If you’re an undergraduate, graduate, or professional student, you may be eligible for a federal Direct Unsubsidized Loan from the Department of Education. These loans are available to students regardless of financial need, and don’t require a credit check. They have relatively low fixed interest rates and are eligible for a variety of repayment plans, including income-driven repayment.
See if you could benefit from a Direct Unsubsidized Loan, and how you can apply.
- At a glance: Direct Unsubsidized Loans
- Eligibility requirements
- Interest rates and fees
- Loan limits
- Repayment plans
- Pros and cons
- What about subsidized loans?
- How to apply for federal student loans
- What if I’m not eligible?
Overview of Federal Direct Unsubsidized Loans
Here’s a closer look at federal Direct Unsubsidized Loans, including their interest rates, loan fees, and borrowing limits for the 2022-23 school year.
Federal Direct Unsubsidized Loan | |
|---|---|
| Undergrad APR | 4.99% |
| Graduate and professional APR | 6.54% |
| Fees | 1.057% origination fee |
| Eligibility | Undergraduate, graduate, or professional student enrolled at least half-time in an eligible program |
| Undergrad limits | $31,000 for dependent students; $57,500 for independent students |
| Graduate limits | $138,500 |
| Financial need required? | No |
| Credit check required? | No |
Eligibility requirements
While you don’t need to demonstrate a financial need or undergo a credit check to qualify for a Direct Unsubsidized Loan, you do need to meet the general requirements for federal financial aid. These include:
- U.S. citizenship or eligible noncitizen status with a Social Security number (with a few exceptions)
- At least half-time enrollment in an eligible degree or certificate program
- Maintaining satisfactory academic progress while you’re in school
- Showing that you’re qualified to go to college by having a high school diploma, GED, or equivalent certification
- Not being in default on a federal student loan or owing money on a federal student grant
Interest rates and fees
Congress sets the rates and fees on Direct Unsubsidized Loans on an annual basis. The interest rates are fixed, meaning your rate won’t change once you borrow the loan.
For unsubsidized loans disbursed between July 1, 2022, and July 1, 2023, the interest rates are:
- 4.99% for undergraduate borrowers
- 6.54% for graduate and professional students
Loans disbursed between Oct. 1, 2020, and Oct. 1, 2023, also come with a loan fee equal to 1.057% of your loan amount.
Loan limits
Federal Direct Unsubsidized Loans come with borrowing limits, meaning you can only borrow up to a certain amount each year and in total.
Here are the annual borrowing limits, depending on your year in school:
| Dependent students | Independent students | |
|---|---|---|
| First-year | $5,500 | $9,500 |
| Second-year | $6,500 | $10,500 |
| Third-year and beyond | $7,500 | $12,500 |
| Graduate or professional student | N/A | $20,500 |
There are also lifetime limits for Direct Unsubsidized Loans, which represent the total amount you can borrow over your entire education:
| Dependent undergraduates | $31,000 |
| Independent undergraduates | $57,500 |
| Graduate and professional students | $138,500 |
Repayment options
With a federal Direct Unsubsidized Loan, you could be eligible for a variety of repayment plans, including:
- Standard: The standard plan sets fixed, monthly payments that are evenly divided over 10 years.
- Graduated: This plan also typically spans 10 years, but payments start small at the beginning and gradually increase every two years.
- Extended: Extended repayment spans 25 years, and payments can be fixed or graduated. You must have more than $30,000 in loans to qualify.
- Income-driven repayment: The government offers four income-driven plans, all of which adjust your monthly payment to a percentage of your discretionary income. If you still owe a balance after 20 or 25 years on an income-driven plan, it will be forgiven. While Direct Unsubsidized Loans are eligible for all of these plans, some have additional qualification requirements.
Pros and cons
Many borrowers qualify for Direct Unsubsidized Loans, and they have plenty of advantages. However, there are some drawbacks to consider before you borrow.
| Pros | Cons |
|---|---|
| Relatively low, fixed interest rates | Graduate and professional students receive higher interest rates |
| No credit check or financial need requirement | Loans come with annual and lifetime borrowing limits |
| Eligible for a variety of repayment plans and federal forgiveness programs | Government does not provide an interest subsidy |
What about subsidized loans?
The Department of Education also offers Direct Subsidized Loans in addition to its unsubsidized option. Subsidized loans are only available to undergraduate students with a proven financial need.
They also have a major advantage over unsubsidized lending: “The federal government pays the interest on subsidized loans during the in-school and grace periods, and during periods of authorized deferment,” explained Mark Kantrowitz, financial aid expert and publisher at SavingforCollege.com.
“On unsubsidized loans, the borrower is responsible for the interest during the in-school, grace, and deferment periods,” he added.
If you can qualify for a subsidized loan, it’s worth maxing that out before turning to unsubsidized loans. However, subsidized loans have even lower borrowing limits than their unsubsidized counterparts, so they may not fully cover your school costs.
How to apply for Direct Unsubsidized Loans
To borrow any federal student loan, you’ll need to fill out and submit the Free Application for Federal Student Aid (FAFSA) annually. Schools rely on the FAFSA to put together financial aid packages. Once you’ve been accepted into school, you’ll receive a financial aid award letter, which will detail the funding you qualify for.
You might receive an offer of Direct Unsubsidized Loans, Direct Subsidized Loans, grants, scholarships, or other types of aid. You can choose which aid you want to accept. Keep in mind that you’re not obligated to accept the full amount of student loans offered to you.
Before receiving your federal loans, you’ll need to complete student loan entrance counseling on the Federal Student Aid website and sign a promissory note. After these steps are completed, your loan money will be sent to your school’s financial aid office, which will apply the funds to tuition and fees.
Any remaining amount will be sent to you to use on school supplies and living expenses. If you borrowed more than you need, you have 120 days to return extra cash without being charged interest on the amount.
What if I’m not eligible for federal student loans?
If you’re not eligible for federal financial aid, you still have options. You could consider borrowing a student loan from a private lender, such as a bank, credit union, or online loan company.
You usually need a good credit score to borrow a private student loan, and your interest rate will be based on your credit and other factors. If you can’t qualify on your own, you may still be able to borrow by applying with a cosigner.