Entrance

COUNSELING GUIDE

FOR DIRECT LOAN BORROWERS
U.S. Department of Education

Arne Duncan

Secretary

Federal Student Aid

James W. Runcie

Chief Operating Officer

July 2015

Online Access:

This publication is available online at 

www.direct.ed.gov/pubs/entrcounselguide.pdf

Contact Information:

Comments and inquiries solely about the content and design of this 

publication may be sent to FSAschoolspubs@ed.gov. 

All URLs were last accessed on May 12, 2015.

Borrowers should use the contact information provided in 

the body of the publication if they need information about or 

assistance with their Direct Loans.
Direct Loans on the Web: www.direct.ed.gov i

Contents

Welcome to Entrance Counseling.....................................1

About This Guide............................................................................1

Terms used in This Guide........................................................2

The Direct Loan Program......................................................4

Types of Direct Loans ...............................................................4

Chart: Types of Direct Loans.........................................................4

Interest Rates in the Direct Loan Program ..............5

Loan Limits in the Direct Loan Program.....................6

Chart: Loan Limits in the Direct Loan Program ............................ 7

Half-Time Enrollment Requirement...............................8

Loan Disbursements...................................................................9

Limitation on Direct Subsidized Loan 

Eligibility for First-Time Borrowers on 

 Or After July 1, 2013..................................................................9

Chart: Periods When Interest Accrues on Direct Subsidized Loans 

 and the 150 percent Limitation.................................................11

Chart: Do Changes in My Student Status Affect My Paying 

 the Interest That Accrues on My Direct Subsidized Loans? ...................12

Be Smart in Your Use of Financial Aid.....................................12

Repayment........................................................................................................14

Chart: Repayment Plan Options for Direct Loans...............................15

Chart: Estimated Monthly Payments for Direct Loans ..................17

Repayment Incentives................................................................19 

Navigating Repayment ..............................................................20

Your Repayment Obligation—Avoiding 

 Delinquency and Default....................................................21

Allowing your loan to become delinquent 

or to go into default can have negative 

consequences for many areas of your life. ...............21

Strategies for Avoiding 

 Delinquency and Default....................................................22

Deferment ........................................................................................25

Forbearance....................................................................................26

Loan Consolidation..................................................................27

Loan Forgiveness and Discharge......................................28

Resolving Student Loan Disputes.....................................29

Financial Planning and Debt Management ...............30

Helpful Resources.......................................................................32

Student Contact Information ..........................................33

Your Rights and Responsibilities 

 as a Borrower.........................................Inside back cover
ii Entrance Counseling Guide

Warning!

Your federal student loan immediately becomes due and payable 

if your eligibility for the loan was established by making a false 

statement. 
Direct Loans on the Web: www.direct.ed.gov 1

Welcome to Entrance Counseling

If you’re borrowing for the first time under the William D. Ford 

Federal Direct Loan (Direct Loan) Program and have not previously 

received the same type of loan through the Direct Loan Program or 

Federal Family Education Loan (FFEL) Program you must complete 

entrance counseling before you can receive the proceeds of your first 

Direct Loan.

Fulfilling the entrance counseling requirement

Entrance counseling can be completed on paper or via the Web. 

Check with your school about how it expects you to fulfill the 

requirement. 

You should have on hand the following information for entrance 

counseling:

f The tuition, fees, and other charges from your school. You can 

find this information on your student account at your school. 

Your school’s student accounts office (often called the bursar’s 

office) can provide you with a paper copy of your student 

account or tell you how to view it online.

f The letter you may have received from your school’s financial 

aid office informing you of the financial aid it is offering you 

(often called an award letter). 

f Your school’s estimate of the cost of your education for the 

year (available from your school’s financial aid office; it might 

have been included in your award letter).

About This Guide

The Entrance Counseling Guide for Direct Loan Borrowers provides 

an overview of the Direct Loan Program, including information 

you’ll need to successfully repay the loans that you’ll be receiving 

to help pay for your college costs. For additional information 

about many of the topics covered in this guide, see your Master 

Promissory Note (MPN) or your copy of the Borrower’s Rights and 

Responsibilities Statement that accompanied your MPN. You can 

find this statement at http://www.direct.ed.gov/pubs/dlrights.pdf.

Throughout this guide, the words we, us, and our refer to the U.S. 

Department of Education. You will also frequently encounter the 

words loan holder, loan servicer, and Master Promissory Note. To 

assist you, we provide the definitions for those and other terms here 

and within the text. You can find an expanded glossary of terms at 

StudentAid.gov/glossary.
2 Entrance Counseling Guide

Terms Used in This Guide

Acceleration—Demand for immediate repayment of your entire 

Direct Loan. This can happen if you default on your Direct Loan. 

In addition, the entire unpaid amount of your Direct Loan becomes 

due and payable if your eligibility for the loan was established by 

your making a false statement.

Aggregate Loan Limit—A limit on the total amount of Direct Subsidized Loans and/or Direct Unsubsidized Loans that you may borrow 

for undergraduate and graduate study. If the total amount you receive 

over the course of your education reaches the aggregate loan limit, 

you will not be eligible to receive additional loans. However, if you repay some of your loans to bring your outstanding loan debt below the 

aggregate loan limit, you could then borrow again, up to the amount 

of your remaining eligibility under the aggregate loan limit.

Annual Percentage Rate (APR)—The actual yearly cost of borrowing 

money reflected as a percentage rate

Capitalized Interest (Capitalization)—Unpaid interest that has been 

added to the principal balance of a federal student loan. Future 

interest is charged on the increased principal balance, and this may 

increase the amount of your monthly payment and the total amount 

you repay over the life of the federal student loan.

Federal Student Loan—In this guide, loans made under the Direct 

Loan Program, Federal Perkins Loan Program, and the Federal 

Family Education Loan (FFEL) Program

Grace Period—For certain types of federal student loans, a period 

of time (generally six months) after you graduate or drop below 

half-time enrollment during which you are not required to make 

payments. The repayment period for your loan begins after the end 

of the grace period.

Interest—The cost of borrowing money. Interest is calculated as a 

percentage of the outstanding (unpaid) principal balance.

The FSA ID

The FSA ID, composed of a username and password, is used to log in 

to certain U.S. Department of Education websites. The FSA ID is also 

used to electronically sign the FAFSA.

If you don’t already have an FSA ID, go to the Federal Student Aid 

website at StudentAid.gov and select “LOG IN” at the upper right. 

The box will expand and you can choose to create your FSA ID (username and password).
Direct Loans on the Web: www.direct.ed.gov 3

Loan Discharge (Cancellation)—The elimination of a loan debt 

under certain limited circumstances

Loan Forgiveness—The elimination of a loan debt under one or more 

of the various Direct Loan forgiveness programs

Loan Holder—A loan holder is the organization that “owns” a federal 

student loan. The U.S. Department of Education is the loan holder for 

all Direct Loans. Your loan servicer will be different than your loan 

holder (see below).

Loan Servicer—An entity that collects payments on loans, responds 

to customer service inquiries, and performs other administrative 

tasks associated with maintaining a loan (e.g., processing requests 

for a change in repayment plans). A federal loan servicer is a loan 

servicer for the U.S. Department of Education. Each Direct Loan is 

assigned to a loan servicer. A current listing of federal loan servicers 

for made through the Direct Loan Program can be found at 

StudentAid.gov/repay-loans/understand/servicers

Principal—The loan amount you borrow plus any capitalized interest

Promissory Note—A legally binding agreement that contains the 

terms and conditions of the loans made under the note. Most federal 

student loans are made under a Master Promissory Note (MPN) 

Identifying Your Loan Servicer

You can identify the servicer for your new Direct Loan (and any 

subsequent Direct Loans) by going to the National Student Loan 

Data System (NSLDS) website at www.nslds.ed.gov/nslds_SA/, and 

logging in with your FSA ID. The site will open to your Financial Aid 

History Page. Select one of your loans to see the loan detail. In the 

section labeled “Make a Payment” you’ll find the loan servicer for that 

specific loan.

Master Promissory Note (MPN) 

An MPN is a binding legal document that you must sign before receiving 

your first Direct Loan. The same MPN can be used to make one or more 

loans for one or more academic years (up to 10 years). Therefore, if you 

leave school and return, you may be able to receive additional loans 

without signing a new MPN. An MPN lists the terms and conditions 

under which you agree to repay the loan and explains your rights and 

responsibilities as a borrower. It’s important to read your MPN and keep 

it in a safe place because you’ll need to refer to it later when you begin 

repaying your loan or at other times when you need information about 

provisions of the loan, such as deferment or forbearance. 
4 Entrance Counseling Guide

The Direct Loan Program

Through the Direct Loan Program, the U.S. Department of 

Education provides loans to eligible students at participating schools 

to help them pay for education after high school. Direct Loans 

include the following: Direct Subsidized Loans, Direct Unsubsidized 

Loans, Direct PLUS Loans, and Direct Consolidation Loans. You 

repay your Direct Loan to the U.S. Department of Education. 

Types of Direct Loans 

You may receive more than one type of loan under the Direct Loan 

Program. Each loan type has its own terms and conditions, such as 

interest rates. 

Remember!

For each federal student loan that you receive under an MPN, you’ll 

receive a disclosure statement that provides specific information 

about that loan, including the loan amount, loan fees, and the expected disbursement dates and amounts. Other disclosures will be 

provided to you throughout the loan process.

Types of Direct Loans

(Excluding Consolidation Loans)

Direct 

Subsidized Loans

Direct

Unsubsidized Loans

Direct

PLUS Loans

Who may receive 

this loan?

Undergraduate students 

with financial need

All students Graduate or professional 

students and parents of 

dependent undergraduate students

When does the 

government pay 

my interest? 1

While you are enrolled, 

and for six months 

after you graduate or 

drop below half-time 

enrollment

Deferment periods

Certain periods of 

repayment under the 

Income-Based Repayment and Pay As You 

Earn Repayment plans

You pay all interest 

charged over the course 

of your loan term

You pay all interest 

charged over the course 

of your loan term

When must I begin 

making payments?

Six months after you 

graduate or drop below 

half-time enrollment

Six months after you 

graduate or drop below 

half-time enrollment

Six months after you 

graduate or drop below 

half-time enrollment

1

 If you are a first-time borrower on or after July 1, 2013, and you exceed the limits described in 

Limitation on Direct Subsidized Loan Eligibility for First-Time Borrowers on or after July 1, 2013, on 

page 9 of this guide, you (instead of the government) may become responsible for paying the 

interest that accrues on your Direct Subsidized Loans during all periods.
Direct Loans on the Web: www.direct.ed.gov 5

Interest Rates in the Direct Loan Program

The interest rates on Direct Subsidized Loans, Direct Unsubsidized 

Loans, and Direct PLUS Loans are fixed rates that are calculated 

each year in accordance with formulas specified in the laws and 

regulations that set the terms and conditions of Direct Loans. 

When the rates are calculated, they apply to all loans for which 

the first disbursement (when funds are posted to your account or 

delivered to you) is made during the period beginning on July 1 of 

one year and ending on June 30 of the following year. Each loan you 

receive over the course of your education may have a different fixed 

interest rate, depending on when the loan is first disbursed, the loan 

type, and whether you are an undergraduate student or a graduate or 

professional student. 

Each type of loan has a maximum fixed interest rate (or cap). The 

maximum interest rates are—

f 8.25% on Direct Subsidized Loans made to undergraduates1

and Direct Unsubsidized Loans made to undergraduates;

f 9.50% on Direct Unsubsidized Loans made to graduate 

students; and

f 10.50% on Direct PLUS Loans made to graduate and 

professional students, and parents of dependent undergraduate students.

1 Graduate and professional students are not eligible for Direct Subsidized 

 Loans.

Direct PLUS Loans and Eligibility for Other Financial Aid 

Accepting a Direct PLUS Loan can affect your eligibility for other 

financial aid. Therefore, we suggest that you contact your school’s 

financial aid office to inquire about your eligibility for grants, workstudy funds, Direct Subsidized Loans, Direct Unsubsidized Loans, and 

other forms of federal, state, and private student aid that do not have 

to be repaid before accepting a Direct PLUS Loan.

How You Can Find the Interest Rate on Your Direct Loan

You can find the interest rate on your Direct Loan (and any 

subsequent Direct Loans) by going to the National Student Loan 

Data System (NSLDS) website at www.nslds.ed.gov/nslds_SA/ and 

logging in with your FSA ID. The site will open to your Financial Aid 

History page, and you’ll see a record of the loans you’ve received. 

By selecting one of the loans, you will be able to see the loan detail, 

including the interest rate for that loan.
6 Entrance Counseling Guide

Loan Limits in the Direct Loan Program

Annual loan limits in the Direct Loan Program vary depending on 

your academic year, grade level, and whether you are a dependent or 

independent student.

Subsidized and Unsubsidized Loan Limits

For Direct Subsidized Loans and Direct Unsubsidized Loans, there 

are limits on the maximum amount you may borrow for an academic 

year (annual loan limits) and the maximum amount you may borrow 

in total for undergraduate and graduate study (aggregate loan limits).

The actual loan amount you are eligible to receive is determined by 

your school and is based on your academic year, grade level, whether 

you are dependent or independent, and other factors, such as

f the length of your program,

f your cost of attendance,

f your Expected Family Contribution (EFC),

f other financial aid you receive, and

f your remaining eligibility under the annual and aggregate 

loan limits.

If you’re an undergraduate student, your annual loan limit will 

include both any Direct Subsidized Loans and Direct Unsubsidized 

Loans you receive for the same academic year period. 

Direct PLUS Loan Limits

Direct PLUS Loans don’t have fixed limits. You can borrow up to 

the cost of attendance at the school you’re attending, minus all other 

financial assistance you receive. Your school will determine the 

actual Direct PLUS Loan amount that you are eligible to receive.

Remember!

If you’re a graduate or professional student, use Direct Unsubsidized 

Loans first, then use Direct PLUS Loans, if needed. Direct Unsubsidized Loans offer the following advantages over Direct PLUS Loans:

•	 Lower interest rates

•	 Lower fees
Direct Loans on the Web: www.direct.ed.gov 7

Dependent Students (except 

students whose parents are unable to obtain PLUS Loans)

Independent Students (and 

dependent undergraduate 

students whose parents are 

unable to obtain PLUS Loans)

First-Year Undergraduate 

Annual Loan Limit

$5,500—No more than $3,500 of 

this amount may be in subsidized 

loans.

$9,500—No more than $3,500 

of this amount may be in 

subsidized loans.

Second-Year Undergraduate 

Annual Loan Limit

$6,500—No more than $4,500 

of this amount may be in 

subsidized loans.

$10,500—No more than 

$4,500 of this amount may be 

in subsidized loans.

Third-Year-and-Beyond Undergraduate Annual Loan Limit$7,500 per year—No more than 

$5,500 of this amount may be in 

subsidized loans.

$12,500—No more than 

$5,500 of this amount may be 

in subsidized loans.

Graduate or Professional 

Student1 Annual Loan Limit

Not applicable $20,500 (unsubsidized loans 

only)

Subsidized and Unsubsidized 

Aggregate Loan Limit

$31,000—No more than 

$23,000 of this amount may be 

in subsidized loans.

$57,500 for undergraduates—

No more than $23,000 of this 

amount may be in subsidized 

loans.

$138,500 for graduate or professional students—No more 

than $65,500 of this amount 

may be in subsidized loans. The 

graduate aggregate limit includes all federal loans received 

for undergraduate study.

Loan Limits in the Direct Loan Program

Academic Year

1

All students enrolled in graduate and professional degree programs are considered independent.

Credit Checks and Direct PLUS Loans

One of the eligibility requirements to receive a Direct PLUS Loan is 

that you must not have an adverse credit history. If you request a 

Direct PLUS Loan, a credit check will be conducted to determine if 

you have an adverse credit history. Direct PLUS Loans are the only 

Direct Loans that require a credit check.

If you have an adverse credit history, you may still receive a Direct 

PLUS Loan if you obtain an endorser or if you document to the U.S. 

Department of Education’s satisfaction that there are extenuating 

circumstances related to your adverse credit history. An endorser 

is someone who does not have an adverse credit history and who 

agrees to repay your federal student loan if you do not. If you 

are determined to have an adverse credit history, but you qualify 

for a Direct PLUS Loan by obtaining an endorser or by providing 

satisfactory documentation of extenuating circumstances, you must 

also complete special Direct PLUS Loan counseling before you can 

receive the loan.
8 Entrance Counseling Guide

Half-Time Enrollment Requirement

You must be enrolled at least half-time to receive a Direct 

Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS 

Loan. For Direct Subsidized Loans and Direct Unsubsidized Loans, 

if you drop below half-time enrollment, the six-month grace period 

(see box on page 18) begins. If you are a student Direct PLUS Loan 

borrower and you drop below half-time enrollment, the six-month 

post-enrollment deferment period begins. You have to begin making 

payments after the end of the six-month grace period or six-month 

post-enrollment deferment period, as applicable.

For undergraduate students, federal regulations set the following 

minimum standards for half-time enrollment:

f Schools that measure academic progress in credit hours and 

use semesters, trimesters, or quarters, half-time is at least six 

semester hours or quarter hours per term.

f Schools that measure academic progress in credit hours but 

do not use terms, half-time is at least 12 semester hours or 18 

quarter hours per academic year. 

f Schools that measure academic progress in clock hours, halftime is at least 12 clock hours per week.

Schools that measure academic progress in credit hours and use 

terms other than semesters, trimesters, or quarters determine the 

minimum number of credit hours for half-time enrollment based on 

the number of weeks of instructional time in the term, the number 

of weeks of instructional time in the program of study’s academic 

year, and the number of credit hours in the program’s academic year.

Schools may choose to define half-time enrollment based on a higher 

number of credit or clock hours than the minimum standards shown 

above, and a school’s half-time enrollment standard may be different 

for summer sessions, for example. Your school can tell you if its 

definition of half-time enrollment is different from these minimum 

standards.

These minimum standards apply only to undergraduate students. If 

you are a graduate or professional student, the definition of half-time 

enrollment is determined by your school.

If you drop below half-time enrollment and then resume enrollment 

on at least a half-time basis before the end of the six-month grace period, your Direct Subsidized Loan or Direct Unsubsidized Loan will 

return to “in-school” status and you will regain a full six-month grace 

period when you leave school or drop below half-time enrollment 

again. Your Direct PLUS Loan will return to in-school deferment status and you will receive a full six-month post-enrollment deferment 

when you leave school or again drop below half-time enrollment.
Direct Loans on the Web: www.direct.ed.gov 9

Loan Disbursements

In most cases, your school will disburse the proceeds of your 

Direct Loan by crediting it to your school account to pay tuition 

and fees, room and board, and other authorized charges. If the 

loan disbursement amount exceeds school charges, the remaining 

balance of the disbursement will be paid to you directly by check or 

other means. You will be notified in writing each time your school 

disburses a portion of your loan. The notification will include

f the expected date and amount of the loan disbursement, and

f your right to cancel all or a portion of your Direct Loan, and

f the procedures and time frame for notifying the school that 

you want to cancel all or a portion of your Direct Loan.

Limitation on Direct Subsidized Loan Eligibility 

for First-Time Borrowers on or After July 1, 2013

Why is this important to know?

How much time you spend in school may affect your responsibility 

for paying interest on any Direct Subsidized Loans you may receive. 

In addition, if you are returning to school, your eligibility for Direct 

Subsidized Loans may be limited by your prior Direct Subsidized 

Loan borrowing.

Maximum eligibility period for 

Direct Subsidized Loans

There is a limit on the maximum period of time (measured in 

academic years) that you can receive Direct Subsidized Loans. 

You may not receive Direct Subsidized Loans for more than 150 

percent of the published length of your program. This is called 

your maximum eligibility period. Your maximum eligibility period 

is based on the published length of your current program. You can 

usually find the published length of any program of study in your 

school’s catalog.

For example, if you are enrolled in a four-year bachelor’s degree 

program, the maximum period for which you can receive Direct 

Subsidized Loans is six years (150% × 4 years = 6 years). If you are 

enrolled in a two-year associate degree program, the maximum 

period for which you can receive Direct Subsidized Loans is three 

years (1.50 × 2 years = 3 years). 

This means that your maximum eligibility period can change if you 

change to a program that has a different length of study. Also, if you 

receive Direct Subsidized Loans for one program and then change 

to another program, the Direct Subsidized Loans you received for 

the earlier program will count toward your new maximum eligibility 

period.
10 Entrance Counseling Guide

Periods that count toward your 

maximum eligibility period

The periods of time that count against your maximum eligibility 

period are periods of enrollment (also known as loan periods) for 

which you received Direct Subsidized Loans. For example, if you are 

a full-time student and you receive a Direct Subsidized Loan that 

covers the fall and spring semesters (a full academic year), this will 

count as one year against your maximum eligibility period.

If you receive a Direct Subsidized Loan for a period of enrollment 

that is shorter than a full academic year, the period that counts 

against your maximum usage period will generally be reduced 

accordingly. For example, if you are a full-time student and you 

receive a Direct Subsidized Loan that covers the fall semester but not 

the spring semester, this will count as one-half of a year against your 

maximum eligibility period.

In most cases, the amount of a Direct Subsidized Loan you receive 

for a period of enrollment does not affect how much of your 

maximum eligibility period you have used. For example, if your 

annual loan limit is $3,500, but for a full academic year you borrow 

only $2,000, the eligibility used would still be considered one full 

academic year. 

Borrowing while enrolled less than full time

If you receive a Direct Subsidized Loan while you are enrolled less 

than full time, the period that is counted against your maximum 

eligibility period will be reduced. For example, if you receive a 

Direct Subsidized Loan for a period of enrollment that covers a 

full academic year but you are enrolled as a half-time student, the 

period of enrollment will count as only one-half year against your 

maximum loan eligibility period. 

Loss of eligibility for additional Direct Subsidized

Loans 

After you have received Direct Subsidized Loans for your maximum 

eligibility period, you are no longer eligible to receive additional 

Direct Subsidized Loans (loans in which the government pays the 

interest in most instances). However, you may continue to receive 

Direct Unsubsidized Loans (and you, not the government, will be 

responsible for paying the interest). 
Direct Loans on the Web: www.direct.ed.gov 11

Becoming responsible for paying interest on Direct 

Subsidized Loans

If you continue to be enrolled in an undergraduate program after 

you have received Direct Subsidized Loans for your maximum 

eligibility period, you become responsible (with certain exceptions) 

for paying the interest that accrues on your Direct Subsidized Loans. 

Your responsibility for paying the interest that accrues on your 

Direct Subsidized Loans begins on the date of your enrollment that 

follows your exhausting the 150 percent limit. The chart that follows 

provides examples of how changes in your circumstances can affect 

your having to pay the interest that accrues on your Direct Subsidized Loans. 

Changing eligibility for Direct Subsidized Loans

Remember, your maximum eligibility period can change if you 

enroll in a different program. So, if you received Direct Subsidized 

Loans for your maximum eligibility period for one program and 

then enroll in a longer program, you will not become responsible 

for interest that accrues on your Direct Subsidized Loans after you 

begin the longer program and before you reach your maximum 

eligibility period (i.e., 150 percent of the published length of the 

longer program).

If you regain eligibility to receive additional Direct Subsidized Loans 

because you enrolled in a program that is longer than your prior 

program and you had been responsible for paying all of the interest 

that accrued on your prior Direct Subsidized Loans, you will not be 

responsible for the interest that accrues on your new loans during 

the periods described in the chart that follows. 

Periods When Interest Accrues on Direct Subsidized Loans 1

and the 150 percent 2 Limitation 

Period Before meeting 

the 150 percent limit

After meeting 

the 150 percent limit

While enrolled in school 

at least half-time

No Yes

During my grace period on loans 

first disbursed (paid out) July 1, 

2012, through June 30, 2014

Yes Yes

During my grace period on loans 

first disbursed (paid out) after June 

30, 2014

No Yes

During deferment periods No Yes

During certain periods of repayment 

under the Income-Based Repayment 

or Pay As You Earn Plan

No Yes

During forbearance periods Yes Yes

During all other periods of 

repayment

Yes Yes

1 Interest on Direct Unsubsidized Loans and Direct PLUS Loans accrues during all periods. 

2

 The 150 percent limit refers to 150 percent of the published length of your program. 
12 Entrance Counseling Guide

Be Smart in Your Use of Financial Aid.

First, finance your education with free money. 

You don’t have to repay grants, scholarships, or 

work-study earnings.

Your school’s financial aid office determines your eligibility for each 

type of federal student aid, based on your Free Application for Federal 

Student Aid (FAFSA®). Filing the FAFSA is free! Go to the FAFSA 

site at StudentAid.gov to complete an application or forecast your 

eligibility for aid. It’s FREE!

1. Apply for grants and scholarships.

◆ Explore federal grant programs.

◆ Search for scholarships and grants offered by your school 

and state as well as nonprofit and private organizations. 

◆ Consider scholarships for U.S. military service, education 

support offered by the military, and education benefits for 

veterans.

◆ For more ideas and information, go to Types of Aid at 

StudentAid.gov. 

Do Changes in My Student Status Affect My Paying 

the Interest That Accrues on My Direct Subsidized Loans? 

Change Yes No

I am no longer eligible for Direct Subsidized Loans and I stay 

enrolled in my current program? P

I am no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate 

program that is the same length or shorter than my prior 

program?

P

I transferred into the shorter program and lost eligibility for Direct 

Subsidized Loans because I have received Direct Subsidized Loans 

for a period that equals or exceeds my new, lower maximum eligibility period, which is based on the length of the new program?

P

I was no longer eligible for Direct Subsidized Loans, did not graduate from my prior program, and am enrolled in an undergraduate 

program that is longer than my prior program?

P

I lose eligibility for Direct Subsidized Loans and immediately 

withdraw from my program? P

I graduated from my prior program prior to or upon meeting the 

150 percent limit, and enroll in an undergraduate program that is 

the same length or shorter than my prior program?

P

I enroll in a graduate or professional program? P

I enroll in preparatory coursework that I am required to complete 

to enroll in a graduate or professional program? P

I enroll in a teacher certification program (where my school does 

not award an academic credential)? P
Direct Loans on the Web: www.direct.ed.gov 13

2. Work part time.

◆ Explore job opportunities on or off campus.

◆ Explore work-study programs, including Federal WorkStudy offered at your school. Contact your school’s financial 

aid office.

◆ Balance work hours with your studies.

3. Borrow only what you need.

◆ You don’t have to accept the full amount offered. You may 

request and borrow a lower amount.

◆ If you’re eligible, take advantage of Direct Subsidized Loans. 

The government pays the interest while you are in school 

and during certain other periods (see chart on Page 11).

Next, use federal student loans before 

considering private loans.

Exhaust your federal student loan options before considering 

student loans offered by a private lender, such as a bank or a credit 

union. Consult your school’s financial aid administrator regarding 

all of your student loan options. Private student loans may have 

disadvantages, including

f variable interest rates that can exceed 18%,

f requiring you to make loan payments while you’re still in 

school,

f penalty fees for paying off your loan early,

f requiring an established credit record and using your credit 

score and other factors to determine the cost of your loan, 

f requiring a cosigner,

f the inability to consolidate private student loans into a Direct 

Consolidation Loan,

f limited options for loan forgiveness, and

f limited options for deferments and forbearances. 

Federal student loans usually offer the following 

advantages over private loans:

f Lower interest rates and interest rates that are fixed once the 

loan is made

f The federal government generally will make interest payments 

on Direct Subsidized Loans while you are in school on at least 

a half-time basis

f No credit check required, except for Direct PLUS Loans
14 Entrance Counseling Guide

f Flexible and affordable repayment plans for Direct Loans

f The ability to consolidate federal education loans into a 

Direct Consolidation Loan (see the later section Loan 

Consolidation)

Repayment

What is repayment? 

Repayment is the process of satisfying your obligation to pay back 

the money you borrowed to help you pay for your education. 

For Direct Subsidized Loans and Direct Unsubsidized Loans, the 

repayment period begins when your grace period (see page 18) ends. 

Direct PLUS Loans enter repayment when they are fully disbursed 

(paid out), but you may defer (postpone) making payments while 

you are enrolled in school at least half-time and for an additional six 

months after you leave school or drop below half-time enrollment. 

What determines the rules of my repayment? 

You repay your loan according to a repayment plan that you 

choose through your loan servicer. The repayment plan you choose 

determines the amount you pay each month and the number of 

payments you must make.

Did you know?

You must repay the full amount of your federal student loans, even 

if you

•	 don’t complete your program of study, 

•	 can’t find employment after graduation, and/or

•	 aren’t satisfied with or didn’t receive the education or other 

services that you paid for with your federal student loans.

How interest accrues

Direct Loans are “simple daily interest” loans. This means that interest 

accrues daily. The amount of interest that accrues per day is calculated by dividing the interest rate on your loan (as a decimal) by the 

number of days in a year, and then multiplying that by the outstanding principal balance of the loan.

For example, on a $10,000 Direct Unsubsidized Loan with a 6.8% 

interest rate, the amount of interest that accrues per day while the 

loan has an outstanding balance of $10,000 is $1.86, calculated as 

follows:

(0.068 / 365) X $10,000 = $1.86
Direct Loans on the Web: www.direct.ed.gov 15

How long do I have to repay my loan?

The maximum time period over which you must repay your federal student 

loan is the repayment period. The repayment period can range from 10 

years to 25 years, depending on your repayment plan and other factors. 

By keeping your repayment period as short as possible and by making your 

payments on time, you reduce the amount of interest you pay over the life 

of the loan. 

When do I need to start making payments?

You are not required to make payments while you are enrolled at least 

half time at an eligible school or (for most loan types) during the first six 

months after you leave school or drop below half-time enrollment.

Repayment Plan Options for Direct Loans 

(Excludes Direct PLUS Loans made to parents and 

Direct Consolidation Loans)1

Eligible 

Borrowers

Eligible 

Loans

Time to

 Repay

Monthly 

Payment

Traditional Repayment Plans

10-Year 

Standard 

Repayment 

Plan

All borrowers All loans Up to 10 years Your payments will be a 

fixed amount of at least $50 

per month. 

Graduated 

Repayment 

Plan

All borrowers All loans Up to 10 years Your payments will start out 

low, and change every two 

years. Payments must be at 

least equal to monthly interest due. No single payment 

will be more than three 

times greater than any other 

payment under the Standard 

Repayment Plan.

Extended 

Repayment 

Plan

Direct Loan borrowers with 

more than $30,000 of Direct 

Loans to repay

FFEL Program borrowers with 

more than $30,000 of FFEL 

Program loans to repay

In addition, you must have 

had no Direct Loan or FFEL 

Program loans as of Oct. 7, 

1998, or have paid off that 

loan before you obtained a 

new loan after that date.

All loans Up to 25 years Your payments will be fixed 

or graduated (increasing 

every two years) in an 

amount that ensures that 

your loan will be paid in full 

in 25 years.
16 Entrance Counseling Guide

Repayment Plan Options for Direct Loans (continued)

(Excludes Direct PLUS Loans made to parents and 

Direct Consolidation Loans)1

Eligible 

Borrowers

Eligible 

Loans

Time to

 Repay

Monthly 

Payment

Income-Driven Repayment Plans

IncomeBased 

Repayment (IBR) 

Plan for 

those who 

borrowed 

before 

7/1/14.2

To be initially eligible, the 

amount you would need to 

pay under this plan must be 

less than what you would 

pay under the 10-Year 

Standard Repayment Plan.

All loans Any remaining 

balance is 

forgiven after 

25 years of 

qualifying 

repayment.

Generally, your payments 

will be the lesser of

•	15 percent of your 

discretionary income; or

•	the 10-Year Standard 

Plan amount.

IncomeBased 

Repayment 

(IBR) Plan 

for new 

borrowers 

on or after 

7/1/14.2

To be initially eligible, the 

amount you would need to 

pay under this plan must be 

less than what you would 

pay under the 10-Year 

Standard Repayment Plan.

All loans Any remaining 

balance is 

forgiven after 

20 years of 

qualifying 

repayment.

Generally, your payments 

will be the lesser of

•	10 percent of your 

discretionary income; or

•	the 10-Year Standard 

Plan amount.

Pay As

You Earn 

Repayment 

Plan 

To be initially eligible, the 

amount you would need to 

pay under this plan must be 

less than what you would 

pay under the 10-Year 

Standard Repayment Plan.

You must have had no Direct 

Loan or FFEL Program loans 

as of Oct. 1, 2007, or have 

paid off that loan before you 

obtained a new loan after 

that date.

You must receive a disbursement of a Direct Loan on or 

after Oct. 1, 2011.

All Direct 

Loans

Any remaining 

balance is 

forgiven after 

20 years of 

qualifying 

repayment.

Generally, your payments 

will be the lesser of

•	10 percent of your 

discretionary income; or

•	the 10-Year Standard 

Plan amount.

IncomeContingent 

Repayment 

(ICR) Plan

All Direct Loan borrowers All Direct 

Loans

Any remaining 

balance is 

forgiven after 

25 years of 

qualifying 

repayment.

Generally, your payments 

will be the lesser of

•	20 percent of your 

discretionary income; or

•	what you would pay on 

a repayment plan with 

a fixed payment over 

the course of 12 years, 

adjusted according to 

your income.

IncomeSensitive 

Repayment 

Plan

All FFEL borrowers All FFEL 

Program 

loans

Up to 10 years Generally, your monthly 

payment is based on your 

annual income.

Your payments change as 

your income changes.

1

 Direct consolidation loans (that did not repay any PLUS loans made to parents) are eligible for all the plans.

2 For IBR, you are a new borrower if you had no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program 

loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014.
Direct Loans on the Web: www.direct.ed.gov 17

Estimated Monthly Payments for Direct Loans 

(by Repayment Plan and Debt When Your Loan Enters Repayment)

Non-Consolidation Borrowers1

Debt When 

Loan Enters 

Repayment

Standard Extended

Fixed

Extended

Graduated Graduated

Per 

Month Total Per Month Total Per Month Total Per Month Total

$5,000 $58 $6,904 N/A N/A N/A N/A $40 $7,275 

10,000 115 13,809 N/A N/A N/A N/A 79 14,550

25,000 288 34,524 N/A N/A N/A N/A 198 36,375

50,000 575 69,048 347 104,109 284 112,678 396 72,749

100,000 1,151 138,096 694 208,217 568 225,344 792 145,498

Debt When 

Loan Enters 

Repayment

Income Contingent2

Income = $25,000

Income-Based2

Income = $25,000

Single Married/HOH3 Single Married/HOH3

Per 

Month Total Per Month Total Per Month Total Per Month Total

$5,000 $37 $8,347 $36 $11,088 N/A N/A $39 $8,005

10,000 75 16,699 71 22,158 110 13,672 39 16,081

25,000 186 41,748 178 55,440 110 45,014 39 60,754

50,000 247 93,322 189 122,083 110 109,623 39 92,704

100,000 247 187,553 189 170,153 110 118,058 39 97,020

Consolidation Borrowers4

Debt When 

Loan Enters 

Repayment

Standard Extended

Fixed

Extended

Graduated Graduated

Per 

Month Total Per Month Total Per Month Total Per Month Total

$5,000 $61 $7,359 N/A N/A N/A N/A $38 $7,978

10,000 97 17,461 N/A N/A N/A N/A 69 19,165

25,000 213 51,123 N/A N/A N/A N/A 172 55,491

50,000 394 118,264 394 118,264 344 126,834 344 126,834

100,000 751 270,452 788 236,528 688 253,660 688 286,305

Debt When 

Loan Enters 

Repayment

Income Contingent2

Income = $25,000

Income-Based2

Income = $25,000

Single Married/HOH3 Single Married/HOH3

Per 

Month Total Per Month Total Per Month Total Per Month Total

$5,000 $40 $9,414 $38 $12,294 N/A N/A $39 $7,818

10,000 80 18,828 77 24,587 110 17,638 39 22,414

25,000 201 47,069 189 61,588 110 59,451 39 52,725

50,000 247 106,630 189 137,766 110 91,388 39 78,816

100,000 247 187,553 189 170,153 110 117,343 39 97,020

1Payments were calculated using a fixed interest rate of 6.8% for Direct Subsidized and Unsubsidized Loans disbursed on or after

July 1, 2006.

2 Assumes a 5 percent annual income growth (Census Bureau)

3

 HOH is Head of Household. Assumes a family size of two.

4

 Payments are calculated using the maximum interest rate for consolidation loans, 8.25%.
18 Entrance Counseling Guide

What if I’m called to active duty military service?

Active duty military service for more than 30 days in a reserve 

component of the U.S. armed forces is not counted as part of your 

grace period. Specifically, active duty service, as well as the time 

necessary for you to reenroll in school after your active duty service 

ends, is excluded from your grace period. However, a period that is 

excluded from your grace period may not exceed three years.

If the call or order to active duty occurs while you are in school 

and requires you to drop below half-time enrollment, the start of 

your grace period will be delayed until after the end of the excluded 

period described above. If the call or order to active duty occurs 

during your grace period, you will receive a full six-month grace 

period at the end of the excluded period.

Can I make payments when I’m not 

required to do so?

Yes! If you have a Direct Loan, you are not required to make 

payments while you are in school and enrolled at least half time, 

during your grace period, or during a period of deferment (see 

page 25), or forbearance (see page 26). However, making payments 

while you are not required to do so—instead of allowing interest to 

be capitalized (added to the principal balance)—can substantially 

reduce the cost of your Direct Loan over time.

Interest that accrues on Direct Unsubsidized and Direct PLUS 

Loans while you are in school, during your grace period, or during 

a forbearance or deferment period may be capitalized (added to the 

principal amount) when your Direct Loan enters repayment or when 

the deferment or forbearance period expires.

Did you know?

Direct Subsidized Loans and Direct Unsubsidized Loans are eligible 

for a six-month grace period that generally begins on the day after 

you graduate, leave school, or drop below half-time enrollment. 

Direct PLUS Loans qualify for a six-month post-enrollment deferment 

after you graduate, leave school, or drop below half-time enrollment. 

You’re not required to make payments during the grace period or 

the six-month post-enrollment deferment period.
Direct Loans on the Web: www.direct.ed.gov 19

What if I want to pay off my loan early?

You may prepay all or part of your Direct Loan at any time without 

a penalty.

If you intend any additional funds you send your servicer to be used 

to pay down your principal, you must instruct your loan servicer 

of your intention or the servicer will apply the funds to future 

scheduled payments. 

What happens if I return to school? 

If you return to school on at least a half-time basis before your sixmonth grace period ends, your Direct Loans will return to in-school 

status. You won’t have to make payments until six months after you 

graduate, again leave school, or drop below half-time enrollment. 

If you return to school on at least a half-time basis after your 

six-month grace period has ended, you’ll qualify for an in-school 

deferment and won’t have to make payments while you remain 

enrolled at least half-time. However, when you graduate, again leave 

school, or drop below half-time, your in-school deferment will end, 

and you’ll be required to begin making payments right away.

Repayment Incentives 

Interest rate reduction for payments made with 

automatic withdrawal 

On your loans that are owned by us, you receive a 0.25% interest rate 

reduction under the Automatic Debit payment option. This option 

allows your loan servicer to automatically deduct your monthly 

payment from your checking or savings account.

Did you know?

You can make payments during your grace period to prevent interest 

from accruing and to reduce the amount of interest that may be capitalized when you enter repayment. 

You can find out how much you can save by using the online Repayment Estimator available at StudentAid.gov/repay-loans/

understand/plans or by contacting your loan servicer. 

If you took out a private student loan, you may have to begin making 

payments while you’re still in school. Contact the holder of that private 

student loan immediately to arrange payment.
20 Entrance Counseling Guide

Navigating Repayment 

Where do I send my payments?

In the Direct Loan Program, each loan you obtain is assigned 

to a federal loan servicer, who handles payments and other 

administrative functions. 

In most cases, you will send your payment to your loan servicer. 

If you do not know who your loan servicer is, visit the National 

Student Loan Data System (NSLDS) at www.nslds.ed.gov/nslds_SA. 

When should I contact my loan servicer?

Contact your loan servicer if you

f graduate;

f change your name, address, or phone number;

f transfer schools;

f drop below half-time enrollment;

f leave school;

f need help making your monthly Direct Loan payments; or

f are called to active duty with the U.S. armed forces for more 

than 30 days. 

How do I change my repayment plan?

Contact your loan servicer to select or change your repayment plan. 

Your loan servicer can explain which repayment plans are available 

to you. However, if you do not select a repayment plan, your loan 

servicer will place you on the Standard Repayment Plan with fixed 

payments over a maximum of 10 years.

Did you know?

You must inform your loan servicer if you

•	 fail to begin classes at the school that determined you were 

eligible to receive your loan, or

•	 do not begin classes as at least a half-time student for the loan 

period certified by your school, or

•	 fall below half-time enrollment.
Direct Loans on the Web: www.direct.ed.gov 21

Your Repayment Obligation—Avoiding 

Delinquency and Default 

Repayment of your Direct Loan is a serious financial obligation. 

When you make payments on time, you begin establishing a 

credit history that will affect your future eligibility to obtain loans 

for the purchase of a car or home. When you apply for a job, 

employers often use your credit history as a way to measure how 

you meet your responsibilities and your ability to establish and 

stick to a plan. 

Falling behind on your Direct Loan payments can have serious 

consequences: 

f Your Direct Loan becomes delinquent the first day after 

you miss (fail to make) a payment that is due. 

f If a Direct Loan is delinquent for 270 days, it goes into 

default. 

f Loans on which payments are delinquent and loans that 

are in default are reported to national credit agencies. 

Allowing your loan to become delinquent 

or to go into default can have negative 

consequences for many areas of your life. 

What are the consequences for my federal student

aid? 

f You will lose your eligibility for loan deferments and 

forbearances, and your eligibility to choose from among 

the available repayment plans. 

f You will not be eligible for additional federal student aid if 

you return to school.

Compare Repayment Plans Online

You can get estimates of your monthly payments for each repayment 

plan. Use your FSA ID to login to the Repayment Estimator at

StudentLoans.gov.
22 Entrance Counseling Guide

What are the consequences for my career and 

future income? 

f You may be required to immediately repay the entire unpaid 

amount of your loan. This process is known as acceleration. 

f You may not be eligible for certain types of employment. 

f Your loans may be turned over to a collection agency, and 

you will have to pay additional charges, late fees, and collection costs. 

f You may have part of your income withheld by the federal 

government. This is known as wage garnishment. 

f Your federal and state income tax refunds may be withheld 

and applied to your debt. This is known as a tax offset. 

What are the consequences for my credit rating? 

f Your credit score will be damaged. 

f You may have difficulty qualifying for credit cards, car loans, 

or mortgages and will be charged much higher interest rates. 

f You may have difficulty signing up for utilities, getting car or 

homeowner’s insurance, or getting a cell phone plan. 

f You may have difficulty getting approval to rent an apartment 

(credit checks may be required).

Strategies for Avoiding Delinquency and Default 

Borrow only what you need.

You have to pay back your federal student loans even if you do not 

complete your studies, are unable to get a job after graduating, or are 

not satisfied with the educational services you received from your 

school. 

f Borrow as a last resort and only borrow what you need. 

Money you don’t borrow is money you don’t have to pay 

back.

f Consider reducing the amount of money you borrow, if you 

can. You may request and borrow a lower federal student loan 

amount than you qualify for. If you find later in the year that 

you need additional loan funds, you can request a higher federal student loan amount.

Alert!

Although your credit history is not taken into account in determining 

your eligibility for Direct Subsidized Loans and Direct Unsubsidized 

Loans, your credit history will be affected if you do not repay your 

federal student loans under the repayment plan you agree to when 

you enter repayment. 
Direct Loans on the Web: www.direct.ed.gov 23

Plan ahead.

f Make sure you have a budget for the whole year, not just the 

next few months.

f Keep in mind that you may have large one-time expenses, 

such as tuition or books, at the start of each year or semester.

f Be aware that you may receive your funding, such as loan 

payments or grants, only a few times a year. 

f For more on this topic, see the later section Financial 

Planning and Debt Management on page 30.

Control your education and non-education

expenses.

f Which ones are vital and which ones are nice to have? Rank 

them and reduce the amount you spend on lower priority 

expenses.

f Share housing or live at home.

f Buy used textbooks or rent textbooks.

f Take public transit or carpool.

f Lower your cell phone bill.

f Choose less expensive entertainment options.

f Try adjusting the expenses in your budget and see how it 

affects your need for income for the year.

f As much as possible, pay expenses with money you’ve earned 

and saved.

Pay for expenses with money you earn and save.

Live within your means, and you will set yourself up for future 

success. You don’t have to repay money you didn’t borrow in the first 

place!

Be a smart borrower.

f If you can, pay interest on your Direct Unsubsidized Loans 

and Direct PLUS Loans while you’re in school. Reduce the 

overall amount you pay by paying interest as it accrues, 

instead of allowing it to be capitalized (added to the principal 

balance), which you must pay once you leave school.

f Use your federal student loan money only to pay for authorized education expenses at the school that certified your 

loan eligibility.

f Pay off debt with a high interest rate. If you have any debt 

with a high interest rate (e.g., credit cards), pay that debt off 

as soon as possible.
24 Entrance Counseling Guide

f Use savings now to reduce borrowing. Money you don’t 

borrow in the first place is money you don’t have to pay back 

or pay interest on.

Finish your program and graduate. 

When you graduate, you are more likely to increase your employability, career options, and potential income. However, making smart 

choices about your occupation and career path can also ensure you 

have the resources to meet your federal student loan obligations.

Stay in touch with your loan servicer.

Open all your mail and read everything about your Direct Loans. 

Signing up for electronic correspondence can help ensure that you 

never miss a letter or bill. Contact your loan servicer before you miss 

a payment on your Direct Loans. Your loan servicer can explain your 

repayment options to help you avoid missing a payment. If you are 

unsure of your loan servicer, please visit nslds.ed.gov/nslds_SA for 

information pertaining to your loans.

Pay on time. 

It is very important that you make your Direct Loan payments on 

time. Contact your loan servicer if you think you will have trouble 

making your payments or won’t be able to pay on time. 

Select a more appropriate repayment plan.

One way to avoid default is to lower your monthly payments by 

changing to a different repayment plan. Some repayment plans have 

a monthly payment based on your income. You are never charged a 

fee to change repayment plans on your Direct Loans. 

If lowering your monthly payment is not an option or you are 

experiencing only a temporary problem repaying your loans, you 

may be able to temporarily postpone or lower your payments by 

applying for deferment or forbearance.

Did you know?

It’s important to graduate! According to U.S. Census Bureau data, the 

average college graduate with a four-year degree earns almost 

$1 million more over a lifetime than a high school graduate. 

Remember!

You must make payments on your federal student loan even if you 

do not receive a bill or repayment notice. You are also responsible for 

staying in touch with your loan servicer.
Direct Loans on the Web: www.direct.ed.gov 25

Deferment

If you are having temporary problems repaying your federal 

student loans, contact your loan servicer to see if you are eligible 

for deferment. A deferment allows you to temporarily stop 

making payments on your federal student loans. If you have 

Direct Subsidized Loans and have not exceeded 150 percent of the 

published length of your program, you are not charged interest 

on those loans during deferment. You are never charged a fee for 

applying for a deferment on your federal student loans.

Note: Interest will continue to be charged during deferment on your 

Direct Unsubsidized and Direct PLUS Loans. If you do not pay this 

interest during the deferment, it will be capitalized at the end of the 

deferment. 

You may qualify for a deferment if you are 

f enrolled at least half time at an eligible postsecondary school; 

f in a full-time course of study in a graduate fellowship program; 

f in an approved full-time rehabilitation program for individuals with disabilities; 

f unemployed or unable to find full-time employment (for a 

maximum of three years); 

f experiencing an economic hardship as defined by federal 

regulations (for a maximum of three years); 

f serving in the Peace Corps;

f serving on active duty during a war or other military operation or national emergency and, if you were serving on or 

after Oct. 1, 2007, for an additional 180-day period following 

the demobilization date for your qualifying service; 

f performing qualifying National Guard duty during a war or 

other military operation or national emergency and, if you 

were serving on or after Oct. 1, 2007, for an additional 180-

day period following the demobilization date for your qualifying service; or

f a member of the National Guard or other reserve component 

of the U.S. armed forces (current or retired) and you are 

called or ordered to active duty under certain circumstances: 

(1) while you are enrolled at least half time at an eligible 

school; (2) within six months of having been enrolled at least 

half time during the 13 months following the conclusion of 

your active duty service; or (3) until you return to enrolled 

student status on at least a half-time basis, whichever is 

earlier.
26 Entrance Counseling Guide

Forbearance 

If you are having temporary problems repaying your Direct Loans

and are not eligible for a deferment, contact your loan servicer to see 

if you are eligible for forbearance. A forbearance is another method 

of temporarily postponing or reducing loan payments. You are never 

charged a fee for applying for a forbearance on your Direct Loans.

You may be granted a forbearance if you meet one of

 the following requirements: 

f You are unable to make your scheduled loan payments for 

reasons including, but not limited to, financial hardship and 

illness. 

f You are serving in a medical or dental internship or residency 

program and you meet specific requirements. 

f The total amount you owe each month for all of the Direct 

Loans you receive is 20 percent or more of your total monthly 

gross income (for a maximum of three years). 

f You are serving in an approved AmeriCorps position. 

f You are performing a teaching service that would qualify for 

loan forgiveness under the requirements of the Teacher Loan 

Forgiveness Program.

f You qualify for partial repayment of your loans under the 

Student Loan Repayment Program, as administered by the 

Department of Defense. 

f You are called to active duty in the U.S. armed forces. 

Note: Interest will continue to be charged during a forbearance on all 

types of loans. If you do not pay this interest, it will be capitalized at 

the end of the forbearance.

Did you know?

You must continue making payments on your federal student loan 

until you have been notified that your deferment or forbearance has 

been granted. If you don’t continue to make payments and your 

application for deferment or forbearance is not approved, your 

federal student loan may become delinquent and may be 

declared in default.
Direct Loans on the Web: www.direct.ed.gov 27

Loan Consolidation

A Direct Consolidation Loan may help make payments more 

manageable by combining several federal student loans into one loan 

with one monthly payment. You need to apply for loan consolidation 

and choose a repayment plan. Depending on the amount of your 

student loans and the repayment plan you choose, you have between 

10 and 30 years to repay your Direct Consolidation Loan. (Private 

education loans are not eligible for consolidation, but they may be 

taken into account when determining your maximum repayment 

period under certain repayment plans.)

The interest rate for Direct Consolidation Loans is fixed. The fixed 

rate is the weighted average of the interest rates on all of the loans 

you consolidate, rounded up to the nearest 1/8 of 1 percent. There is 

no cap on the interest rate on a Direct Consolidation Loan. To learn 

more, visit StudentAid.gov/repay-loans/consolidation.

How can consolidation help me manage my debt?

Loan consolidation can offer you benefits to help manage your 

education debt. Through consolidation, you can

f make lower monthly payments by increasing your repayment 

period, and

f make a single monthly loan payment on one bill to one 

lender.

As with other types of student loans, you may prepay a Direct 

Consolidation Loan without penalty and may change repayment 

plans if you find that your current plan no longer meets your needs.

Did you know?

Periods of deferment and forbearance do not count toward the maximum length of time you have to repay your federal student loans, 

except for periods while on Economic Hardship Deferment, under 

the income-driven repayment plans.

For more information on deferment and forbearance, visit

StudentAid.gov/repay-loans/deferment-forbearance.
28 Entrance Counseling Guide

Is there a downside to consolidation?

Although consolidation can help many students manage 

their monthly payments, there are some cases when a Direct 

Consolidation Loan may not be right for you:

f Any outstanding interest on the loans you consolidate will be 

capitalized immediately upon consolidation. 

f Because Direct Consolidation Loans can have a repayment 

period of up to 30 years, you may be increasing the total 

amount you have to pay in interest.

f If you consolidate Perkins Loans, you lose eligibility for cancellation benefits that are available only for Perkins Loans, 

and you also lose eligibility for Perkins Loan interest subsidy 

benefits.

Loan Forgiveness and Discharge

Under certain circumstances, you may have all or a portion of your 

Direct Loans forgiven or discharged. Contact your loan servicer for 

details. If you are unsure of your loan servicer, please visit 

nslds.ed.gov/nslds_SA for information pertaining to your loans. 

Loan forgiveness programs

Teacher Loan Forgiveness 

You are eligible for Teacher Loan Forgiveness if you teach full time 

at certain elementary or secondary schools or educational service 

agencies that serve low-income students.

This program forgives up to $5,000 (up to $17,500 for highlyqualified teachers in certain subject areas) of your Direct Subsidized 

Loans and Direct Unsubsidized Loans (not Direct PLUS Loans), 

provided you teach for five consecutive years as a highly qualified 

teacher. For more information, visit 

StudentAid.gov/repay-loans/forgiveness-cancellation

and select “Teacher Loan Forgiveness.”

Remember!

Federal loans are not generally included in debts eliminated under 

personal bankruptcy. Contact your loan servicer to discuss federal 

student loan repayment.
Direct Loans on the Web: www.direct.ed.gov 29

Public Service Loan Forgiveness (PSLF)

PSLF forgives all of your remaining Direct Loan debt after you have made 

the 120 qualifying payments. To be eligible for PSLF, you must be

◆ making payments under a qualifying repayment plan; and

◆ working full-time at a qualifying public service organization 

while making 120 qualifying monthly payments.

For more information, visit StudentAid.gov/sa/repay-loans/

forgiveness-cancellation/public-service.

Loan discharge

School-related discharge

Your Direct Loans may be discharged if

◆ your school closed before you could complete your 

program,

◆ your school falsely certified your loan eligibility,

◆ your school signed your name without your authorization,

◆ your school failed to refund all or a portion of your Direct 

Loan to the loan servicer when it was required by law to do 

so, or

◆ your Direct Loan was falsely certified as a result of identity 

theft.

Total and permanent disability discharge

If you become totally and permanently disabled as defined in 

federal regulations and meet certain other requirements, your 

loan may be discharged. For more information, please visit

StudentAid.gov/repay-loans/forgiveness-cancellation

/charts/disability-discharge.

Death

If you die, or if you are a parent borrower of a Direct PLUS 

Loan and the student for whom you obtained the loan dies, 

you may be eligible for a discharge.

Resolving Student Loan Disputes

If you think there might be an issue with your Direct Loan, first 

collect and review all of your loan paperwork, then identify and 

document what you think the problem is. Call your loan servicer to 

discuss the issue. A current listing of federal loan servicers can be 

found at StudentAid.gov/repay-loans/understand/servicers. If you 

don’t know your servicer, see “Identifying Your Loan Servicer” on 

page 3. 
30 Entrance Counseling Guide

The Ombudsman

If you are unable to resolve the issue by working with your loan 

servicer, then, as a last resort, you may contact the Federal Student 

Aid (FSA) Ombudsman Group for assistance. The FSA Ombudsman 

Group works with federal student loan borrowers to resolve disputes 

or issues from an impartial, independent viewpoint. Contact 

information is below: 

U.S. Department of Education

Federal Student Aid

Ombudsman Group

830 First St. NE

4th Floor, UCP-3/MS 5144

Washington, DC 20202-5144

Toll Free Phone: 1-877-557-2575

You can find additional information about the Federal Student Aid 

Ombudsman Group at

StudentAid.gov/repay-loans/disputes/prepare/contact-ombudsman.

If you would like additional information to guide you through the 

problem resolution process, you can visit the section “Resolving 

Disputes” at StudentAid.gov/repay-loans/disputes

Financial Planning and Debt Management

Every successful aspect of your life requires planning, whether it 

is planning a weekend or planning a year-long project. Personal 

financial planning might be the most important of all because it can 

help secure your future.

Budgeting

The first important step in planning your finances is to create a 

monthly budget that includes what you will earn, spend, and owe. 

Having a budget that you stick to will make you much more knowledgeable about your finances and about money in general. 

Knowing exactly where your money is going every month can help 

you avoid falling further into debt and can help you see future financial issues before they arise. If you include the loan payments you 

will have to make under the various repayment options available to 

you, you can determine the repayment plans that offer payments you 

will be able to afford. Then you can choose the repayment plan that 

best helps you meet your goals (e.g., getting out of debt as quickly as 

possible).
Direct Loans on the Web: www.direct.ed.gov 31

Set short- and long-term goals.

f Pay off credit card debt.

f Buy a car without having to borrow.

f Pay off your student loans.

Save. 

f Take advantage of any retirement savings plan offered by your 

employer, especially any matching plan. Increase automatic 

deposits when you get a raise.

f Start a private savings plan. As your budget becomes more 

familiar to you, you will be able to come up with new ways to 

squeeze savings out of your monthly income. Saving just $10 

per week at 3% interest adds up to $6,000 in 10 years. 

f Set up automatic deposits from your paycheck.

Create a monthly spending plan and spend wisely.

f Gather details on your income and expenses. 

f Set monthly spending limits.

f Pay with money you have, and track whether you exceed your 

spending limits.

f Pay your credit card balance in full each month.

f Pay your bills on time.

Take advantage of education-related tax incentives.

f Stay up-to-date on federal tax deductions for educationrelated expenses and on interest you pay on your Direct 

Loans.

f Learn about tax credits for education-related expenses while 

attending school.

Is your budget realistic?

Compare your budget to the amount you actually spend in a given 

month.

You may be surprised how fast small expenses can add up!
32 Entrance Counseling Guide

Helpful Resources 

Keep your loan paperwork in a safe place, including your MPN, 

disclosure notices and billing statements. These provide you with a 

record of the terms of your Direct Loans and how much you have 

borrowed. Copies of your MPN are available on StudentLoans.gov

if you completed your MPN electronically.

If you choose to receive electronic correspondence from the 

U.S. Department of Education, copies of that correspondence, 

including loan disclosure statements, will also be available from 

StudentLoans.gov.

You can find information about all of your federal student loans on 

the National Student Loan Data System (NSLDS) by visiting

www.nslds.ed.gov/nslds_SA/. 

Your servicer can also assist you with questions you may have about 

your loan. If you are unsure of your servicer, see “Identifying Your 

Loan Servicer” on page 3. 
Direct Loans on the Web: www.direct.ed.gov 33

Student Contact Information

You are required to provide your current contact information to your loan 

servicer. If you complete the Department’s entrance counseling online at 

StudentLoans.gov, your contact information will automatically be provided 

to your loan servicer. If you did not (and will not) complete entrance 

counseling online, you may use this form to provide the information to your 

school. You are also required to notify your loan servicer of any changes to 

your contact information after you leave school. You can use this form for 

that as well. You must complete all items except those marked as optional.

Personal (Please print clearly)

Last Name, First Name (Middle Name is Optional) 

Your permanent Home Street Address

City, State, Zip Code/Postal Code, Country

Area Code/Telephone Number Email Address (Optional)

Driver’s License or State ID number (Optional) Issuing State (Optional)

Employer (Optional, if known)

Expected employer (after leaving school) 

Street Address 

City, State, Zip Code/Postal Code, Country

Employer Phone Number

Important: You are required by law to provide your loan servicer 

with the above contact information as well as information on 

your next of kin and two personal references (see back of this 

page), and you must keep the information current.
Student Contact Information

Page 2

Enter next of kin with a U.S. address different from

yours, who will know your whereabouts for at least three years

Last Name, First Name

Street Address

City, State, Zip Code

Area Code/Telephone Number

References: You must list two persons with U.S. addresses different 

from each other and from yours, who will know your whereabouts 

for at least three years.

Last Name, First Name

Street Address

City, State, Zip Code

Area Code/Telephone Number

I have received entrance counseling materials for Direct Loan 

borrowers. I have read and I understand my rights and responsibilities 

as a borrower. I understand that I have a loan from the federal 

government that must be repaid.

Student’s Signature Date 

Student’s Name (Please Print) 

Last Name, First Name

Street Address

City, State, Zip Code

Area Code/Telephone Number

1

2
Your Rights and Responsibilities

as a Borrower

I have the right to

f written information on my loan obligations and information 

on my rights and responsibilities as a borrower;

f a copy of my MPN either before or at the time my loan is 

disbursed;

f a grace period and an explanation of what this means;

f notification, if the Department transfers your loan to another 

servicer without your consent;

f a disclosure statement, received before I begin to repay my 

loan, that includes information about interest rates, fees, the 

balance I owe, and a loan repayment schedule;

f deferment or forbearance of repayment for certain defined 

periods, if I qualify and if I request it;

f prepay my loan in whole or in part anytime without an earlyrepayment penalty; and

f documentation when my loan is paid in full.

I am responsible for

f completing exit counseling before I leave school or drop 

below half-time enrollment;

f repaying my loan according to my repayment schedule even 

if: I do not complete my academic program; I am dissatisfied 

with the education I received; or I am unable to find employment after I graduate;

f notifying my lender or loan servicer if I 

◆ move or change my address,

◆ change my telephone number,

◆ change my name,

◆ change my Social Security number, or

◆ change employers or my employer’s address 

or telephone number changes;

f making monthly payments on my loan after my grace period 

ends, unless I have a deferment or forbearance; and

f notifying my lender or loan servicer of anything that might 

alter my eligibility for an existing deferment or forbearance.