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(Direct Loans) Subject: Direct Subsidized Loan Interest Rates Effective July 1, 2013.

Posted Date:July 3, 2013

Author: Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid

Subject: Direct Subsidized Loan Interest Rates Effective July 1, 2013.

Under the College Cost Reduction and Access Act (CCRAA) (Public Law 110-84), the interest rate on subsidized loans made to undergraduate students under the Direct Loan Program was lowered to 3.4 percent from 6.8 percent. The lower rate was set to expire on July 1, 2012. However, as a result of the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Public Law 112-141), the 3.4 percent rate was extended to July 1, 2013. Absent further Congressional action, the interest rate for all Direct Subsidized Loans with a first disbursement date on or after July 1, 2013, is 6.8%. This is the same interest rate that applies to Direct Unsubsidized Loans.

The Administration continues to work with Congress to reach agreement on a plan to reverse the doubling of those interest rates. Further, the Administration has urged that any plan passed by Congress apply to all loans first disbursed after June 30, even loans already disbursed. If the law is changed, the Department and its servicers will adjust rates for all affected borrowers, including those who had already received their first subsidized loan disbursement, without any further action on the part of the borrower or the school.

Therefore, not only should students and their families continue to complete FAFSAs if they have not already done so, but schools should continue to award and originate Direct Subsidized Loans with estimated disbursement dates.

We will continue to provide updates as needed to ensure students and families stay informed.

Last Modified: 07/02/2013