Federal loans are government-backed financial aid options available to undergraduate students, providing favorable terms and repayment flexibility. Federal student loans are made through the William D. Ford Federal Direct Loan Program. Eligible students borrow directly from the U.S. Department of Education and the University of Iowa administers the loan.
How to Apply
- Complete the Free Application for Federal Student Aid (FAFSA).
- Once available, review your financial aid offer to know which loan(s) you are eligible for.
- First-time borrowers must complete Entrance Counseling and a Master Promissory Note (MPN) for Undergraduates.
- Transfer students who have already completed a Master Promissory Note at another school can report that to our office.
- Accept, reduce, or decline your Federal Direct Loan(s) for each semester in MyUI before the end of the semester the loan was offered for.
- Plan ahead for loan processing: Federal regulations determine when our office can process a Federal Direct Loan. If you plan to use a loan at the start of a semester, complete all required steps at least one month before the semester begins to avoid delays.
Federal Direct Subsidized Loan
- Available only to undergraduate students with financial need who are enrolled in at least six credits. Financial need is based on the cost of attendance, student aid index (SAI) calculated from the FAFSA, and other financial aid available.
- The federal government pays the interest that accrues while the borrower is in an in-school, grace, or deferment status
- Interest begins to accrue when the borrower enters repayment
- If eligible, we encourage all students to borrow this loan before borrowing PLUS or private student loans
Federal Direct Unsubsidized Loan
- Available to undergraduate students enrolled in at least six credits
- Not based on financial need
- Interest begins to accrue when the loan is disbursed and will accrue through the life of the loan
- Interest payments are not required while a student is in school, but it will reduce the total repayment amount
- We encourage all students to borrow this loan before borrowing PLUS or private student loans
Annual Loan Limits
Note: Federal loan limits assume full-time enrollment. If you enroll less than full-time, your annual loan eligibility will be reduced proportionally based on the number of credits you take.
| Grade level | Subsidized Annual Maximum Eligibility | Unsubsidized Annual Minimum Eligibility | Combined Annual Maximum Eligibility |
|---|---|---|---|
| First-Year (00-29 credits) | $3,500 | $2,000 | $5,500 |
| Second-Year (30-59 credits) | $4,500 | $2,000 | $6,500 |
| Third- and Fourth-Year (60+ credits) | $5,500 | $2,000 | $7,500 |
| Grade level | Subsidized Annual Maximum Eligibility | Unsubsidized Annual Minimum Eligibility | Combined Annual Maximum Eligibility |
|---|---|---|---|
| First-Year (00-29 credits) | $3,500 | $6,000 | $9,500 |
| Second-Year (30-59 credits) | $4,500 | $6,000 | $10,500 |
| Third- and Fourth-Year (60+ credits) | $5,500 | $7,000 | $12,500 |
Lifetime Loan Limits
| Grade level | Subsidized Lifetime Maximum Eligibility | Unsubsidized Lifetime Minimum Eligibility | Combined Lifetime Maximum Eligibility |
|---|---|---|---|
| Dependent Undergraduate | $23,000 | $8,000 | $31,000 |
| Independent Undergraduate | $23,000 | $34,500 | $57,500 |
6.39 %
For loans first disbursed between
7/1/2025 and 6/30/2026
1.057 %
For loans first disbursed between
10/1/20 and 9/30/25
What is Interest?
Interest is additional money that you pay to a lender as a cost of borrowing money. Interest is calculated as a percentage of the unpaid principal amount that you borrowed.
Direct Loans are “daily interest” loans. On daily interest loans, interest accrues (adds up) every day.
An origination fee is a percentage of your loan amount charged by the lender for the processing of your loan.
Federal student loans have an origination fee; therefore, the amount you may receive as a disbursement may be slightly lower than the amount you accept.