Federal Direct Subsidized and Unsubsidized Loans

Undergraduate students enrolled half-time or higher are eligible for both Federal Direct Subsidized and Unsubsidized loans. Graduate and professional students are only eligible for Federal Direct Unsubsidized loans and GRAD PLUS loans. The Direct Subsidized and Unsubsidized loans are fixed interest rate loans with the same repayment programs and include options for deferment and forbearance, albeit the interest on the loans can be treated differently during in-school and grace periods.




  • Submit the Free Application for Federal Student Aid (FAFSA)
  • Be a U.S. citizen or permanent resident
  • Can't be in default on a federal loan.
  • Must be enrolled at least half-time.
  • Maintain Satisfactory Academic Progress (SAP).
  • Males 18-25 years of age must register with Selective Service.
  • Complete Entrance Loan Counseling online at studentloans.gov.
  • Complete a Master Promissory Note online at studentloans.gov.
  • If you are applying for summer, make sure you are enrolled at least half-time.
  • Effective July 1, 2013, first-time* Direct Loan borrowers are limited in the amount of time they can receive Direct Subsidized Loans. 

    Borrowers may receive Direct Subsidized Loans for no more than 150% of the length of the student’s current academic program (ex. 6 years for a 4-year program).

    Once a student has reached 150% time limit, they will not be eligible for any further subsidized loans.

    If a student has reached 150% time limit, and they continue to enroll, they will lose the interest subsidy on the subsidized loans they borrowed in the past.

    Students who have reached the 150% limit will remain eligible for Direct Unsubsidized Loans. The time limit for borrowing subsidized loans will be adjusted to reflect part time attendance and attendance for only one semester.

          * First-time borrowers are students with no outstanding federal loan balance as of July 1, 2013


Difference Between Subsidized & Unsubsidized Loans

The subsidized loan is considered a need based loan which means it is only awarded to those students who can demonstrate a financial need on the FAFSA. The unsubsidized loan is available to anyone whose other financial aid doesn't meet the Cost of Attendance. Each loan has a six month grace period after the student graduates, withdraws, or is enrolled less than half-time.


In-School Interest Subsidy

Federal Direct Subsidized loans do not accrue interest while the student is enrolled at least half time. The Consolidated Appropriations Act of 2012 (dated December 14, 2011) eliminated Federal Direct Subsidized loan interest subsidy during the six-month grace period for all Federal Direct Subsidized loans originated from July 1, 2012 through June 30, 2014. For all other subsidized loans, interest does not accrue on these loans during the borrowers six-month grace period.


Loan Fees

An origination fee applies to the Federal Direct Subsidized and Federal Direct Unsubsidized loans at the time of disbursement. Due to sequestration, the origination fee have been updated based on the loans first disbursement date.

  • Direct Subsidized and Unsubsidized loans with a first disbursement prior to July 1, 2013 have a 1% origination fee.
  • Direct Subsidized and Unsubsidized loans with a first disbursement on or after July 1, 2013 have a 1.051% origination fee.
  • Direct Subsidized and Unsubsidized loans with a first disbursement on or after December 1, 2013 have a 1.072% origination fee.




Direct Loan Interest Rates
Grade Level Interest Rates
Subsidized Unsubsidized
Undergraduate 3.86% 3.86%
Graduate & Professional Careers n/a 5.41%




Dependent Undergraduate Annual Loan Limits
Grade Level Subsidized Unsubsidized Combined
Freshman 3,500 2,000 5,500
Sophomore 4,500 2,000 6,500
Junior & Senior 5,500 2,000 7,500






Independent Undergraduate Annual Loan Limits
Grade Level Subsidized Unsubsidized Combined
Freshman 3,500 6,000 9,500
Sophomore 4,500 6,000 10,500
Junior & Senior 5,500 7,000 12,500




Graduate & Professional Annual Loan Limits
Grade Level Unsubsidized
Graduate  20,500
Medical Year 1 43,833
Year 2, 3, 4 47,167
Veterinary Year 1, 2, 3 40,500
Year 4 47,167
Doctorate of Pharmacy  33,000
Master of Public Health (MPH) 33,000




Loan Limits

Annual federal loan limits are based on academic grade level and borrower dependency status.

  • An undergraduate student's dependency status is determined by the FAFSA application and federal guidelines.
  • Independent students may borrow up to $4,000 (freshmen, sophomores) or $5000 (juniors, seniors) in additional unsubsidized loans as shown in the chart below.
  • If the borrower is not eligible for the maximum subsidized loan, they are offered the difference as unsubsidized loans, not to exceed the Cost of Attendance less other financial aid.
  • Aggregate loan limits, are the lifetime maximum loan amounts a borrower is eligible for in their academic career. A borrowers aggregate total is the total off all loans that student has borrowed.
  • Federal regulations require that seniors who graduate in less than a full academic year cannot access the full senior maximum in Federal Direct Loans ($7,500 for dependent students, $12,500 for independent students). UW Madison was exempt from this rule for many years. Beginning with the summer, 2012 term, UW Madison will be required to begin prorating loans for seniors who graduate after attending only one term of the 2012-2013 year. For example, the 2012-2013 school year is made up of three terms; summer 2012, fall 2012 and spring 2013. If a senior graduates after attending only ONE of those terms their Direct Loans must be prorated down to reflect the actual number of credits taken. If the student is not attending fulltime the loan is reduced further. The formula used for the dependent senior loan amount is (# credits/24 x $7,500). For independent seniors the amount is determined by (# credits/24 x $12,500).



 Grade Level  Lifetime Aggregate Limits
 Subsidized  Unsubsidized  Combined
 Dependent Undergrad   23,000  8,000  31,000
 Independent Undergrad   23,000  34,500  57,500
 Graduate  65,500*  73,000  138,500*
 Medical, Veterinary   65,500*  158,500  224,000*
 Medical, Pharmacy & MPH   65,500*  158,500  224,000*


*Graduate aggregate limits include undergraduate loans borrowed.

Automatic Electronic Debit

If a borrower enrolls in electronic debit to repay their loans, they are eligible for a monthly interest rate reduction of .25% on their federal loans. While using this option, you still have the ability to pay additional amounts in order to pay off your loan faster.


Deferment and Forbearance

These plans are available to borrowers who qualify due to unforeseen financial, health or military circumstances. You may also qualify for an In-School Deferment if you return to school at least half-time. Contact your loan servicer for the appropriate forms.

Entrance & Exit Counseling

To learn more about loan counseling click here.


Summer Term Borrowing

After loans are offered for the summer term, if a summer balance exists when the student's term of enrollment is ending, the financial aid office will accept the loan for the amount of the balance. A notification will be sent to the borrower. Due to the shortened summer period of enrollment, students often forget to accept their loans for their term balance. Once the term is over, the loan can not be disbursed unless it is accepted within the enrollment period. If the borrower does not want the loan, please contact the Federal Direct & Private Loan Office at 608-262-4987 or email directloans@finaid.wisc.edu and the loan will be cancelled.