How can Direct LoansSM help pay for 

college or career school expenses?

Direct Loans are low-interest loans for students and 

parents to help pay for the cost of a student’s education 

after high school. The lender is the U.S. Department of 

Education (the Department) rather than a bank.

Direct Loans are:

n Simple—You borrow directly from the 

federal government.

n Flexible—You can choose from several repayment 

plans that are designed to meet the needs of 

almost any borrower, and you can switch repayment 

plans if your needs change.

What kinds of Direct Loans 

are available?

n Direct Subsidized and Unsubsidized Loans—

Your eligibility for Direct Subsidized and 

Unsubsidized Loans is based on the information 

reported on the Free Application for Federal 

Student Aid (FAFSASM). No interest is charged 

on subsidized loans while you are in school at 

least half-time, during your grace period, and 

during deferment periods. Interest is charged on 

unsubsidized loans during all periods.

n Direct PLUS Loans—Direct PLUS Loans are lowinterest loans available to parents of dependent 

students and to graduate and professional degree 

students. Interest is charged during all periods. 

n Direct Consolidation Loans—Direct Consolidation 

Loans are loans for borrowers who want to 

combine their eligible federal student loans into a 

single loan.

What are the 

eligibility requirements?

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

that participates in the Direct Loan Program, and 

you must meet general eligibility requirements for 

the Federal Student Aid programs. You can find more 

information about these requirements on the Direct 

Loan website at www.direct.ed.gov, or by contacting 

your school’s financial aid office.

How do I apply for aid?

You apply for a Direct Subsidized and Unsubsidized 

Loan and other federal student aid by completing 

a Free Application for Federal Student Aid (FAFSA). 

The information from your application will be shared 

with the schools that you have identified on the 

FAFSA. Some schools have additional application 

procedures—check with your school’s financial 

aid office to be sure. After your FAFSA has been 

processed, the school will notify you, usually through 

an award letter, of the types of aid for which you 

are eligible.

How do I take out a Direct Loan?

You must complete a Master Promissory Note (MPN). 

The MPN is a legally binding agreement to repay your 

loan to the Department. In most cases, one MPN can 

be used for loans that you receive over several years 

of study. Before receiving your first Direct Loan, you 

must sign an MPN that you’ll get from your school 

or from the Department. Check with your school’s 

financial aid office.

How much can I borrow?

The maximum amount you can borrow each school 

year depends on your grade level and other factors.

It ranges from $5,500 per year for a dependent freshman 

to $20,500 per year for a graduate or professional 

degree student; however, 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.

Graduate and professional degree students who need 

to borrow more than the maximum subsidized or 

unsubsidized loan amounts to meet education expenses 

not covered by other financial aid may be eligible to 

receive a Direct PLUS Loan.

Contacts

Student Aid on the Web

www.studentaid.ed.gov 

For more information about the Direct Loan 

Program and the aid application process, 

including helpful publications and tools to help 

manage Direct Loans, visit Student Aid on 

the Web.

StudentLoans.gov

www.studentloans.gov

Check with your school’s financial aid office 

about completing entrance counseling and a 

Master Promissory Note (MPN) online 

at StudentLoans.gov.

Once your loan has been made, you will be 

contacted by your loan servicer. You can check your 

loan servicer’s website for the most recent account 

information regarding your Direct Loans.

The National Student Loan Data SystemSM (NSLDSSM)

www.nslds.ed.gov

For information about all of your Direct Loans, 

Federal Family Education Loan (FFELSM) Program 

Loans, Federal Perkins Loans, and federal grants, 

visit the Department’s National Student Loan 

Data System(NSLDS). You will need your Federal 

Student Aid PIN to access NSLDS. NSLDS does not 

include information about any private loans you 

may have received. 

Direct Consolidation Loans

www.loanconsolidation.ed.gov

For everything you need to know about 

Direct Consolidation Loans and for an online 

application, visit the Department’s Direct 

Consolidation Loans website.

Direct Loan Basics 

for Students

A simple and flexible way 

to finance your education.

The William D. Ford Federal Direct Loan Program is one of the 

Federal Student Aid programs of the U.S. Department of Education.

Direct Loan Website 

www.direct.ed.gov

Printed: August 2010 | Cover Photos U.S. Department of Education, © 2010 Jupiter Images, © 2010 123RF Limited, © 2010 Shutterstock Images LLC
What is the interest rate?

Direct Loans have a fixed interest rate that differs 

depending on the loan type and other factors. Check 

with your school’s financial aid office or the Direct Loan 

website at www.direct.ed.gov for details and current 

interest rate information.

Is there a charge for this loan?

Yes. In addition to interest, you pay a loan fee that is 

a percentage of the principal amount of the 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.

How will I receive my loan money?

Your school will generally disburse your loan money 

by crediting it to your school account but may also 

give some of it to you directly. Your loan money will

usually be disbursed in at least two installments.

How will I repay my loan?

When you receive your first Direct Loan, you will be 

contacted by the servicer for that loan. Your loan 

servicer will provide regular updates on the status of 

your Direct Loan and of any additional Direct Loans 

that you receive. 

When do I have to begin repaying 

my loan?

Direct Subsidized and Unsubsidized Loans have a 

6-month grace period that starts the day after you 

graduate, leave school, or drop below half-time 

enrollment. You don’t have to begin making payments 

until your grace period ends.

Note that repayment on a Direct PLUS Loan begins 60 days 

after the last installment of the loan for that school year is 

made; however, there is the option to defer repayment of 

a Direct PLUS Loan. See “Repaying Your Loans” on Student 

Aid on the Web at www.studentaid.ed.gov.

How much time will I have to repay 

my loan, and how much will I have 

to pay each month?

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

loan, depending on the repayment plan that you choose. 

Your monthly payment amount will be based on how 

much you borrowed and how long you take to repay.

You may choose one of several repayment plans:

n Standard Repayment Plan—Fixed monthly 

payments for up to 10 years.

n Graduated Repayment Plan—Payments that start 

off lower at first, and then gradually increase, usually 

every 2 years. The loan must be repaid in 10 years.

n Extended Repayment Plan—Fixed or graduated 

monthly payments over a period of time, not

to exceed 25 years. To be eligible for this repayment 

plan, you must have more than $30,000 in 

Direct Loan debt and you must not have had 

an outstanding balance on a Direct Loan on 

Oct. 7, 1998.

n Income-Contingent Repayment (ICR) Plan—Your 

monthly payment is adjusted each year based on 

your annual income (and your spouse’s income, 

if you’re married), your family size, and the 

total amount of your Direct Loans. After 25 years, 

any unpaid loan amount will be forgiven. (This 

plan is not available to parent Direct PLUS 

Loan borrowers.)

n Income-Based Repayment (IBR) Plan—Your monthly 

payment is capped at an amount that is affordable 

based on your income and family size. To find out 

if your federal student loan debt is high enough to 

qualify for this plan, use the repayment calculators on 

Student Aid on the Web at www.studentaid.ed.gov 

or on your loan servicer’s site. Your monthly payment 

amount may be adjusted annually. If you repay under 

IBR for 25 years and meet other requirements, any 

remaining balance will be forgiven. (Direct PLUS 

Loans made to parents may not be repaid under IBR.)

You can change plans at any time. There’s no penalty if 

you make payments before they are due or pay more 

than the amount due each month.

For more information about these repayment plans, or to 

use our online calculator to calculate your estimated loan 

payment under different repayment plans, go to Student 

Aid on the Web at www.studentaid.ed.gov or to your 

loan servicer’s website. 

Can I ever postpone making 

loan payments?

Yes, under some conditions you may receive a deferment 

or forbearance that allows you to temporarily stop or 

lower your payments.

For example, you may qualify for a deferment if:

n You return to school at least half-time at a school 

that’s eligible to participate in the Federal student 

Aid programs.

n You are studying full-time in a graduate 

fellowship program.

n You are in an approved full-time disability 

rehabilitation program.

n You are unemployed or meet our rules for 

economic hardship (limited to 3 years).

You may also qualify for a deferment based on active duty 

service in the U.S. Armed Forces or National Guard. Refer 

to the Master Promissory Note for your loan or contact 

your loan servicer for more information about specific 

qualifications for deferment based on military service and 

for other available deferments.

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 a forbearance.

Can my loan ever be cancelled, 

discharged, or forgiven?

You must repay your loan even if you don’t complete 

or can’t find a job related to your program of study, or 

are unhappy with the education you paid for with your 

loan. However, we will discharge (forgive) your loan 

if you have your loan cancelled in bankruptcy, if you 

become totally and permanently disabled, or if you die.

We may discharge some or all of your loan if:

n Your school closed before you completed 

your program.

n Your school forged your signature on your 

promissory note or falsely certified that you 

were eligible for aid.

n Your loan was falsely certified through 

identity theft.

n You withdrew from school but the school didn’t 

pay a refund that it owed. See Student Aid on 

the Web at www.studentaid.ed.gov for more 

information about refund policies.

You also may qualify for forgiveness of some or all of 

your loan balance:

n If you teach full-time for 5 years at a school or 

educational service agency serving low-income 

families and meet other requirements; or

n After you have made 120 payments on a Direct 

Loan while employed in certain public service jobs 

(additional conditions apply).

For more information about loan forgiveness

options, go to Student Aid on the Web 

at www.studentaid.ed.gov.

Where can I get more information?

For more information about the Direct Loan Program

and other Federal Student Aid programs, contact the 

financial aid office at your school or go to Student Aid 

on the Web.

SAVE TIME & MONEY WITH 

AUTOMATIC PAYMENT WITHDRAWAL

This repayment incentive program encourages you to 

repay your loans on time. With this payment option, 

your bank automatically deducts your monthly 

payment from your checking or savings account and 

sends the payment to your loan servicer. This ensures 

that your payment always will be made on time and 

your interest rate will be reduced by a quarter point 

(0.25%) during all periods when payments are made 

through this option. Your loan servicer will include 

information about this payment option in your first 

bill. Contact your loan servicer for more information.

Direct Loan Website 

www.direct.ed.gov