While you are attending school, the interest accumulates on this loan. You must either pay the interest on this loan quarterly to the Direct Loan Servicing Center or let the interest accumulate and capitalize. Capitalized interest makes the loan payback more expensive over time.
No payment on the principal balance of the loan is necessary so long as the student remains half time (six credit hours undergraduate and five credit hours graduate students).
The interest rate may vary depending on if you are an undergraduate or graduate student. Yearly loan amounts you may borrow may vary depending on the following:
- Your credit hours enrolled per semester
- Your class standing (freshman, sophomore, junior, senior, or graduate student)
- Whether the FAFSA form considers you a dependent or independent student
The Department of Education's Direct Loan Servicing Center is the holder of this loan when a student goes into repayment.