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Direct Loan Changes for 2012

Important Information: Direct Loan Changes for 2012

The Budget Control Act (BCA) of 2011 – signed into law on August 2, 2011 – makes two (2) significant changes to the Direct Loan Program which will likely affect your financial aid awards and repayment beginning in 2012.


Change #1 – Loss of Subsidized Loan Eligibility for All Graduate and Professional Students

All graduate and professional students will no longer be eligible to receive Federal Direct Subsidized Loans effective with loans made for students with enrollment periods (class start dates) beginning on or after July 1, 2012. Direct Unsubsidized (interest accruing) Loans will continue to be offered.


What this means to you: If you are a graduate or professional (not undergraduate) student, applying for financial aid and whose first class day for the 2012-2013 academic year is on or after July 1, 2012, you will not be offered SUBSIDIZED (non-interest accruing) loans regardless of your FAFSA information. The Federal government has terminated the Direct Subsidized Loan program for all graduate and professional students effective as of that date.


Change #2 – Termination of Direct Loan Repayment Incentives

Effective for loans DISBURSED on or after July 1, 2012 the U.S. Dept. of Education can no longer offer any type of repayment incentives to Direct Loan borrowers to encourage on-time repayment of loans. With one exception* this includes any reduction in the Direct Loan interest rate (including the up-front interest rebate) or origination fee.


*Interest rate reductions will continue to be allowed for Direct Loan borrowers who have payments automatically electronically debited from an account.



Refer to Budget Control Act of 2011, Title V, Sections 502 & 503

No changes have been made to the annual loan amounts or variety of repayment plans and options open to borrowers.