and professional students are not eligible for subsidized loans.

How Will I Know If I Received a Direct Subsidized Loan?

If you are eligible, the loan will appear in your financial aid offer in the MyUAlbany portal.

You can accept the full amount, reduce the amount or decline the loan. You are not required to borrow the full amount offered.

Before accepting a loan, review your charges, other financial aid and expected out-of-pocket costs so you can borrow only what you need.

Note: A subsidized loan may cost less than an unsubsidized loan over time, but it is still a loan that must be repaid.

What Do I Need to Do Before My Loan Can Be Paid?

If you are borrowing a Federal Direct Loan for the first time, you must complete two steps on the Federal Student Aid website:

• Entrance Counseling
• Master Promissory Note (MPN)

Entrance Counseling explains your responsibilities as a borrower. The Master Promissory Note is your legal promise to repay the loan, including any interest and fees.

UAlbany cannot disburse your loan until these requirements are complete and all financial aid Tasks in your MyUAlbany portal are resolved.

Note: Entrance Counseling and the Master Promissory Note are completed on the Federal Student Aid website using your FSA ID.

When Will My Loan Be Applied to My Student Account?

After you accept the loan and complete all required loan steps, the funds can be applied to your student account.

Financial aid, including loans, are first used to pay eligible University charges. If your total financial aid is greater than your charges, you may receive a refund to help pay other education-related expenses.

Note: A refund is not extra money. It may include borrowed funds that you will need to repay later.

When Do I Have to Repay a Direct Subsidized Loan?

Payments on Federal Direct Loans begin six months after you drop below half-time enrollment, leave school or graduate. At UAlbany, less than six credits per semester is considered below half-time enrollment for undergraduate students.

This six-month period is called a grace period. After the grace period ends, you will begin making payments to your federal loan servicer.

Note: Previous gaps in enrollment, other than summer, can use part or all of your grace period.

Frequently Asked Questions