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Federal Direct Loans

What is a Federal Direct Loan?

A federal direct loan is money you borrow from the government that you have to pay back with interest. We encourage students to apply for grants and scholarships before taking out a student loan. A loan is a serious and long-term obligation.

Loan Eligibility

To be eligible for a federal student loan, you must:

  • Submit the Free Application for Federal Student Aid (FAFSA)
  • Demonstrate that you are qualified to enroll in college by one of the following means:
    • You have a high school diploma
    • You have a General Education Development (GED) Certificate
    • You passed the California High School Proficiency Exam (CHSPE)
  • Be a US citizen or eligible non-citizen with a social security number (SSN)
  • Be enrolled in an eligible degree or certificate program
  • Be enrolled in six units that apply toward the completion of your program
  • Maintain satisfactory academic progress
  • Certify that you will use federal financial aid only for educational purposes
  • Certify that you are not in default on a federal student loan and do not owe money on a federal student grant

All borrowers must sign the Master Promissory Note (MPN) annually. New borrowers must also complete entrance loan counseling through the Student Aid website.

Types of Federal Loans

Subsidized Direct Loans

Subsidized direct loans are given to eligible students who demonstrate financial need.

The federal government pays the interest on subsidized loans while you are enrolled in school at least half-time (six units in the fall or spring semester; three units in the summer semester). If you graduate, drop below half-time, or withdraw from school, then you have a six-month grace period where the federal government will continue to pay the interest on your loan. After the six-month grace period, you are responsible for paying the interest on your loan.

Unsubsidized Direct Loans

Unsubsidized direct loans are given to eligible students, regardless of their financial need. The combined amount of an unsubsidized direct loan and all other financial aid that you receive cannot exceed the cost of attendance.

Interest accrues from the time the loan is disbursed, and interest payments begin immediately but can be deferred until you are done with school. It is advantageous to pay the interest while you are in school. This way, the debt will be the principal amount only when repayment begins. Regular monthly payments begin six months after you graduate, drop below half-time status, or withdraw from school.

Annual Loan Limits

Year Dependent Students (except students whose parents are unable to obtain PLUS Loans) Independent Students (and dependent undergraduate students whose parents are unable to obtain PLUS Loans)
First-Year Undergraduate Annual Loan Limit $5,500 – no more than $3,500 of this amount may be in subsidized loans. $9,500 – no more than $3,500 of this amount may be in subsidized loans.
Second-Year Undergraduate Annual Loan Limit $6,500 – no more than $4,500 of this amount may be in subsidized loans. $10,500 – no more than $4,500 of this amount may be in subsidized loans.
Subsidized and Unsubsidized Aggregate Loan Limit $31,000 – no more than $23,000 of this amount may be in subsidized loans. $57,500 for undergraduates – no more than $23,000 of this amount may be in subsidized loans.

How to Apply for Loans

Steps to Apply

Step 1: Federal Direct Loan Request in eServices

Only students who received an Award Notification may submit a Federal Loan Request.

  1. Log in to eServices
  2. Select Financial Aid
  3. Select Financial Aid Award Year
  4. Click on the Federal Direct Loan Request link
Step 2: Loans Offered 

A notification will be sent to your message center within a week for you to accept the offer.

Step 3: Accept, Decline, or Reduce Loans Offered

(Note: Firefox browser is recommended.)

Once you receive notification that your loans were offered, you can accept the amount, decline the offer, or reduce the amount to fit your financial need.

To Accept: Once you receive notification that your loans were offered, you can accept the amount offered. After you accept the loans offered, you will see checklist items added to your To Do List.

To Decline: Once you receive notification that your loans were offered, you can decide to decline the loans completely.

  1. Under the Awards, click on Accept/Decline.
  2. Click on the edit/pencil icon.
  3. Under Award Decision column, click Accept/Decline to accept or decline the award.
  4. Click the Submit button to submit your loan.
Federal Direct Loans screenshot

To Reduce: Once you receive notification that your loans were offered and you have determined that you do not need the amount offered, but would like a reduced amount, please follow these steps:

  1. Under the Awards, click on Accept/Decline.
  2. Click on the edit/pencil icon.
  3. To reduce the award, click Accept under the Award Decision column
  4. Check the Reduce box.
  5. Enter the updated amount.
  6. Click the Submit button to submit your loan.

After you accept the loans offered, you will see checklist items added to your To Do List.

Federal Direct Loans screenshot

If the process doesn’t work for you, please contact the Financial Aid Office.

Step 4: Origination (Automated Process)

After loans have been originated, you will then be allowed to complete the Master Promissory Note (MPN) process.

Students are encouraged to electronically sign the MPN annually via the Federal Student Aid/Master Promissory Note webpage.

Alternatively, students can complete, print, sign and mail a paper MPN.* Paper MPNs are available at the financial aid office upon request.

*A mailed paper MPN may delay your refund for up to two months.

Mail a paper MPN to:

Post Office Box (standard mail) Street Address (overnight or commercial courier)
U.S. Department of Education
P.O. Box 1130
Fairfax, VA 22033
U.S. Department of Education
4050 Legato Road, #1100
Fairfax, VA 22033

Step 5: Disbursement

Typically, loans are disbursed to students who have satisfied all the requirements to receive loans.

Borrower's Rights and Responsibilities

When you accept a loan, you accept legal rights and responsibilities that last until the loan is repaid.

Borrower's Rights

You have the right to:

  • Receive a copy of your promissory note either before or at the time the loan is made
  • Receive a disclosure statement before repayment on your loan begins, including information about:
    • Interest rates
    • Fees
    • Loan balance
    • The number of payments
    • The amount of each payment
  • A grace period after you leave school or drop below half-time status and before your loan payments begin (if applicable)
  • Prepay all or part of your loans without a repayment penalty
  • Receive written notice if your loan is sold to a new holder
  • Apply for deferment for your loan payments for certain specified periods (if eligible)
  • Request forbearance from the holder of your loan if unable to make payments and don't qualify for deferment
  • Receive proof when your loan is paid in full

Borrower's Responsibilities

You agree to:

  • Repay your loan(s), including accrued interest and fees, even if you do not:
    • Complete or find satisfaction in your education
    • Complete the program within the regular timeframe
    • Obtain employment
  • Attend exit counseling before you leave school or drop below half-time enrollment
  • Notify your loan holder within ten days if you:
    • Change your name, address, or phone number
    • Drop below half-time status
    • Withdraw from school
    • Transfer to another school
    • Change your graduation date
  • Direct all correspondence to your loan holder or servicer
  • Make monthly payments on your loan after leaving school, unless you are granted a deferment or forbearance
  • Notify your loan holder of anything that might change your eligibility for an existing deferment

Loan Exit Counseling

All students who receive a loan must complete mandatory online loan exit counseling through the Department of Education. Loan exit counseling provides important information regarding repayment, deferment, and default prevention.

How to Complete Loan Exit Counseling

Visit the Student Aid website to complete loan exit counseling. You will need your FAFSA PIN to complete the loan exit counseling. Be sure to select American River College (federal school code: 001232) when asked, otherwise the Financial Aid Office will not receive confirmation that you completed the requirement.

When to Complete Loan Exit Counseling

Loan recipients must complete loan exit counseling when they do any of the following:

  • Withdraw from college
  • Drop below half-time units
  • Transfer to another college
  • Graduate

Failure to complete loan exit counseling may result in the delay of your financial aid processing.

Learn More

Videos About Federal Direct Student Loans

Federal Direct Student Loan Limits

Types of Federal Direct Student Loans

What Are My Repayment Options?