How do I replace Direct Unsubsidized with Direct Subsidized Loans?


I was accepted by several colleges. One of the colleges offered me a Direct Subsidized Loan but the school I decided to attend offered me only a Direct Unsubsidized Loan. How can I get a Direct Subsidized Loan at the school I’ve chosen to attend?


Federal rules require a college to award a student the maximum Direct Subsidized Loan amount for which the student is eligible before certifying any Direct Unsubsidized Loans. The only exception is when the amount of the subsidized loan would be $200 or less, in which case the college may include it in an Direct Unsubsidized Loan, up to the loan limits. Since subsidized Direct Loans are not subject to a fixed pool of funding like the Perkins Loan and some institutional loans, there’s no reason why a college would not award a Direct Subsidized Loan to an eligible student.

The Direct Subsidized Loan is subject to annual and cumulative loan limits. The Direct Subsidized Loan is also capped at the amount of the borrower’s unmet demonstrated financial need.

Differences in demonstrated financial need and differences in the packaging of other need-based aid are the most likely reasons why a student would be eligible for Direct Subsidized Loans at one school but not at another.

Demonstrated financial need is defined as the difference between the college’s cost of attendance (COA) and the student’s expected family contribution (EFC):

Demonstrated Financial Need = COA - EFC

If the colleges have different cost of attendance figures, the demonstrated financial need may differ, affecting eligibility for the Direct Subsidized Loan. Also, one college may have made an adjustment to increase the student’s cost of attendance (e.g., for high dependent care costs, for the cost of a computer, for actual textbook and transportation costs beyond the estimate in the college’s standard cost of attendance) and the other might not have made an adjustment.

One college may have awarded the student more institutional grants and campus-based aid than the other, affecting the amount of unmet financial need. (Colleges are required to award the Federal Pell Grant if the student is eligible for it, but the Federal Supplemental Educational Opportunity Grant, (FSEOG), Federal Work-Study, Perkins Loan, and institutional grants are under the college financial aid office’s discretionary control.) If a college meets full demonstrated financial need with grants and need-based student employment, the student might not be eligible for Direct Subsidized Loans. Also, one college could have met the student’s demonstrated financial need with the Perkins Loan, a need-based subsidized loan, instead of the Direct Subsidized Loan.

If the student wins a private scholarship, it can reduce the student’s demonstrated financial need, thereby, affecting the student’s eligibility for Direct Subsidized Loans. If one college is aware of the private scholarship and the other is not, it could prevent the college that is aware of the private scholarship from awarding the need-based Direct Subsidized Loan.

College financial aid administrators are required to use the federal methodology for calculating a student’s EFC when awarding federal student aid. Some colleges may incorrectly use an institutional methodology for calculating the EFC, leading to a different definition of demonstrated financial need and a different amount of eligibility for Direct Subsidized Loans.

Talk to the financial aid administrator at the college that did not award any Direct Subsidized Loans. Ask if there is any way to qualify for the subsidized loan, such as swapping a Federal Work-Study award with a Direct Subsidized Loan or qualifying for an increase in the cost of attendance to cover actual and/or additional costs.