Federal Subsidized & Unsubsidized Loans

Federal Student Loans

Subsidized and unsubsidized loans are federal student loans for eligible students to help cover the cost of higher education. The U.S. Department of Education offers eligible students at participating schools Direct Subsidized Loans and Direct Unsubsidized Loans. (Some people refer to these loans as Stafford Loans or Direct Stafford Loans.)

What’s the difference between Direct Subsidized Loans and Direct Unsubsidized Loans?

  • Subsidized loans are interest free while the student is enrolled at least half-time. To be eligible for this loan, a student must demonstrate financial need as determined from the FAFSA.
  • Unsubsidized loans accrue interest while the student is in attendance. Students have the option to make interest only payments on the loan while they are in school or defer all payment until after they graduate or leave school for any reason. Students who do not qualify for a subsidized loan will usually qualify for an unsubsidized loan.
The annual and aggregate limits for subsidized and unsubsidized loans.


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.

For information regarding current interest rates and origination fees, please visit https://studentaid.gov/understand-aid/types/loans/interest-rates

Eligibility Requirements

  • Must have a valid FAFSA on file
  • Must be a U.S. citizen or eligible noncitizen
  • Accepted as a regular student working toward a degree or eligible certificate program
  • Attending at least half-time (6 credit hours)
  • Maintain satisfactory progress toward a degree per the policies of the college
  • Cannot be in default on any other federal loans
  • Cannot owe a refund on a federal student grant or loan

Entrance Counseling

Entrance Counseling is a mandatory, online session for all first-time federal loan borrowers. The purpose of Entrance Counseling is to inform the student borrower of their rights and responsibilities, as well to help educate the student on topics such as interest rates, responsible borrowing, repayment plans, and avoiding default.

Students can check the status of their Entrance Counseling in their MyOCC account.

Master Promissory Note

The Master Promissory Note (MPN) is a legal document in which you promise to repay your loan(s) and any accrued interest and fees. It also explains the terms and conditions of your loan(s). By signing the MPN you are agreeing to the terms of your loan(s).

Students can check the status of their Master Promissory Note in their MyOCC account.

Disbursement of Loan Funds

Loans are generally awarded for the full academic year and disbursed in two equal installments near the beginning of the Fall and Spring semesters. Funds are disbursed directly to the college and are applied to the student’s account to cover any outstanding charges such as tuition, fees, room and board. Any loan funds in excess of a student’s charges will be refunded to the student via paper check or direct deposit.

Loan Servicer

Once your loan has been originated, the Department of Education will assign your loan to a federal servicer. The servicer assigned to your loan(s) will send you correspondence including disclosure statements that contain loan amounts, interest rates and disbursement dates, repayment information and options regarding loan consolidation. Always be sure to notify your loan servicer with any changes to your personal information such as name, address, or phone number.

Contact information for your federal loan servicer can also be found by reviewing your loan(s) at https://studentaid.gov/.

Exit Counseling

Exit Counseling helps students understand their rights and responsibilities as student loan borrowers. The exit counseling session will provide useful tips and information to help manage student loans, including repayment plans and estimated monthly payments.

Any student that borrows funds from the Federal Direct Loan program is required to complete exit counseling when

  • The student is no longer enrolled at least half-time (6 credit hours of required coursework in their program of study.)
  • The student graduates.
  • The student transfers to another school.

Loan Repayment and Consolidation

Once you graduate, drop below half-time enrollment, or leave school, your federal student loan goes into repayment. For Direct Subsidized and Direct Unsubsidized loans, you have a six-month grace period before you are required to start making regular payments.

The U.S. Department of Education offers several different repayment plan options to help make payments more convenient and affordable. Please visit https://studentaid.gov/manage-loans/repayment for more information.