All Direct Loans are either Subsidized or Unsubsidized. 

With Subsidized loans, interest does not accrue until after students graduate or leave school. To receive a Subsidized Direct Loan, you must have financial need.
 

With Unsubsidized loans, interest begins to accrue after the first disbursement. While repayment does not begin until after the student leaves school, we recommend that students try to make payments on the interest during the time they are enrolled, in order to help reduce the total loan balance at the point of graduation.

 

Many students combine Subsidized loans with Unsubsidized loans to borrow the maximum amount permitted each year.

View the Annual Federal Direct Loan Limits

 

Interest Rate and Origination Fee

View the Federal Student Loans: Repaying Your Loans Guide (PDF)

The interest rate for Federal Direct Student Loans depends on when the loan was first disbursed. Visit the Federal Student Aid Interest Rates for information about current and past rates. Interest rates are determined each spring for new loans being made for the upcoming award year, which runs from July 1 to the following June 30. Each loan has a fixed interest rate for the life of the loan.

The Department of Education charges an "Origination fee" on all Direct Subsidized Loans and Direct Unsubsidized Loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement.

See the Federal Student Aid Loan Fees for the current percentages.

How To Apply

To apply for either the Subsidized or Unsubsidized Federal Direct Loan, you must:

  1. Apply for Financial Aid
  2. Accept your Federal Direct Loan through My Aid Status
  3. Complete a Direct Loan Entrance Counseling
  4. Complete a Subsidized/Unsubsidized Master Promissory Note

As long as your requirements are completed, Subsidized and Unsubsidized loans generally take 3-5 business days to disburse to your BARC (billing) account.

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. This legislation contains provisions that reshape student financial aid, including changes to Subsidized and Unsubsidized loan eligibility.

What is changing in 2026-2027?

For Direct Loans packaged and originated for the 2026–2027 academic year, a student’s annual loan limit must be adjusted if they enroll less than full-time (also known as a schedule of reductions or proration).

This requirement applies to all undergraduate, graduate, and professional student Direct Loan borrowers, including Direct Subsidized Loans, Direct Unsubsidized Loans, and Graduate PLUS Loans (for legacy borrowers). Parent PLUS Loans are not subject to these adjustments.

If a student drops classes during the middle or at the end of a quarter, we will have to recalculate their loan eligibility based on total units enrolled for the school year, and may be forced to reduce future disbursements based on the new revised total loan limit. For UCSB Undergrads 12 units per quarter is considered full time*, so for 2 quarters that would be 24 units, and for the full year (3 quarters) the minimum would be 36 units total. The calculation for schedule of reduction (SOR) will be as follows:

Students enrolled credits ÷ total full-time credits for the academic year (36) * 100 = SOR %

*Full-time for Graduate students at UCSB is 8 units per quarter (24 total for the academic year).

 

 

Example 1: A sophomore borrows their full $4,500 subsidized loan for the school year, with disbursements of $1,500 per quarter. Student begins attending full time, but then drops down to 8 units during Fall Quarter...

8 (Fall) + 12 (Winter) + 12 (Spring) = 32 total units enrolled

32 ÷ 36 * 100 = 89% (rounded to nearest whole percentage point)

$4,500 loan * 89% = $4,005 revised annual SOR loan limit

Fall amount $1,500 + reduced Winter amount $1,253 + reduced Spring amount $1,252

Example 2: The same student above also drops down to only 8 units in Winter Quarter...

8 (Fall) + 8 (Winter) + 12 (Spring) = 28 total units enrolled

28 ÷ 36 * 100 = 78% (rounded to nearest whole percentage point)

$4,500 loan * 78% = $3,510 revised annual SOR loan limit

Fall amount $1,500 + Winter amount $1,253 + reduced Spring amount $757

 

Exit Requirements

When you graduate or permanently leave UCSB, you must complete the Direct Loan Exit Counseling. 

You must complete exit counseling when you leave school or drop below half-time enrollment. The purpose of exit counseling is to ensure you understand your student loan obligations and are prepared for repayment. You'll learn about what your federal student loan payments will look like after school. You will receive a repayment strategy that best suits your future plans and goals.

Loan Cancellation

If you have accepted a student or PLUS loan but would like to cancel it, you may cancel within 120 days of the funds first being disbursed. You may do so by submitting a Loan Cancellation/Reduction Form to our office. This is found in the Forms tab of our website.

If you cancel within 120 days, you do not have to pay interest or the loan fee on the part of your loan that is cancelled. Loans cancelled with our office will be charged back to your student BARC account for repayment. We will notify your loan servicer of the cancelled loan.

After 120 days: Please contact your loan servicer for guidance on how and where to return your loan money. You will be responsible for any interest that has accrued from the date of disbursement. Please note that you should not cancel your loan with our office and must repay your loan servicer.

Repayment

Repayment for subsidized and unsubsidized Direct Loans begins six months after a student leaves school or drops below half-time enrollment. Information about your loans will be submitted to the National Student Loan Data System (NSLDS), and will be accessible by guaranty agencies, lenders, and schools determined to be authorized users of the data system.

Please visit StudentAid.gov to view your borrowed loan amounts, disbursement dates, and who your federal loan servicer is as well as their contact information. The federal loan servicer is assigned by the Department of Education, and they handle matters related to billing and repayment of your loans.

If you have questions about changing your repayment plan, loan consolidation or if you qualify for loan forgiveness please talk to your servicer.

We suggest you utilize Federal Student Aid’s Repayment Estimator while you are in school to see approximately how much a month you will owe post-graduation.