As part of the compromise to pass a federal budget extension (and prevent a federal government shutdown), the Subsidized Direct Loan for graduate students was eliminated, beginning with the 2012-13 academic year. This means graduate students will be limited to only borrowing a Federal Unsubsidized Direct Loan. Passage of the Budget Control Bill of 2011 means most Direct Loan borrowed by graduate students for the 2012-13 academic year will begin to accrue interest at 6.8% as soon as a disbursement is made on the loan. Graduate students can remain eligible for the subsidized loan for 2012-13 by enrolling for the summer term, since the elimination of the subsidized loan takes effect on loan periods beginning on or after July 1, 2012.
The Federal Direct Loan interest rate of 3.4% is set to expire on July 1, 2012. Loans processed for an enrollment period after this date will have an interest rate of 6.8%, the same rate charged for borrowing the Unsubsidized Direct Loan. While it appears that there is consensus in Congress that the rate should remain at 3.4%, a budget agreement must be reached on how to pay for this lower rate. Borrowers will be notified if and when the interest rate is adjusted.