A Federal Direct Unsubsidized Loan is a type of federal student loan available to both undergraduate and graduate/professional students that is not based on financial need. This loan helps cover the cost of higher education but, unlike subsidized loans, the borrower is responsible for paying the interest from the time the loan is disbursed until it is fully repaid. Interest accrues during all periods, including while the student is in school, during grace periods, and deferment periods. The borrower can either pay the interest as it accrues or allow it to accumulate and be capitalized (added to the principal amount), which increases the total repayment amount. Key points about Federal Direct Unsubsidized Loans:
- Available to undergraduate and graduate students.
- Not based on financial need.
- Interest starts accruing as soon as the loan is disbursed.
- Borrowers can choose to pay interest while in school or let it accumulate.
- There are annual and aggregate loan limits.
- Requires completion of FAFSA, Master Promissory Note, and entrance counseling before receiving the loan.
Interest rates vary and are fixed for the life of the loan but may change for new borrowers annually. For example, rates for these loans typically range around 6-8% depending on borrower status and year.
