FEDERAL 

STUDENT 

LOANS

Basics for Students

®
2

U.S. Department of Education

Arne Duncan

Secretary

Federal Student Aid

James W. Runcie

Chief Operating Officer

Customer Experience Office

Brenda F. Wensil

Chief Customer Experience Officer

Except as otherwise noted, the content of 

this publication is not protected by copyright. 

See the back cover of this publication for a 

list of photo and image credits. Except for 

images protected by copyright, authorization 

to reproduce the publication in whole or in 

part is granted. While permission to reprint 

this publication is not necessary, the citation 

should be: U.S. Department of Education, 

Federal Student Aid, Customer Experience 

Office, Basics for Students, Washington, 

D.C., 2015.

To order copies of this publication:

Students and Parents

Order online at: www.edpubs.gov

E-mail your request to: 

edpubs@edpubs.ed.gov

Call in your request toll free: 

1-877-433-7827 (1-877-4-ED-PUBS)

Those who use a telecommunications 

device for the deaf (TDD) or a teletypewriter

(TTY) should call 1-877-576-7734.

Counselors, Mentors, and Other Professionals

Order online at: www.FSAPubs.gov

E-mail your request to: orders@fsapubs.gov

Call in your request toll free: 1-800-394-7084

Those who use a telecommunications device for 

the deaf (TDD) or a teletypewriter (TTY) should call 

1-877-576-7734.

Online Access

This publication is also available at 

StudentAid.gov/resources#loan-basics-students.

Alternate Formats

On request, this publication is available in alternate 

formats, such as Braille. For more information, 

please contact Federal Student Aid using the 

information provided in the previous section.

Some of the Web addresses in this publication are 

for sites created and maintained by organizations 

other than the U.S. Department of Education (ED). 

They are provided for the reader’s convenience. 

ED does not control or guarantee the accuracy, 

relevance, timeliness, or completeness of this outside 

information. Further, the inclusion of particular Web 

addresses is not intended to reflect their importance, 

nor is it intended to endorse any views expressed or 

products or services offered on these outside sites, 

or the organizations sponsoring the sites.

All Web addresses included in this publication were 

accurate at press time.

Find detailed federal student aid information at 

StudentAid.gov.
3

If you apply for financial aid, you may be offered student loans as part 

of your financial aid package. Federal student loans are available to help 

you cover your education expenses at a college or university, community 

college, or trade, career, or technical school. Student loans originate from 

the federal government or from private sources, such as a bank or financial 

institution. Loans made by the federal government are called “federal 

student loans.” 

What kinds of federal student loans are available?

The U.S. Department of Education (ED) offers loans through the 

William D. Ford Federal Direct Loan (Direct Loan) Program. It is the 

largest federal student loan program, ED is your lender, and there are four 

types of Direct Loans:

1. Direct Subsidized Loans—For eligible undergraduate students. 

Generally, no interest is charged on subsidized loans while you are 

in school at least half-time, during the grace period, and during 

deferment periods. Note: If you are a first-time borrower on or 

after July 1, 2013, there is a limit on the maximum period of time 

(measured in academic years) that you can receive this loan type. For 

more information visit StudentAid.gov/sub-unsub.

2. Direct Unsubsidized Loans—For eligible undergraduate, graduate, and 

professional degree students. Interest is charged on unsubsidized 

loans during all periods. 

3. Direct PLUS Loans—For eligible graduate or professional degree 

students, and for parents of dependent undergraduate students. 

Interest is charged on PLUS loans during all periods. Visit 

StudentAid.gov/plus to learn more about PLUS loans.

4. Direct Consolidation Loans—For eligible student and parent 

borrowers. A consolidation loan combines the borrower’s eligible 

loans into a single loan. See page 6 for information about interest 

rates for these loans. Visit StudentAid.gov/consolidation for 

more information. 
4

What are the eligibility requirements to receive 

a Direct Loan?

You must be enrolled at least half-time at a school that participates 

in the Direct Loan Program, and you also must meet general eligibility 

requirements for the federal student aid programs. Learn more about 

these requirements at StudentAid.gov/eligibility, or by contacting your 

school’s financial aid office. 

How do I apply for federal student loans?

Complete the Free Application for Federal Student Aid (FAFSA®). The 

fastest and easiest way to complete the FAFSA is online at 

fafsa.gov. The schools that you have identified on your FAFSA will 

receive your information. Some schools have additional application 

procedures—check with your school’s financial aid office to be sure. 

Visit StudentAid.gov/fafsa for more ways to complete and submit 

the FAFSA.

Receive and read your aid offer. The schools you identified on your 

FAFSA (and that have offered you admission) will send you financial 

aid offers that include the types and amounts of financial aid you may 

receive. Review your aid offers and identify any Direct Loans listed. If 

the schools did not include Direct Loans in their aid offers, ask their 

financial aid offices if you have the option to apply for them. Not all 

schools participate in the Direct Loan Program. To learn more about the 

types of loans a school may include in your aid offer, visit 

StudentAid.gov/federal-vs-private. 
5

Complete a Master Promissory Note (MPN). You must complete an 

MPN to receive a Direct Loan. The MPN is a legal document by which 

you promise to repay your loans and any accrued interest and fees to 

ED. In most cases, a single MPN can be used for loans that you receive 

over several years of study.

Complete entrance counseling. Before you receive your first loan 

disbursement, you must complete entrance counseling. This is 

a mandatory information session that explains your rights and 

responsibilities as a borrower. It also provides great information that 

you’ll want and need to know for the future.

Check with your school’s financial aid office to find out how to complete both 

entrance counseling and the MPN.

How much can I borrow?

The maximum amount you can borrow each school year depends on 

your grade level and other factors. For Direct Subsidized and Direct 

Unsubsidized Loans, the amount ranges from a maximum of $5,500 

per year for a dependent freshman to a maximum of $20,500 per year 

for a graduate or professional degree student. The actual amount you 

are eligible to borrow each year is determined by your school and may 

be less than the maximum amount. There are also limits on the total 

amount of your loan debt.

Learn more about federal student loans and borrowing limits at 

StudentAid.gov/types/loans.

Graduate and professional degree students: You may be eligible to receive a 

Direct PLUS Loan. Check with your school’s financial aid office to determine 

your eligibility and to apply.

Parents of dependent students: Direct PLUS Loans are also available to parents 

of dependent undergraduate students. For more information see Direct PLUS 

Loan Basics for Parents at StudentAid.gov/resources#loan-basics-parents.
6

Did You Know?

You can borrow less money than your school includes in your financial 

aid offer. If you need help determining how much you need to borrow, 

see Federal Student Loans: Be a Responsible Borrower at 

StudentAid.gov/resources#responsible-borrower. 

What is the interest rate?

The interest rate for Direct Subsidized Loans, Direct Unsubsidized 

Loans, and Direct PLUS Loans is determined annually for new 

loans that are made between July 1 of one year and June 30 of the 

following year. Each loan will have a fixed interest rate for the life of 

the loan. The interest rate for a Direct Consolidation Loan is based 

on the weighted average of the interest rates on the loans that are 

consolidated. The rate is also a fixed rate for the life of the loan. View 

the latest interest rate information at StudentAid.gov/interest or check 

with your school’s financial aid office.

Is there a charge to take out a Direct Loan?

In addition to interest, you pay a loan fee that is a percentage of the 

principal amount of each loan. We deduct the fee before you receive 

any loan money, so the loan amount you actually receive will be less 

than the amount you have to repay. The current fees by loan type are 

available at StudentAid.gov/interest.

David Schaffer/Caiaimage/Getty Images
7

How will I receive my loan money?

Your loan money will usually be paid out in at least two installments. 

Your school will generally credit the loan money to your school account 

to pay tuition, fees, and other authorized charges. Check with your 

school for your options for receiving any remaining loan funds.

When will I begin repayment of my loan?

For most student loans, there is a set period of time after you graduate, 

leave school, or drop below half-time enrollment before you must begin 

making payments. Depending on the type of loan you have, this period 

is called a grace or a deferment period, and it may last six months. The 

repayment period begins the day after your grace period ends. Your 

loan servicer will let you know when your first payment is due. However, 

you’re responsible for making your payments on time even if you don’t 

receive this information. Remember, you may make payments on your 

loans without penalty at any time before the repayment period begins.
8

What is a loan servicer?

ED assigns your loan to a loan servicer after your loan amount is first 

disbursed (paid out). Servicers will help you manage the repayment of 

your federal student loans.

What is principal?

It is the total sum of money borrowed plus any interest that has 

been capitalized.

What is capitalization?

It is the addition of unpaid interest to the principal balance of a loan. 

When the interest is not paid as it accrues during periods of in-school 

status, or during the grace period, deferment, or forbearance, ED 

may capitalize the interest. This increases the outstanding principal 

amount due on the loan and may cause your monthly payment amount 

to increase. Interest is then charged on that higher principal balance, 

increasing the overall cost of the loan.

How do I repay my loan?

Your loan servicer will contact you and provide you with a loan 

repayment schedule. It will state when your first payment is due, the 

number and frequency of payments, and the amount of each payment. 

Your servicer also will give you the opportunity to pay any interest that 

accumulated on your Direct Loans while you were enrolled in school 

and during the six-month grace or deferment period. If you don’t pay 

this interest, it will be capitalized.

Contact your loan servicer directly to find out how to make payments. 

To avoid more costs and potentially defaulting on your loan, it’s very 

important that you make your full loan payment on time according to 

your repayment schedule.
9

How much time will I have to repay my loan?

Generally, you’ll have from 10 to 25 years to repay your loan, depending 

on the repayment plan that you choose. You may find that a plan based 

on your income is best for you. If you consolidate your loans into a 

Direct Consolidation Loan after you leave school, you may have up to 

30 years to repay it. When you are ready to consolidate your loans, 

check StudentAid.gov/consolidation. 

To get the latest repayment plan information and to calculate your estimated 

payment amount under each of the different plans, use the Repayment 

Estimator at StudentAid.gov/repayment-estimator. 
10

Can I ever postpone making loan payments?

Yes. Under certain conditions you can receive a deferment or forbearance 

that allows you to temporarily postpone or reduce your federal student 

loan payments. You’ll need to work with your loan servicer to apply for 

deferment or forbearance; be sure to keep making payments on your 

loan until the deferment or forbearance is in place. More information is 

available at StudentAid.gov/deferment-forbearance.

Note: If you don’t qualify for a deferment but are temporarily unable to 

make loan payments for such reasons as illness or financial hardship, 

we may grant you loan forbearance. With forbearance, you may be able 

to stop making payments or reduce your monthly payment. Interest will 

continue to accrue on your subsidized and unsubsidized loans (including 

all PLUS loans).

Benefits for Military Service

You may qualify for a deferment based on active duty service in the U.S. armed 

forces or National Guard. Contact your loan servicer for more information about 

specific qualifications for deferment based on military service or check out 

StudentAid.gov/deferment-forbearance for additional details. 

Hero Images/Hero Images/Getty 
11

Can my loan ever be canceled, discharged, 

or forgiven?

You may qualify to have some or all of your loan amount forgiven if you 

perform certain types of service (for example, teaching in a low-income 

school or working for certain types of public service organizations). In 

certain other circumstances, such as if you were unable to complete 

your program of study because the school closed, if you become 

totally and permanently disabled (in accordance with our definition), 

or if you die, your obligation to repay your federal student loan may be 

discharged. Additional requirements apply to receive these benefits. 

Learn about cancellation, discharge, and forgiveness at 

StudentAid.gov/forgiveness. 

REMEMBER...

Stay in contact with your loan servicer and inform your servicer of 

changes to

• your name, address, or phone number; or

• your enrollment status, such as transferring schools, dropping 

below half-time enrollment, or leaving school (including graduation).
RESOURCES

Federal Student Aid’s Website

StudentAid.gov

Get detailed information about federal student aid. You’ll find details 

about loan repayment and much more. For other federal student aid 

publications, including Be a Responsible Borrower and Repaying Your 

Loans, visit StudentAid.gov/resources.

“My Federal Student Aid”

View your financial aid history. Simply log in at StudentAid.gov/login.

StudentLoans.gov

Get more information about completing Master Promissory Notes and 

Direct PLUS Loan requests.

Financial Aid for Graduate and Professional Degree Students

Get more information about loans for graduate or professional school at 

StudentAid.gov/grad.

Stay connected: 

/FederalStudentAid

/FAFSA

 /FederalStudentAid

Printed September 2015

Photos: U.S. Department of Education except as noted. 

Getty Images photos (pages 6 and 10) are protected by 

copyright. Permission to use or otherwise reproduce these 

photos must be obtained directly from Getty Images.

Note: The information in this document was compiled in 

summer 2015. For updates or additional information, visit 

StudentAid.gov or call 1-800-4-FED-AID.

Notice to Limited English Proficient Persons

If you have difficulty understanding English, you may 

request language assistance services for the U.S. 

Department of Education information that is available to 

the public. 

These language assistance services are available free of 

charge. If you need more information about interpretation 

or translation services, please call 1-800-USA-LEARN 

(1-800-872-5327) (TTY: 1-800-437-0833), or e-mail us 

at: ed.language.assistance@ed.gov. Or write to:

U.S. Department of Education 

Information Resource Center

LBJ Education Building

400 Maryland Ave., SW

Washington, DC 20202

To view federal student aid publications and resources in 

Spanish, go to StudentAid.gov/recursos.