Entrance

COUNSELING GUIDE

FOR DIRECT LOAN BORROWERS
U.S. Department of Education

Arne Duncan

Secretary

Federal Student Aid

James W. Runcie

Chief Operating Officer

December 2013

Revised: July 2014

Online Access:

This publication is available online at 

http://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 April 10, 2014.

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......................................................3

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

Chart: Types of and Interest Rates on Direct Loans ......................4

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

Loan Limits in the Direct Loan Program.....................5

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

Half-Time Enrollment Requirement...............................7

Loan Disbursements...................................................................8

Limitation on Direct Subsidized Loan 

Eligibility for First-Time Borrowers on 

Or After July 1, 2013 ....................................................................8

Chart: Periods When Interest Accrues on Direct Subsidized Loans 

 and the 150% Limitation..........................................................10

Chart: How Changes in My Student Status Affect My Paying 

 the Interest That Accrues on My Direct Subsidized Loans.....................11

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

Repayment........................................................................................................13

Chart: Repayment Plan Options for Direct Loans...............................14

Chart: Estimated Monthly Payments for Direct Loans ..................16

Repayment Incentives................................................................18

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

Your Repayment Obligation—Avoiding 

 Delinquency and Default....................................................19

Strategies for Avoiding 

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

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

Forbearance....................................................................................25

Loan Consolidation..................................................................26

Loan Forgiveness and Discharge......................................27

Resolving Student Loan Disputes.....................................28

Financial Planning and Debt Management ...............29

Helpful Resources.......................................................................31

Your Rights and Responsibilities as 

 a Borrower....................................................................................32

Student Contact Information .......................................................33
ii Entrance Counseling Guide
Direct Loans on the Web: www.direct.ed.gov 1

Welcome to Entrance Counseling

Entrance counseling is a requirement if you’re borrowing for the first 

time under the William D. Ford Federal Direct Loan (Direct Loan) 

Program and have not previously received a loan through the Federal 

Family Education Loan (FFEL) Program. In fact, 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 more detailed information about 

any of the topics covered, see your Master Promissory Note (MPN) 

or your copy of the Borrower’s Rights and Responsibilities Statement. 

You can find this statement at 

www2.ed.gov/offices/OSFAP/DirectLoan/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 

StudentLoans.gov/myDirectLoan/glossary.action.
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 Federal 

Perkins Loan Program, the Federal Direct Loan Program, and the 

Federal Family Education Loan (FFEL) Program.

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

percentage of the outstanding (unpaid) principal balance. 

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

under certain circumstances. 

Loan Forgiveness—The cancellation of a loan debt under various 

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 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 
Direct Loans on the Web: www.direct.ed.gov 3

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

for federally held loans 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). 

Master Promissory Note

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. 

The Direct Loan Program

The U.S. Department of Education provides loans through the Direct 

Loan Program 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. 

Warning!

Your federal student loan immediately becomes due and payable 

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

statement. 

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 Counseling Guide

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. 

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.

Types of and Interest Rates on Direct Loans

(Excluding Direct 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

What is the 

rate of interest 

on loans first 

disbursed on or 

after 7/1/2014 

and before 

7/1/2015? 1

4.66% Undergraduates 

4.66%

Graduates and 

Professional 

Students 6.21% 

7.21%

When does the 

government pay 

my interest? 2

For 6 months after you 

graduate or drop below 

half- time enrollment 

(for Direct Subsidized 

Loans first disbursed on 

or after 7/1/2012 and 

before 7/1/2014, you are 

responsible for paying 

the interest that accrues 

during this period)

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?

6 months after you 

graduate or drop below 

half-time enrollment

6 months after you 

graduate or drop below 

half-time enrollment

6 months after you 

graduate or drop below 

half-time enrollment

1 The interest rate is fixed and will apply for the life of the loan. (See the information on interest 

rates that follows.)

2

 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 8 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 law 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 is made during the period beginning on July 1 of one 

year and ending on June 30 of the following year. Separate loans that 

you receive over the course of your education may have different 

fixed interest rates, depending on when the loan is first disbursed, 

the loan type, and whether you are an undergraduate student or a 

graduate or professional student. The maximum interest rate for 

Direct Subsidized Loans and Direct Unsubsidized Loans made 

to undergraduate students is 8.25%. The maximum interest rate 

for Direct Unsubsidized Loans made to graduate or professional 

students is 9.5%. The maximum interest rate for Direct PLUS Loans 

is 10.5%. You will receive a disclosure statement that notifies you of 

the fixed interest rate for each loan you receive.

Loan Limits in the Direct Loan Program

Annual loan limits in the Direct Loan Program vary depending 

on the borrower’s academic year and whether the borrower is 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 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. 
6 Entrance Counseling Guide

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

Credit Checks and Direct PLUS Loans

Direct PLUS Loans are the only Direct Loans that require a credit check. 

A credit check will be conducted to determine your credit history. 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 the federal 

student loan if you do not.

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

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

Half-Time Enrollment Requirement

You must maintain half-time enrollment to receive Direct Loans and 

maintain in-school status as a federal student loan borrower. For 

Direct Unsubsidized Loans and Direct Subsidized Loans, if you drop 

below half-time enrollment, you lose your in-school status and the 

grace period begins (see box on page 15). Your first payment is due 

at the end of the six-month grace period.

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 6 

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 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.
8 Entrance Counseling Guide

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 percent of 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 percent of 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.
Direct Loans on the Web: www.direct.ed.gov 9

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. However, if you receive a loan for the maximum 

annual loan limit for a period of enrollment that is less than an 

academic year, the loan period counts as one full year against your 

maximum eligibility period regardless of your enrollment status 

(half-time, three-quarter time, or full-time).

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, and not the government, will 

be responsible for paying the interest). 
10 Entrance Counseling Guide

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% 2 Limitation 

Period Before meeting 

the 150% limit

After meeting 

the 150% 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% limit refers to 150% of the published length of your program. 
Direct Loans on the Web: www.direct.ed.gov 11

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 (FAFSASM). 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. 

How 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% 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
12 Entrance Counseling Guide

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 10).

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 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.
Direct Loans on the Web: www.direct.ed.gov 13

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, repayment 

begins when your grace period (see page 15) ends.

What determines the rules of my repayment? 

You repay your loan according to a repayment plan set up and 

agreed upon between you (the borrower) and your lender. 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
14 Entrance Counseling Guide

Repayment Plan Options for Direct Loans

(Excludes Direct PLUS Loans made to parents and Direct Consolidation Loans)

Traditional Repayment Plans

Eligible 

Borrowers

Time to

 Repay

Monthly 

Payment

10-Year 

Standard 

Repayment 

Plan

All Direct Loan borrowers. Up to 10 years. Your payments will be a fixed amount of at 

least $50 per month. 

Graduated 

Repayment 

Plan

All Direct Loan borrowers. 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.

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.

Income-Driven Repayment Plans

IncomeBased 

Repayment (IBR) 

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.

Up to 25 

years, with 

forgiveness of 

any remaining 

balance.

Your payments will be the lesser of

•	15% 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.

Up to 20 

years, with 

forgiveness of 

any remaining 

balance.

Your payments will be the lesser of

•	15% of your discretionary income; or

•	the 10-Year Standard Plan amount.

IncomeContingent 

Repayment 

(ICR) Plan

All Direct Loan borrowers. Up to 25 

years, with 

forgiveness of 

any remaining 

balance.

Your payments will be the lesser of

•	20% of your discretionary income; or

•	the amount you would pay on a 

10-Year Standard Repayment Plan 

multiplied by a percentage based on 

your income.

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 calculator 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.
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 30 years, depending on loan amount, loan 

type, and repayment plan. 

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.

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.

Did you know?

Borrowers with Direct Subsidized Loans and Direct Unsubsidized 

Loans are eligible for a Grace Period that generally begins on the day 

after a borrower graduates, leaves school, or drops below half-time 

enrollment and ends on the day before the repayment period begins. 

A borrower is not required to make payments during the grace 

period. 
16 Entrance Counseling Guide

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% 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%.

Note: Information contained on these pages reflects the most current data in the National Student Loan Data System (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 holder of your loans for 

further information.
Direct Loans on the Web: www.direct.ed.gov 17

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, during your grace period, or 

during a period of deferment (see page 23) or forbearance (see 

page 25). 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.

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.

After you have begun repaying your Direct Loans, any amount 

you pay in addition to your regular required monthly payment 

will first satisfy any outstanding late charges and interest, and then 

reduce your outstanding principal balance. Paying down principal 

faster will reduce the amount of interest that accrues over time and 

therefore lower the total cost of your Direct Loan over time.

To ensure that you pay down your principal faster, be sure to 

instruct your loan servicer that any extra amount you pay is not 

intended to cover future 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.

You can see your actual repayment data.

If you’d like to compare repayment plans online, use the Repayment 

Estimator at StudentLoans.gov. The estimator will use current loan 

data from www.NSLDS.ed.gov. To sign in, you will need your Federal 

Student Aid personal identification number (PIN).
18 Entrance Counseling Guide

Repayment Incentives 

Up-front interest rebate 

You may have received an up-front interest rebate on a Direct 

Subsidized Loan, Direct Unsubsidized Loan, or Direct PLUS Loan 

that was first disbursed before July 1, 2012. The interest rebate is 

equal to a percentage of the amount you borrowed. The disclosure 

statement that you received about your Direct Loan, around the time 

your loan was first disbursed, indicates if you received an up-front 

interest rebate. 

To keep an up-front interest rebate, you must make all of your first 

12 required monthly payments on time (the loan servicer must 

receive each payment no later than six days after the due date). If you 

lose the interest rebate, your loan servicer will add the rebate amount 

back to the principal balance on your Direct Loan account. This will 

increase the amount that you have to repay.

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.

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/. 

If you do not have a loan servicer, you will send your payments to 

your loan holder. Almost all loan servicers allow you to make your 

payment online. 
Direct Loans on the Web: www.direct.ed.gov 19

When should I contact my loan servicer/holder?

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.

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. 

Did you know?

You must inform your loan holder or 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.
20 Entrance Counseling Guide

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 eligibility for loan deferment, forbearance, and 

repayment plans. 

f 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? 

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 You may be denied a professional license (medical, engineering, etc.). 

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. 
Direct Loans on the Web: www.direct.ed.gov 21

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.

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 29.

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. 
22 Entrance Counseling Guide

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.

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.

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

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 www.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.

Deferment

If you are having temporary problems repaying your Direct Loans, 

contact your loan servicer to see if you are eligible for deferment. 

A deferment allows you to temporarily stop making payments on 

your Direct Loans. If you have Direct Subsidized Loans, you are not 

charged interest on those loans during deferment. You are never 

charged a fee for applying for a deferment on your Direct 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. 

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.
24 Entrance Counseling Guide

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 (including Peace Corps 

service) as defined by federal regulations (for a maximum of 

three years); 

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

after October 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 October 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.

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 25

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?

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.
26 Entrance Counseling Guide

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 that is made 

based on an application received on or after July 1, 2013. To learn 

more, visit www.loanconsolidation.ed.gov.

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.

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

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 

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/charts/

teacher.

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.

If you have Perkins Loans and at least one other qualifying loan 

(Direct Loan or FFEL Loan), you may consolidate them into a Direct 

Consolidation Loan to take advantage of PSLF. 

For more information, visit StudentAid.gov/PublicService/.

Remember!

Federal loans are not generally included in debts eliminated under 

personal bankruptcy. Contact your loan servicer to discuss federal 

student loan repayment.
28 Entrance Counseling 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

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, visit www.nslds.ed.gov/nslds_SA/. 
Direct Loans on the Web: www.direct.ed.gov 29

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 for assistance. The FSA Ombudsman 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

If you would like additional information to guide you through the 

problem resolution process, you may also visit the section entitled 

“Resolving Disputes” on the website 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 yearlong 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 

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!
30 Entrance Counseling Guide

possible).

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

attending school.

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. 

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

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

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

loans. 
32 Entrance Counseling Guide

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 I am in my grace period or repayment, no later 

than 45 days after a lender assigns, sells or transfers my loan to 

another lender;

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.
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 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 except 

those marked as optional.

Personal (Please print clearly)

Last Name, First Name (Middle Name is Optional) 

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 different U.S. addresses, 

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