2018

Federal Student Aid

Direct Loan 

Entrance Counseling Guide
U.S. Department of Education

Betsy DeVos

Secretary

Federal Student Aid

James Manning

Acting Chief Operating Officer

Federal Student Aid, an office of the U.S. Department of Education, ensures that all 

eligible Americans benefit from federal financial assistance—grants, loans and work-study programs—

for education beyond high school. By championing the promise of post secondary education, we uphold 

its value as a force for greater inclusion in American society and for the continued vitality of America as a nation.

July 2016, revised August 2017 and July 2018.

All URLs were last accessed on May 30, 2018.

Need More Information, or Have a Comment?

If you are a borrower with questions about the Direct Loan Program or your Direct Loans, you should contact 

your loan servicer, or the websites or the offices described in the content of this publication.

If you have general questions about the federal student aid programs, 

you may call the Federal Student Aid Information Center (FSAIC) at

1-800-4-FED-AID (1-800-433-3243),

TTY (for the hard of hearing) 1-800-730-8913,

Locations without access to 800 numbers 1-334-523-2691. 

You can email FSAIC at studentaid@ed.gov.

2018

Direct Loan Entrance Counseling Guide
i Entrance Guide July 2018

Contents

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

Terms Used in This Guide....................................................................................................................................................... 2

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

Credit Checks and Direct PLUS Loans............................................................................................................................... 7

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

Chart: Periods When Interest Accrues on Direct Subsidized Loans and 

the 150 Percent Limitation ............................................................................................................................................. 8

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

150 Percent Limitation on Direct Subsidized Loan Eligibility .................................................................................. 9

Chart: Do Changes in My Student Status Affect My Paying the Interest That Accrues on 

 My Direct Subsidized Loans?................................................................................................................................................... 10

Be Smart in Your Use of Financial Aid ..............................................................................................................................11

Repayment ................................................................................................................................................................................12

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

Chart: Flexible Repayment Plan Options for Direct Loans .......................................................................................16

Chart: Estimated Monthly Payments for Direct Loans and FFEL Program Loans ...............................................17

Navigating Repayment .........................................................................................................................................................18

Your Repayment Obligation—Avoiding Delinquency and Default......................................................................19 

Allowing Your Loan to Become Delinquent or To Go Into Default Can Have Negative 

Consequences for Many Areas of Your Life .............................................................................................................20

Strategies for Avoiding Delinquency and Default ......................................................................................................21

Deferment..................................................................................................................................................................................23

Forbearance ..............................................................................................................................................................................24

Loan Consolidation.................................................................................................................................................................24

Loan Forgiveness and Discharge.......................................................................................................................................25

Resolving Student Loan Disputes.....................................................................................................................................26

Financial Planning and Debt Management...................................................................................................................27

Your Credit and Identity........................................................................................................................................................28

Financial Literacy.....................................................................................................................................................................29

Helpful Resources....................................................................................................................................................................30

Student Contact Information and Acknowledgment................................................................................................31 

Your Rights and Responsibilities as a Borrower............................................................................................................33
ii Entrance Guide July 2018

Direct Loan Entrance Guide

Important! 

You never have to pay for help with your student loans. 

Free assistance with managing your loans is provided by your federal loan servicer. 

There is a growing number of so-called commercial student loan debt relief companies that 

claim to offer assistance in managing your federal student loans for a fee. Despite what these 

companies claim, there’s nothing a student loan debt relief company can do for you that you 

can’t do yourself for free with the assistance of your federal loan servicer. 

If you ever need assistance, the Department of Education and our federal loan servicers will 

help you at no cost!

For more information on avoiding loan scams, go to

https://StudentAid.ed.gov/sa/repay-loans/avoiding-loan-scams.

If you’re having problems managing your student loans, contact your federal loan servicer or 

the Federal Student Aid (FSA) Ombudsman Group.

Keep this publication and all other documents you receive associated with your Direct Loan in a safe 

place. You will need to refer to them as you progress in and complete your postsecondary education. 
1 Entrance Guide July 2018

About This Guide

The Direct Loan Entrance Counseling Guide provides an overview of the William D. Ford Federal Direct Loan (Direct Loan) 

Program including information you’ll need to successfully repay the federal student 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 by going to https:// StudentLoans.gov/myDirectLoan/whatYouNeed.action?page=mpn 

logging in, scrolling down the page, and selecting either the PDF version of the Master Promissory Note (MPN) for Direct 

Subsidized or Unsubsidized Loans, or the PDF version of the Federal Direct PLUS Loan Master Promissory Note (MPN) for a 

graduate/professional student.

What is Entrance Counseling?

If you have not previously received a Direct Loan or Federal Family Education Loan (FFEL), the federal government requires 

you to complete entrance counseling to ensure that you understand the responsibilities and obligations you are assuming. You 

must complete entrance counseling before you can receive the proceeds of your first Direct Loan.

If you are completing entrance counseling to borrow a loan as an undergraduate student, then the entrance counseling will 

fulfill counseling requirements for Direct Subsidized Loans and Direct Unsubsidized Loans. If you are completing entrance 

counseling to borrow a loan as a graduate or professional student, the entrance counseling will fulfill counseling requirements 

for Direct Unsubsidized Loans and Direct PLUS loans.

Who should complete entrance counseling?

Federal law requires entrance counseling for students who have not previously received a subsidized or unsubsidized loan or 

PLUS loan (graduate/professional students only) under the Direct Loan Program or Federal Family Education Loan (FFEL) 

Program.

What information do I need to complete entrance counseling?

◆ a verified FSA ID;

◆ the name of your school and the tuition, fees, and other charges you will be paying this year; 

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.

◆ the letter you may have received from your school’s financial aid office informing you of the financial aid it is 

offering you. (It is often called an award letter); and

◆ details on your income, financial aid, and living expenses.

How does one complete entrance counseling?

You must complete the Direct Loan Entrance Counseling online at https://StudentLoans.gov/myDirectLoan/index.action. 

Your school may have alternate entrance counseling requirements. Check with your school’s financial aid office to be sure that 

the counseling available on this website satisfies its requirements for entrance counseling.
2 Entrance Guide July 2018

Direct Loan Entrance Guide

Terms Used in This Guide

Note: 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 within this publication. 

 You can find an expanded glossary of terms at https://StudentAid.ed.gov/sa/glossary.

Acceleration—Demand for immediate repayment of your entire federal student loan. The entire unpaid amount of your 

federal student loan becomes due and payable if you

◆ receive loan money, but don’t enroll at least half-time at the school that determined you were eligible to receive 

the federal student loan;

◆ use your loan money to pay for anything other than expenses related to your education at the school that 

determined you were eligible to receive the federal student loan;

◆ make a false statement that causes you to receive a federal loan that you’re not eligible to receive; or

◆ default on your federal student loan.

Aggregate Loan Limit—A limit on the total amount of FFEL or Direct Subsidized Loans and/or 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—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.

FSA ID

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

U.S. Department of Education websites and to electronically sign the FAFSA® form.

You created your FSA ID when you completed and electronically signed the FAFSA® form 

that you used to establish your eligibility for federal student aid. Your Direct Loan is one part 

of that aid.
3 Entrance Guide July 2018

2018

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—The U.S. Department of Education is your loan holder. Your loan servicer will be different than your loan 

holder (see below).

Loan Servicer—An entity that collects payments on a federal student loan, responds to customer service inquiries, and 

performs other administrative tasks associated with maintaining a loan on behalf of a loan holder. A loan servicer performs all 

servicing tasks on behalf of the U.S. Department of Education. A current listing of federal loan servicers for federally held loans 

made through the Direct Loan Program can be found at https://StudentAid.ed.gov/sa/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. 

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.
4 Entrance Guide July 2018

Direct Loan Entrance Guide

The Direct Loan Program

Through the Direct Loan Program, the U.S. Department of Education provides the following loans to eligible students at 

participating schools: 

◆ Direct Subsidized Loans, 

◆ Direct Unsubsidized Loans,

◆ Direct PLUS loans, and 

◆ Direct Consolidation 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. 

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

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 PLUS loans are federal loans that graduate or 

professional students and parents of dependent undergraduate students can use to help pay for college or 

career school.

PLUS loans can help pay for education expenses not 

covered by other financial aid.

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

During certain periods of repayment 

under the Income-Based Repayment, 

Pay As You Earn, and Revised Pay As You 

Earn 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

Most PLUS loans require you to start making payments 

six months after you leave school or drop below halftime enrollment. Graduate and professional student 

borrowers with Direct and FFEL PLUS loans that were 

first disbursed on or after July 1, 2008, receive an 

automatic deferment while in school and a six-month 

deferment after they graduate, leave school, or drop 

below half-time enrollment.

1 If you are a borrower whose first loan is made on or after July 1, 2013, and you exceed the limits described in 150 Percent Limitation on Direct Subsidized Loan Eligibilityon 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.
5 Entrance Guide July 2018

2018

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

◆ 8.25% on Direct Subsidized Loans made to undergraduates1 and Direct Unsubsidized Loans made to 

undergraduates;

◆ 9.50% on Direct Unsubsidized Loans made to graduate students; and

◆ 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.

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

How You Can Find the Interest Rates on Your Loans

You can find the interest rates for your 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 will 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 Guide July 2018

Direct Loan Entrance Guide

Loan Limits in the Direct Loan Program

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 

◆ the length of your program,

◆ your cost of attendance,

◆ your Expected Family Contribution (EFC),

◆ other financial aid you receive, and

◆ 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 Loans and 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 PLUS Loans and Eligibility for Other Financial Aid 

A Direct PLUS Loan can affect your eligibility for other financial aid. Before applying for a Direct 

PLUS Loan, ask your school’s financial aid office about federal grants and work-study, state and 

private grants and scholarships, and Direct Subsidized Loans and Direct Unsubsidized Loans.
7 Entrance Guide July 2018

2018

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 have an adverse credit history, but you manage to qualify for a Direct 

PLUS Loan by obtaining an endorser or by providing satisfactory documentation of extenuating circumstances, you must 

complete special Direct PLUS Loan counseling before you can receive the loan.

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

1All students enrolled in graduate and professional degree programs are considered independent.
8 Entrance Guide July 2018

Direct Loan Entrance 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 13) 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:

◆ For 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.

◆ For 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. 

◆ For schools that measure academic progress in clock hours, half-time 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..

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) 

between 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, Pay As You Earn, and Revised Pay As You Earn plans

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. 
9 Entrance Guide July 2018

2018

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

◆ the expected date and amount of the loan disbursement, 

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

◆ the procedures and time frame for notifying the school that you want to cancel all or a portion of your Direct 

Loan.

150 Percent Limitation on Direct Subsidized Loan Eligibility

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 (150% × 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.

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. 
10 Entrance Guide July 2018

Direct Loan Entrance Guide

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). 

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 you exhausting the 150 percent limit. The chart above provides examples of how changes 

in your circumstances can affect your having to pay the interest that accrues on your Direct Subsidized Loans. 

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 enrolled 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 course work 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
11 Entrance Guide July 2018

2018

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 on 

page 10.

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 form is free! Go to the FAFSA site at https://StudentAid.ed.gov/ to 

complete an application or forecast your eligibility for aid.

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 https://StudentAid.ed.gov/. 

2. Work part time.

■ Explore job opportunities on or off campus.

■ Explore work-study programs, including Federal Work-Study 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 8).

Warning!

Your federal student loan immediately becomes due and payable if your eligibility for the loan was 

established by making a false statement. 
12 Entrance Guide July 2018

Direct Loan Entrance Guide

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

◆ variable interest rates that can exceed 18%,

◆ requiring you to make loan payments while you’re still in school,

◆ penalty fees for paying off your loan early,

◆ requiring an established credit record and using your credit score and other factors to determine the cost of your 

loan, 

◆ requiring a cosigner,

◆ the inability to consolidate private student loans into a Direct Consolidation Loan,

◆ limited options for loan forgiveness, and

◆ limited options for deferments and forbearances. 

Federal student loans usually offer the following advantages over private loans:

◆ Lower interest rates and interest rates that are fixed once the loan is made

◆ The federal government generally will make interest payments on Direct Subsidized Loans while you are in school 

on at least a half-time basis.

◆ No credit check required, except for Direct PLUS loans

◆ Flexible and affordable repayment plans for Direct Loans

◆ The ability to consolidate federal education loans into a Direct Consolidation Loan (See the discussion later under 

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, Direct Unsubsidized Loans, and Direct PLUS loans as a graduate or professional student the 

repayment period begins when your grace period ends (see page 8). Direct PLUS loans for parent borrowers enter repayment 

when they are fully disbursed (paid out), but parents may defer (postpone) making payments while their child is enrolled in 

school at least half-time and for an additional six months after their child graduates, leaves school or drops below half-time 

enrollment.

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. 
13 Entrance Guide July 2018

2018

What determines the rules of my repayment?

You repay your loan according to a repayment plan that you choose through your federal loan servicer. The repayment plan 

you choose determines the amount you pay each month and the number of payments you must make.

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.

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 30 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.

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 23) or forbearance (see page 24). 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.1

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.

Did you know?

You can make payments during your grace period to prevent interest from accruing and reduce the 

amount of interest that may be capitalized when you enter repayment. You can find out how much 

you can save 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.

1

 On Direct Unsubsidized Loans, Direct PLUS loans, and Direct Subsidized Loans on which borrowers have lost their eligibility for the subsidy, interest accrues while borrowers are in school, during a grace period, and periods of 

 forbearance and deferment. That interest may be capitalized (added to the principal amount) when your DirectLoan enters repayment or when the deferment or forbearance period expires.
14 Entrance Guide July 2018

Direct Loan Entrance Guide

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 six-month grace period ends, your Direct Loan 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 halftime 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.

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.

What are my options if my federal student loan payments are high compared to my income?

If your Direct Loan payments are high compared to your income, you may want to repay your loans under an income-driven 

repayment plan.

Most Direct Loans are eligible for at least one income-driven repayment plan. If your income is low enough, your payment 

could be as low as $0 per month.

The Direct Loan Program offers four income-driven repayment plans:

◆ Revised Pay As You Earn Repayment Plan (REPAYE Plan)

◆ Pay As You Earn Repayment Plan (PAYE Plan)

◆ Income-Based Repayment Plan (IBR Plan)

◆ Income-Contingent Repayment Plan (ICR Plan)

These plans are designed to make your student loan debt more manageable by reducing your monthly payment amount. 

If you’d like to repay your federal student loans under an income-driven plan, you need to fill out an application.
15 Entrance Guide July 2018

2018

Repayment Plan Options for 

Direct Loans

Repayment 

Plans

Eligible 

Loans

Monthly Payment 

 and Time Frame

Eligibility and

Other Information

Traditional Repayment Plans

Standard 

Repayment Plan

Direct Subsidized and Unsubsidized Loans

Direct PLUS loans

Direct Consolidation Loans 

Payments are a fixed amount that 

ensures your loans are paid off within 

10 years (within 10 to 30 years for 

Consolidation Loans).

All borrowers are eligible for this plan.

You’ll usually pay less over time than under other 

plans.

Standard Repayment Plan with a 10-year repayment 

period is not a good option for those seeking Public 

Service Loan Forgiveness (PSLF).

Standard Repayment Plan for Consolidation Loans is 

not a qualifying repayment plan for PSLF.

Graduated 

Repayment Plan

Direct Subsidized and Unsubsidized Loans

Direct PLUS loans

Direct Consolidation Loans

Payments are lower at first and then 

increase, usually every two years, and 

are for an amount that will ensure 

your loans are paid off within 10 years 

(within 10 to 30 years for 

Consolidation Loans).

All borrowers are eligible for this plan.

You’ll pay more over time than under the 10-year 

Standard Repayment Plan.

Generally not a qualifying repayment plan for PSLF.

Extended 

Repayment Plan

Direct Subsidized and Unsubsidized Loans

Direct PLUS loans

Direct Consolidation Loans

Payments may be fixed or graduated, 

and will ensure that your loans are 

paid off within 25 years.

You must have more than $30,000 in outstanding 

Direct Loans.

Your monthly payments will be lower than under the 

10-year Standard Repayment Plan or the Graduated 

Repayment Plan.

You’ll pay more over time than under the 10-year 

Standard Repayment Plan.

Not a qualifying repayment plan for PSLF. 

Did you know?

You must repay the full amount of your federal student loan(s), 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.
16 Entrance Guide July 2018

Direct Loan Entrance Guide

Flexible Repayment Plan Options for Direct Loans 

Repayment 

Plans

Eligible 

Loans

Monthly Payment 

 and Time Frame

Eligibility and

Other Information

Income-Driven Repayment Plans

Revised Pay As 

You Earn 

Repayment 

Plan (REPAYE)

Direct Subsidized and 

Unsubsidized Loans

Direct PLUS loans made 

to students

Direct Consolidation 

Loans that do not include 

PLUS loans (Direct or 

FFEL) made to parents

Your monthly payments will be 10 percent of discretionary 

income.

Payments are recalculated each year and are based on your 

updated income and family size. You must update your income 

and family size each year, even if they haven’t changed.

If you’re married, both your and your spouse’s income or loan 

debt will be considered, whether taxes are filed jointly or 

separately (with limited exceptions).

Any outstanding balance on your loan will be forgiven if you 

haven’t repaid your loan in full after 20 years (for loans made 

for undergraduate study) or 25 years (for loans made for 

graduate study).

Any Direct Loan borrower with an eligible loan 

type may choose this plan.

Your monthly payment can be more than the 10-

year Standard Repayment Plan amount.

You may have to pay income tax on any amount 

that is forgiven.

A good option for those seeking Public Service 

Loan Forgiveness (PSLF).

Pay As You 

Earn 

Repayment 

Plan (PAYE)

Direct Subsidized and 

Unsubsidized Loans

Direct PLUS loans made 

to students

Direct Consolidation 

Loans that do not include 

Direct PLUS loans made 

to parents

Your monthly payments will be 10 percent of your discretionary 

income, but never more than you would have paid under the 10-year Standard Repayment Plan.

Payments are recalculated each year and are based on your 

updated income and family size. You must update your income 

and family size each year, even if they haven’t changed.

If you’re married, your spouse’s income or loan debt will be 

considered only if you file a joint tax return.

Any outstanding balance on your loan will be forgiven if you 

haven’t repaid your loan in full after 20 years.

You must be a new borrower on or after 

Oct. 1, 2007, and must have received a 

disbursement of a Direct Loan on or after Oct. 

1, 2011.

You must have a high debt relative to your 

income.

Your monthly payment will never be more than 

the 10-year Standard Repayment Plan amount.

You’ll usually pay more over time than under the 10-year Standard Repayment Plan.

You may have to pay income tax on any amount 

that is forgiven.

A good option for those seeking Public Service 

Loan Forgiveness (PSLF).

Income-Based 

Repayment 

Plan (IBR)

Direct Subsidized and 

Unsubsidized Loans

All PLUS loans made to 

students

Direct Consolidation 

Loans that do not include 

Direct PLUS loans made 

to parents

Your monthly payments will be 10 or 15 percent of your

discretionary income, (depending on when you received your 

first loans), but never more than you would have paid under 

the 10-year Standard Repayment Plan.

Payments are recalculated each year and are based on your 

updated income and family size.

If you’re married, your spouse’s income or loan debt will be 

considered only if you file a joint tax return.

Any outstanding balance on your loan will be forgiven if you 

haven’t repaid your loan in full after 20 or 25 years (depending 

on when you received your first loan).

You must have a high debt relative to your 

income.

Your monthly payment will never be more than 

the 10-year Standard Repayment Plan amount.

You’ll pay more over time than under the 10-year 

Standard Repayment Plan.

You may have to pay income tax on any amount 

that is forgiven.

A good option for those seeking Public Service 

Loan Forgiveness (PSLF).

IncomeContingent 

Repayment 

Plan (ICR)

Direct Subsidized and 

Unsubsidized Loans

Direct PLUS loans made 

to students

Direct Consolidation 

Loans

Your monthly payment will be the lesser of

• 20 percent of your discretionary income, or

• the amount you would pay on a repayment plan with a 

 fixed payment over 12 years, adjusted according to your

 income.

You must update your income and family size each year, even if 

they haven’t changed. 

Payments are recalculated each year and are based on your 

updated income, family size, and the total amount of your 

Direct Loans.

If you’re married, your spouse’s income or loan debt will be 

considered only if you file a joint tax return or you choose to 

repay your Direct Loans jointly with your spouse.

Any outstanding balance will be forgiven if you haven’t repaid 

your loan in full after 25 years.

Any Direct Loan borrower with an eligible loan 

type may choose this plan.

You may have to pay income tax on any amount 

that is forgiven.

A good option for those seeking Public Service 

Loan Forgiveness (PSLF).

Parent borrowers can access this plan by 

consolidating their Parent PLUS loans into a 

Direct Consolidation Loan.
17 Entrance Guide July 2018

2018

Estimated Monthly Payments for 

Direct Loans and FFEL Program Loans 

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

1 Payments 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%.

Information contained on this pages reflects the most current data in the NSLDS database. The data contained on this site is for general 

information purposes and should not be used to determine eligibility, loan payoffs, overpayment status, or tax reporting. Please consult the

financial aid officer at your school or the specific holder of your loans for further information.
18 Entrance Guide July 2018

Direct Loan Entrance 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

◆ fail to begin classes at the school that determined you were eligible to receive your loan,

◆ do not begin classes as at least a half-time student for the loan period certified by your school,

◆ drop below half-time enrollment during the semester or term, 

◆ transfer schools, 

◆ leave school,

◆ graduate,

◆ change your name, address, or phone number,

◆ need help making your monthly federal student loan payments, 

◆ want to change or select a repayment plan, or

◆ are called to active duty with the U.S. armed forces for more than 30 days.

Remember!

Choose the repayment plan that’s right for you. You can select and change your repayment 

plan at any time. Contact your loan servicer to find out what repayment plans are available 

to you.

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.

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 https://StudentLoans.gov/.
19 Entrance Guide July 2018

2018

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.

You can qualify for an interest rate reduction for payments you make automatically 

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.

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: 

◆ Your Direct Loan becomes delinquent the first day after you miss (fail to make) a payment that is due. 

◆ If a Direct Loan is delinquent for 270 days, it goes into default. 

◆ Loans on which payments are delinquent and loans that are in default are reported to national credit agencies. 

Important!

If your account becomes delinquent, your loan servicer will send you warning notices reminding you 

of your repayment obligation. Contact your loan servicer if you think you will have trouble making 

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

Allowing your federal student loans to go into default can increase the amount you will have to pay 

back because fees and penalties will be added to the balance due.
20 Entrance Guide July 2018

Direct Loan Entrance Guide

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? 

◆ You will lose your eligibility for loan deferments and forbearances, and your eligibility to choose from among the 

available repayment plans. 

◆ You will not be eligible for additional federal student aid if you return to school.

What are the consequences for my career and future income? 

◆ You may be required to immediately repay the entire unpaid amount of your loan. This process is known as 

acceleration. 

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

◆ Your loans may be turned over to a collection agency, and you will have to pay additional charges, late fees, and 

collection costs. 

◆ You may have part of your income withheld by the federal government. This is known as wage garnishment. 

◆ 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? 

◆ Your credit score will be damaged. 

◆ You may have difficulty qualifying for credit cards, car loans, or mortgages and will be charged much higher 

interest rates. 

◆ You may have difficulty signing up for utilities, getting car or homeowner’s insurance, or getting a cell phone plan. 

◆ You may have difficulty getting approval to rent an apartment (credit checks may be required).

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.
21 Entrance Guide July 2018

2018

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. 

◆ 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.

◆ 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.

Plan ahead.

◆ Make sure you have a budget for the whole year, not just the next few months.

◆ Keep in mind that you may have large one-time expenses, such as tuition or books, at the start of each year or 

semester.

◆ Be aware that you may receive your funding, such as loan payments or grants, only a few times a year. 

◆ For more on this topic, see the later section Financial Planning and Debt Management on page 27.

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.

◆ If you can, pay any interest that accrues on your Direct Unsubsidized Loans, Direct PLUS Loans, and Direct 

Subsidized Loans that have lost eligibility for the subsidy, while you’re in school. Paying interest as it accrues, 

instead of allowing it to be capitalized (added to the principal balance you must pay once you leave school), 

reduces the amount you will pay over time. 

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

your loan eligibility.

◆ 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.

◆ 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.

Remember!

Federal loans are not generally included in debts eliminated under personal bankruptcy. 

Contact your loan servicer to discuss federal student loan repayment.
22 Entrance Guide July 2018

Direct Loan Entrance Guide

Control your education and non-education expenses.

◆ Which ones are vital and which ones are nice to have? Rank them and reduce the amount you spend on lowerpriority expenses.

◆ Share housing or live at home.

◆ Buy used textbooks or rent textbooks.

◆ Take public transit or carpool.

◆ Lower your cell phone bill.

◆ Choose less expensive entertainment options.

◆ Try adjusting the expenses in your budget and see how it affects your need for income for the year.

◆ As much as possible, pay expenses with money you’ve earned and saved.

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.

Visiting your servicer’s website, using their online payment options, and signing up for electronic correspondence can help 

ensure that you never miss a letter or bill. Open all your mail and read everything about your federal student loan(s). Contact 

your loan servicer before you miss a payment on your federal student loan(s). Your loan servicer can explain your repayment 

options so you can avoid missing a payment. If you are not sure of your loan servicer and for information pertaining to your 

loans, please visit https://nslds.ed.gov/npas/index.htm. 

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. 

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.

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!
23 Entrance Guide July 2018

2018

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.

Deferment

If you experience temporary problems in 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. In most 

cases, 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 Loans 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 

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

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

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

◆ unemployed or unable to find full-time employment (for a maximum of three years); 

◆ experiencing an economic hardship (including serving in the Peace Corp) as defined by federal regulations (for a 

maximum of three years); 

◆ 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; 

◆ 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

◆ 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.
24 Entrance Guide July 2018

Direct Loan Entrance 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: 

◆ You are unable to make your scheduled loan payments for reasons including, but not limited to, financial hardship 

and illness. 

◆ You are serving in a medical or dental internship or residency program and you meet specific requirements. 

◆ 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). 

◆ You are serving in an approved AmeriCorps position. 

◆ You are performing a teaching service that would qualify for loan forgiveness under the requirements of the 

Teacher Loan Forgiveness Program.

◆ You qualify for partial repayment of your loans under the Student Loan Repayment Program, as administered by 

the Department of Defense. 

◆ 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.

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%. There is no cap on the interest rate on a Direct Consolidation 

Loan. To learn more, visit https://StudentAid.ed.gov/sa/repay-loans/consolidation.

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 

https://StudentAid.ed.gov/sa/repay-loans/deferment-forbearance.
25 Entrance Guide July 2018

2018

How can consolidation help me manage my debt?

Loan consolidation can offer you benefits to help manage your education debt. Through consolidation, you can

◆ make lower monthly payments by increasing your repayment period, and

◆ 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.

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:

◆ Any outstanding interest on the loans you consolidate will be capitalized immediately upon consolidation. 

◆ 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.

◆ 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 www.nslds.ed.gov/nslds_SA/ for information pertaining 

to your loans. 

Loan forgiveness programs

Teacher Loan Forgiveness Program

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 highly-qualified 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 https://StudentAid.ed.gov/sa/repay-loans/forgiveness-cancellation/

teacher.

Public Service Loan Forgiveness (PSLF) Program

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 https://StudentAid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service.
26 Entrance Guide July 2018

Direct Loan Entrance Guide

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 

https://StudentAid.ed.gov/sa/repay-loans/forgiveness-cancellation/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 https://StudentAid.ed.gov/sa/repay-loans/understand/servicers. If you don’t know your servicer, see 

“Identifying Your Loan Servicer” on page 3.

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. 

You can find additional information about the FSA Ombudsman Group at https://StudentAid.ed.gov/sa/repay-loans/

disputes/prepare. You can contact the Ombudsman at:

FSA Ombudsman Group

P.O. Box 1843

Monticello, KY 42633

Toll Free Phone: 1-877-557-2575

If you would like additional information to guide you through the problem resolution process, you can visit the section 

“Resolving Disputes” at https://StudentAid.ed.gov/sa/repay-loans/disputes.
27 Entrance Guide July 2018

2018

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).

Set short- and long-term goals.

◆ Pay off credit card debt.

◆ Buy a car without having to borrow.

◆ Pay off your student loans.

Save. 

◆ Take advantage of any retirement savings plan offered by your employer, especially any matching plan. Increase 

automatic deposits when you get a raise.

◆ 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. 

◆ Set up automatic deposits from your paycheck.

Create a monthly spending plan and spend wisely.

◆ Gather details on your income and expenses. 

◆ Set monthly spending limits.

◆ Pay with money you have, and track whether you exceed your spending limits.

◆ Pay your credit card balance in full each month.

◆ Pay your bills on time.

Take advantage of education-related tax incentives.

◆ Stay up-to-date on federal tax deductions for education-related expenses and on interest you pay on your Direct 

Loans.

◆ Learn about tax credits for education-related expenses while attending school.
28 Entrance Guide July 2018

Direct Loan Entrance Guide

Your Credit and Identity

A credit report is a collection of information about you and your credit history, kept by the four major credit bureaus:

◆ Equifax

◆ TransUnion

◆ Innovis

◆ Experian

These credit bureaus track and store information on your credit history, such as

◆ how promptly you pay your bills,

◆ the total amount of debt you owe, and

◆ how many credit cards you have.

Credit bureaus also report your credit score. Lenders use your credit score to decide whether to lend you money and what 

interest rate to charge you. Employers and insurance companies may also check your credit score.

Maintain a good credit score:

◆ Review your credit report. You are entitled to check your credit report once per year for free. Learn more at 

https://www.annualcreditreport.com/index.action.

◆ Contact credit bureaus to correct inaccurate information.

◆ Pay all bills on time, including federal student loan payments.

◆ Keep your debt-to-income ratio as low as possible.

Tips on protecting your credit and identity:

◆ Never give your personal information (e.g., Social Security number, date of birth, account numbers, etc.) to an 

individual or business with which you did not initiate contact. 

◆ Store documents containing your personal or financial information in a safe location and shred unnecessary 

documents.

◆ Protect your passwords.

◆ Monitor your bank and credit card statements.

◆ Avoid costly credit card interest charges by using your credit card to charge only what you can afford to pay off

completely at the end of the month.

◆ Search for the lowest annual interest rate (APR) and fees on credit cards and loans.

◆ Limit the number of credit cards you hold.

◆ Limit other borrowing, and reduce the amount you borrow for large purchases (e.g., a car) by planning ahead and 

saving for those purchases in advance.

◆ Read the fine print in every credit card and loan agreement.
29 Entrance Guide July 2018

2018

Financial Literacy

If you are similar to most first-time Direct Loan borrowers, the Direct Loans you will be receiving to help finance 

your postsecondary education will be your first substantial financial commitment. One of the best ways you can help prepare 

yourself to meet that commitment is to become financially literate (knowledgeable).

What is financial literacy?

The President’s Advisory Council on Financial Capability defines “personal financial literacy” as the ability to use knowledge 

and skills to manage financial resources effectively for a lifetime of financial well-being. Financial literacy includes skills in 

credit and debt management and the knowledge necessary to make financially responsible decisions. 

Federal Student Aid defines “financial literacy” as the ability for postsecondary students to use knowledge and skills to make 

good decisions related to budgeting, borrowing, and repayment strategies.

What are the advantages of being financially literate?

Without the necessary knowledge to properly manage your money, you’re basically living on the edge—which sounds exciting, 

but can have very serious consequences—including personal bankruptcy.

Research shows that financial knowledge correlates with better outcomes. The financially savvy are less likely to

◆ engage in expensive credit card behaviors; 

◆ fall prey to predatory lending and payday loans; 

◆ pay penalties for making late payments and overdrawing their accounts; 

◆ be a victim of financial scams; and

◆ declare personal bankruptcy.

Remember!

Borrowers with higher credit scores are charged lower interest rates than those with lower credit 

scores. (This does not apply to federal student loans.)

For more information on credit reports and credit scores, you can visit the Federal Trade Commission 

(FTC) website at www.ftc.gov/.
30 Entrance Guide July 2018

Direct Loan Entrance Guide

How can I become financially literate?

Many colleges and universities offer courses in financial literacy to their students at minimal or no cost, and many financial 

service businesses offer similar courses for free to their customers (and potential customers). The best way for you to prepare 

to meet your financial obligations and to protect yourself against financial pitfalls is to take advantage of free or low-cost 

courses offered at your school or online by financial services organizations.

If you are interested in learning more about financial literacy, check out the tools and information offered by these government 

and non-profit organizations:

◆ The Treasury Department’s website https://www.mymoney.gov/ serves as the federal government’s one-stop shop 

for federal financial literacy and education programs, grants and other information. The website is available in 

English and Spanish.

◆ The National Financial Education Network is the Treasury Department’s resource center and can be found at 

https://www.treasury.gov/resource-center/financial-education/Pages/commission-index.aspx.

◆ National Endowment for Financial Education (NEFE) at www.nefe.org/ is a private, nonprofit national 

foundation dedicated to empowering financial decision making for individuals and families through every stage 

of life.

◆ American Student Assistance (ASA) at https://www.saltmoney.org/ is a private, nonprofit national foundation 

that provides content, forms and tools to help you make smart financial decisions before, during, and after college.

◆ The Consumer Finance Protection Bureau at https://www.consumerfinance.gov/practitioner-resources/

adult-financial-education/ offers clear, impartial answers to hundreds of financial questions and the information 

you need to make more informed choices about your money.

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 federal student loan(s) and how much you have borrowed. Copies of your MPN are 

available on https://StudentLoans.gov/myDirectLoan/index.action if you completed your MPN electronically.

If you choose to receive electronic correspondence, copies of that correspondence will be available from your loan servicer.

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 don’t know your servicer, see 

Identifying Your Loan Servicer on page 3.
31 Entrance Guide July 2018

2018

Student Contact Information and Acknowledgment

You are required to provide your current contact information to your loan servicer. If you complete entrance

counseling online, 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 the form for that as well. You must complete all items on both the front and back.

Important: You must provide your loan servicer with your contact information as well as information on 

 your next of kin and two personal references. You must keep the information current.

Personal Information (Please print clearly)

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 

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

Expected Employer (after leaving school) 

Employer’s Street Address 

Employer’s City, State, Zip Code/Postal Code, Country 

Employer’s Area Code/Telephone Number 

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 Email Address

Please turn the page over and complete the reverse side. 
32 Entrance Guide July 2018

Direct Loan Entrance Guide

1

2

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

Last Name, First Name

Street Address

City, State, Zip Code

Area Code/Telephone Number Email Address

Student Acknowledgment

	 r I have received entrance counseling materials for Direct Loan borrowers. 

r I have read and I understand my rights and responsibilities as a borrower. 

r I understand that I have a loan from the federal government that must be repaid.

Student’s Signature Date 

Student’s Name (Please Print) 

Student Contact Information and Acknowledgment (page 2)
33 Entrance Guide July 2018

2018

Your Rights and Responsibilities

as a Borrower

I have the right to

◆ written information on my loan obligations and information on my rights and responsibilities as 

a borrower;

◆ a copy of my MPN either before or at the time my loan is disbursed;

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

◆ notification, if the Department transfers my loan to another servicer without my consent;

◆ 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;

◆ deferment or forbearance of repayment for certain defined periods, if I qualify and if I request it;

◆ prepay my loan in whole or in part anytime without an early repayment penalty; and

◆ documentation when my loan is paid in full.

I am responsible for

◆ completing exit counseling before I leave school or drop below half-time enrollment;

◆ 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;

◆ 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;

◆ making monthly payments on my loan after my grace period ends, unless I have a deferment or 

forbearance; and

◆ notifying my lender or loan servicer of anything that might alter my eligibility for an existing 

deferment or forbearance.