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Direct loans for NAU students
What they are and how to get them
Direct loans are offered directly from the federal government and are meant to help students pay for college. These are the most common type of student loans. Direct loans generally have more favorable terms and conditions than private loans. We recommend using direct loans when possible over private loans.
There are two types of direct loans:
Subsidized loans
Subsidized loans won’t accrue interest while you’re still attending school at least half-time. Students must demonstrate financial need to be eligible for subsidized loans. Graduate students are not eligible for subsidized loans.
Half-time enrollment (6+ credits for undergraduates and 5+ credits for graduates) is required. You’re responsible for paying the interest on unsubsidized loans even while you’re still in college.
Unsubsidized loans
Unsubsidized loans are available to all undergraduate and graduate students as long as they have not met the lifetime loan limit.
Half-time enrollment is required. Interest accrues on on unsubsidized loans even while you’re still in college.
Loan interest rates and fees
Interest rates are set by US Congress each year.
Undergraduates: The interest rate for 2026-2027 subsidized and unsubsidized loans originated on or after July 1, 2026 is 6.52%.
Graduates/professionals: The interest rate for 2026-2027 unsubsidized loans originated on or after July 1, 2026 is 8.07%.
All federal student loans have a 1.057% origination fee charged by the US Department of Education.
Loan reductions
Federal Direct Subsidized and Unsubsidized Loans will be prorated based on the number of credit hours a student is enrolled in. If a student enrolls in fewer than the full-time minimum, their loans will be reduced.
Full-time minimums:
- Undergraduates: 12 credits
- Graduates/professionals: 9 credits
Schedule of Reductions (SOR) policy
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced major changes to federal student aid programs. Several provisions affecting student loans became effective July 1, 2026. Among the most significant changes is the introduction of the Schedule of Reductions (SOR), which requires federal student loan eligibility to be reduced based on enrollment level.
Beginning with the 2026 fall term, annual federal student loan amounts will be reduced based on enrollment. Full-time students (12 or more credits for undergraduates and 9 or more credits for graduates) will receive a full loan amount, but part-time students (6-11 credits for undergraduates and 5-8 credits for graduates) will receive a proportional total loan amount. Students must enroll at least half-time to be eligible for federal direct loans.
Students will initially be awarded with an expectation of full-time enrollment.
NAU will monitor enrollment and update student loan eligibility through the date of disbursement. Students should not expect immediate or ‘live’ updates to award packages based on changes made to their course schedule. It will take the financial aid office staff additional time to manually review and update the student loan amount to match the enrollment level.
At time of loan disbursement, the loan amount will be based on actual enrollment.
For example, if enrolled in 12 credits, the student will receive 100% of the expected loan. However, if enrolled in 9 credits, the student will receive a lesser amount (75%). The amount will vary based on the individual student’s eligibility.
The impact of dropping, failing to start, or withdrawing courses will be considered when calculating loan eligibility. It is strongly advised that students discuss impacts of withdrawing or dropping a course with the financial aid office.
If your enrollment drops below full-time after your fall loan has been disbursed, your spring federal loan amount may be reduced based on your enrollment level.
Adding courses after the first disbursement of a federal student loan will not result in an automatic increase in loan amount in the same term. Adjustments to increase loan amounts in the same term based on updated credits can be made upon request. Email financial.aid@nau.edu.
It is strongly recommended to discuss course changes, when they affect the total number of credits, with an academic advisor or member of the financial aid office prior to making the change.
What is the Schedule of Reduction (SOR)
SOR is a new rule introduced in the One Big Beautiful Bill Act that requires institutions to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.
Which loans are affected by SOR?
Federal student loans are impacted by this policy: unsubsidized, subsidized and Graduate PLUS loans*
*Graduate PLUS loans are only available to qualifying legacy students.
What is considered fulltime enrollment at NAU?
12 or more credits for undergraduates
9 or more credits for graduates
What happens if I drop classes?
If you drop classes before the first disbursement of your loan, your amounts may be adjusted based on your actual enrollment. If you drop classes after the first disbursement of your loan, your spring federal student loan will be reduced.
After the first disbursement, can I add a course to increase my loan in the same term?
Yes, but this will not be done automatically. Students wanting an increase to their student loan will need to email financial.aid@nau.edu. The Office of Scholarships and Financial Aid will review your loan eligibility and determine if an increase can be made. Requests for loan increases must be made by the deadline to accept student loans for the semester the request is being made for.
Am I eligible for student loans if I am enrolled less than half-time?
No. Students must be enrolled at least half-time to borrow federal student loans. Half-time for undergraduates is 6 credits. Half-time for graduates is 5 credits.
Will Pell (or other financial aid) be affected?
Pell Grant is not directly affected by this new SOR rule.
Am I liable for charges on my LOUIE account that my aid, or adjusted aid does not cover?
Yes. All charges in the LOUIE account are the student’s responsibility, regardless of whether they are receiving financial aid. It’s important to be aware of your charges, know when your aid will be disbursed, and whether you have enough aid to help pay your charges.
One Big Beautiful Bill Act (OBBBA) federal loan changes
| Borrower/Loan Type | Legacy/Interim Exception Limits* | OBBBA Limits |
|---|---|---|
| Dependent Undergraduate | Lifetime limit: $31,000 Annual limit: between $5,500 and $7,500 depending on the student’s academic level | Unchanged |
| Independent Undergraduate | Lifetime limit: $57,500 Annual limit: between $9,500 and $12,500 depending on the student’s academic level | Unchanged |
| Graduate | Lifetime limit: $138,500 (includes undergraduate loans) Annual limit: $20,500 | Lifetime limit: $100,000 (excludes undergraduate loans) Annual limit: $20,500 |
| Professional Graduate | Lifetime limit: $224,000 (includes undergraduate loans) Annual limit: $35,777 | Lifetime limit: $200,000 (excludes undergraduate loans) Annual limit: $50,000 |
| Graduate PLUS Loan Borrowers | No lifetime limit Annual limit: Up to the student’s Cost of Attendance | Eliminated for new borrowers |
| Parent PLUS Loan Borrowers | No lifetime limit Annual limit: Up to the student’s Cost of Attendance | Lifetime limit: $65,000 per dependent student Annual limit: $20,000 per dependent student |
| Overall Lifetime Limit | None, aggregate limits could be paid down and re-borrowed | $257,500 total federal loan limit Includes subsidized, unsubsidized and graduate PLUS loans Excludes parent PLUS loans |
*Note: The legacy/interim exception requires consecutive fall/spring enrollment and lasts for the shorter of 3 years or until the student’s remaining expected time to credential.
Tools and resources
- View your loan offers: log into your LOUIE account and click the “Financial Aid” menu tile to view your award offers each academic year. Subsidized and unsubsidized loans must be accepted via the LOUIE account if a student is interested in borrowing.
- Additional requirements: after accepting your loan in LOUIE, you must complete Entrance Counseling, which will help you understand your loan and how it works. You’ll also need to sign a Master Promissory Note, which is an agreement to repay your loans and their interest.
- Loan repayment and consolidation: learn more about the process and the best methods for paying off your student loans.
- Review loan amount limits: learn more about how much you can borrow per academic year or in your lifetime.