Direct Loan Basics & 

Entrance Counseling Guide

For Graduate and Professional Student

Direct PLUS Loan Borrowers
DIRECT LOAN BASICS & ENTRANCE 

COUNSELING GUIDE

For Graduate and Professional Student Direct PLUS Loan Borrowers

CONTENTS

TYPES OF DIRECT LOANS

What kinds of loans are available to graduate and professional 

students through the Direct Loan Program? 1

THINKING ABOUT BORROWING?

What are the eligibility requirements? 2

How do I apply for aid? 2

Can I request a lower loan amount than the amount I’ve been offered? 2

GETTING A LOAN

The Master Promissory Note 3

Is there a fee for my Direct Loan? 3

How will I receive my loan money? 3

PAYING BACK YOUR LOAN

When do I have to begin making payments on my loan? 4

How much time will I have to repay my loan, and how much 

will I have to pay each month? 4

Can I get help repaying my loan? 6

Can my loan ever be canceled or discharged? 6

Keep your loan account updated! 7

Delinquency and default 8

Staying out of default 9

Loan consolidation 11

Rights and responsibilities summary checklist Tear out/13

 

This guide provides a general overview of information that you will need to successfully repay the Direct Loans that you are 

receiving to help pay for your college costs. For more detailed information about a specific topic, see the Master Promissory 

Note for your loan or your copy of the Borrower’s Rights and Responsibilities Statement. Much of the information in this 

booklet is a part of entrance counseling, which graduate or professional student borrowers must complete before receiving 

a Direct Subsidized, Unsubsidized, or student PLUS Loan. Throughout this guide the words “we,” “us,” “our” and “the Department” 

refer to the U.S. Department of Education. Also, all references to “loan” in the singular apply to more than one loan as well.

October 2008
Direct Loans on the Web: www.direct.ed.gov 1

Types of Direct Loans

u Direct Subsidized Loans 

Direct Subsidized Loans for graduate and 

professional student borrowers are made 

for up to $8,500 per school year and have 

a fixed interest rate. The actual amount that 

you will receive may be less, depending 

on your financial need and other factors. 

(Financial need is your cost of attendance 

minus your estimated financial assistance 

and your Expected Family Contribution 

or EFC.) 

u Direct Unsubsidized Loans 

Direct Unsubsidized Loans can be used to 

meet your remaining education costs and 

to replace your EFC. The interest rate on 

unsubsidized loans is also a fixed rate. 

Graduate or professional students may 

borrow up to $20,500 per school year, less 

any Direct Subsidized Loan amount you 

receive. (Study in certain health professions 

programs may qualify you for higher limits.)

u Direct PLUS Loans 

Direct PLUS Loans can be made to 

graduate or professional students who 

need to borrow more than the maximum 

subsidized and unsubsidized loan amounts 

to meet education costs that are not covered 

by other financial aid. The interest rate for 

PLUS loans is also a fixed rate. (Parents 

of dependent undergraduate students are 

also eligible for PLUS loans on behalf of 

their children.)

What kinds of loans are available to graduate and 

professional students through the Direct Loan Program?

The Direct Loan Program offers several low-interest loans to graduate and professional students 

who are attending schools participating in the program. The lender is the U.S. Department of 

Education (the Department) rather than a bank or other financial institution.

Direct Loan Interest Rates 

Direct Loan Type Interest

Rate (fixed) When Interest Accrues 

Direct Subsidized Loan 

(graduate & professional students) 

6.8% No interest accrues while you are in school at least 

half-time,* during grace and deferment periods.

Direct Unsubsidized Loan 6.8% Interest begins to accrue with the first disbursement 

of your loan. You are responsible for paying interest 

during all periods.

Direct PLUS Loan

(graduate & professional students)

7.9%

*Check with your school for their definition of half-time enrollment.
2 Entrance Counseling for Student PLUS Borrowers

THINKING ABOUT BORROWING?

What are the eligibility requirements?

You must meet the general eligibility requirements for Federal Student Aid programs, including 

citizenship or status as an eligible permanent resident. You can find out more about these 

requirements in our publication, Funding Education Beyond High School: The Guide to Federal 

Student Aid, or by visiting Student Aid on the Web (www.studentaid.ed.gov).

To receive a Direct Loan (Subsidized, Unsubsidized, or student PLUS) you must be enrolled at 

least half-time at a school that participates in the Direct Loan Program. Graduate or professional 

student PLUS Loan borrowers, must be enrolled in a graduate or professional degree program 

and must not have an adverse credit history (a credit check will be conducted). 

Note: If the credit check shows that you have an adverse credit history, you still may be able 

to have your loan approved if you can get the loan endorsed by someone who does not have 

an adverse credit history. By endorsing your loan, the endorser is agreeing to repay the loan 

if you do not repay it.

How do I apply for aid?

You apply for Direct Loans and other Federal Student Aid by completing the Free Application for 

Federal Student Aid (FAFSA). The information from your application will be shared with the 

schools that you have identified on the FAFSA. After your FAFSA has been processed, the school 

will notify you, usually through an award letter, of the types of aid for which you are eligible. Note 

that some schools have additional application procedures—check with your school’s financial 

aid office to be sure.

Can I request a lower loan amount than the amount 

I’ve been offered?

Yes, you can request less than the amount that the school has offered to you, or decline the loan. 

The school’s aid offer is based on typical expenses for its student population. If you budget carefully, 

you may be able to reduce your costs during your period of attendance and thus reduce your need 

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

The Master Promissory Note

To apply for any Direct Loan, you must complete 

a Master Promissory Note (MPN). The MPN is a

legally binding agreement to repay your loan to the 

Department. In most cases, one MPN can be used 

for loans that you receive over several years of study. 

If you received Direct Subsidized or Unsubsidized 

Loans as an undergraduate student, you may still 

have a valid MPN on file that you may use to take out further subsidized or unsubsidized loans 

as a graduate or professional student, if you are attending a school that participates in the Direct 

Loan Program.

If you are getting a Direct PLUS Loan for the first time as a graduate or professional student, you’ll 

need to complete and sign a PLUS MPN that is separate from the one that you use for your Direct 

Subsidized and Unsubsidized Loans. When you complete a PLUS MPN, you are 

authorizing the Department to perform a credit check. 

Is there a fee for my Direct Loan?

Yes, it is called the origination fee. You pay a fee 

that is a percentage of each Direct Loan that you 

receive. The amount will be shown on the disclosure 

statement that you will receive. Disclosure statements 

tell you the type of loan (Subsidized, Unsubsidized 

and PLUS), the amount of the loan, the amount of 

each disbursement, the fees, and other information 

about the loan. We deduct the fee before you receive 

any loan money, so the loan amount you actually receive 

will be less than the amount you have to repay. 

How will I receive my loan money? 

The school will generally disburse loan money by crediting your school account. It also may give some 

of it to you directly. Your loan money usually will be disbursed in at least 2 installments. You may use 

the loan money you receive only to pay for your education expenses at the school that is giving you the 

loan. Education expenses include such school charges as tuition, room and board, and fees, and such 

indirect expenses as books, supplies, equipment, dependent child care expenses, transportation and 

rental or purchase of a personal computer.

The entire unpaid amount of your loan may become due and payable (on your MPN this 

is called “acceleration”) if it turns out that you are not eligible for the loan. For instance, 

you’ll have to pay back the loan immediately if:

u You don’t enroll at least half-time at the school that gave you the loan.

u You gave false information that made you eligible for the loan.

getting a loan

PHOTO: ©Jupiter Images Corporation, 2008.

The origination fee for a Direct 

PLUS Loan is 4%; however, we offer 

a 1.5% interest rate rebate that 

helps reduce this fee. Once you 

begin repayment, you must make 12

on-time monthly payments to retain 

this benefit.

Check with your school to 

see if you can complete an 

MPN electronically.
4 Entrance Counseling for Student PLUS Borrowers

When do I have to begin making payments on my loan?

Direct PLUS Loans—Repayment begins 60 days after you’ve received the last installment of the 

loan for a school year. However, as long as your school reports to us that you are still enrolled 

at least half-time, we will grant a deferment that allows you to postpone payments while you’re 

continuing your education.* There is no grace period for PLUS loans, so you will be expected 

to begin repayment as soon as your deferment ends. 

Direct Subsidized and Unsubsidized Loans—Repayment begins after a 6-month grace period. 

The grace period begins the day after you cease at least half-time enrollment. 

How much time will I have to repay my loan, and 

how much will I have to pay each month?

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

plan that you choose. Your monthly payment amount will be based on the amount you borrowed 

and the repayment plan you select.

Paying interest on your loan while you are in school 

If you choose not to pay the interest on your Direct Unsubsidized or PLUS Loan 

while you’re in school, we will add it to the unpaid principal amount of your loan 

when you enter repayment. This is called “capitalization.” Capitalization increases 

the unpaid principal balance of your loan, and we will then charge interest on 

the increased principal amount. Check your interest statements, and use the online 

calculators at www.dl.ed.gov to find out how much you’ll pay over the life of 

the loan if the in-school interest is added to your loan balance. If you want to pay 

the interest that accrues on your Direct Unsubsidized Loan or your PLUS Loan while 

you’re in school, contact the Direct Loan Servicing Center at 1-800-848-0979.

PAying Back Your Loan 

* Your account is placed in an in-school deferment status.
Direct Loans on the Web: www.direct.ed.gov 5

Direct Loan student borrowers may choose one of several repayment plans:

u Standard Repayment Plan—You make fixed monthly payments for up to 10 years.

u Graduated Repayment Plan—Your payments start off lower at first and then gradually 

increase, usually every 2 years. The loan must be repaid within 10 years.

u Extended Fixed or Extended Graduated Repayment Plan—You make fixed or 

graduated monthly payments over a period of time not to exceed 25 years. Extended 

repayment plans are available only to new Direct Loan borrowers on or after Oct. 7, 

1998, who currently have an outstanding Direct Loan balance of more than $30,000.

u Income Contingent Repayment Plan—Your monthly payment is adjusted each year 

based on your annual income (and your spouse’s income, if you’re married), your 

family size, and the total amount of your Direct Loans. After 25 years, any unpaid loan 

amount will be forgiven. This plan is currently available only to Direct Subsidized or 

Unsubsidized Loan borrowers. Beginning July 1, 2009, this plan also will be available 

to student Direct PLUS Loan borrowers.

Note that beginning July 1, 2009, a new Income-based Repayment Planwill become available to 

student Direct Loan borrowers (parent Direct PLUS Loan borrowers may not repay their Direct 

PLUS Loan under this plan). Your payment under this plan will be based on your income 

during any period when you have a partial financial hardship. Your monthly payment amount 

may be adjusted annually. The maximum repayment period under this plan may exceed 10 

years. If you meet certain requirements over a specified period of time, you may qualify for 

cancellation of any outstanding balance on your loans.

You can change plans at any time. There’s no penalty if you make payments before they are 

due or pay more than the amount due each month.

You can use the charts on page 10 of this guide to estimate the monthly and total amounts you 

would repay under these plans. You can find more information about these plans by contacting 

the Department’s Direct Loan Servicing Center Online at: www.dl.ed.gov.
6 Entrance Counseling for Student PLUS Borrowers

Can I get help 

repaying my loan? 

Public Service Employment—If you 

are employed in certain public service 

jobs and have made 120 payments on 

your Direct Loans (after Oct. 1, 2007), 

the remaining balance that you owe 

may be forgiven. Only payments made 

under certain repayment plans may 

be counted toward the required 120 

payments. You must not be in default 

on the loans that are forgiven. 

Armed Forces—As part of their 

recruitment programs, the Armed 

Forces may repay your education 

loan if you enlist in the military. For 

more information, contact your local 

military service recruitment office.

Can my loan ever be canceled or discharged?

You must repay your loan even if you don’t complete or can’t find a job related to your program 

of study, or if you are unhappy with the education you paid for with your loan. However, we will 

cancel your loan if you have your loan discharged in bankruptcy, if you die, or if you become 

totally and permanently disabled and meet certain additional requirements. We may discharge 

some or all of your loan if:

	 u The school closed before you completed your program.

	 u The school forged your signature on your promissory note or falsely certified that 

you were eligible to get the loan.

	 u A loan in your name was falsely certified through identity theft.

	 u You withdrew from school but the school didn’t return the portion of your aid award 

that it was required to return under our regulations. (See the written notice on return 

of aid that your school provides to its students.)

PHOTO: ©Jupiter Images Corporation, 2008.
Direct Loans on the Web: www.direct.ed.gov 7

Keep your loan account updated!

One of the most common reasons a loan goes into default is because we don’t have current 

information on a borrower. You must notify the Direct Loan Servicing Center and your school’s 

financial aid office about certain changes. This is your responsibility. 

Until you graduate or leave school, you must notify your school’s financial aid office and 

the Direct Loan Servicing Center if you: 

	 u Change your local address, permanent address or telephone number; 

	 u Change your name (for example, maiden name to married name); 

	 u Do not enroll at least half-time for the loan period certified by the school; 

	 u Do not enroll at the school that certified your loan; 

	 u Stop attending school or drop below half-time enrollment; 

	 u Transfer from one school to another school; or 

	 u Graduate. PHOTO: ©Jupiter Images Corporation, 2008.

Keep in contact!

You must also notify the Direct Loan Servicing Center if any of these 

types of changes listed above happen after you leave school. In 

addition, you must notify the Servicing Center if you have any 

other change that would affect your loan, for example, if your 

eligibility for a deferment has ended.
8 Entrance Counseling for Student PLUS Borrowers

Because we report information about your 

loan to national credit bureaus, making timely 

payments on your loan will help you keep 

a good credit rating. If you think you might 

have a problem making the scheduled payments 

on your loan, contact the Direct Loan Servicing 

Center immediately at 1-800-848-0979. The 

Servicing Center can help you avoid the costs 

and penalties of delinquency and default.

Delinquency and default

If you fail to make a payment, we’ll send 

you a reminder that your payment is late. 

If your account remains delinquent, we’ll 

send you warning notices reminding you 

of your obligation to repay your loan and 

the consequences of default. Late fees may 

be added if your payments are late, and your 

delinquency will be reported to one or 

more national credit bureaus. 

Default occurs when you become 270 days delinquent in making payments on your loan. 

If you default:

	 u The entire unpaid amount of your loan becomes due and payable.

	 u We will report your default to national credit bureaus.

	 u We may sue you, or take all or part of your federal tax refund or other federal 

payments, or garnish your wages so that your employer is required to send us 

part of your salary to pay off your loan, or use a combination of these actions.

	 u You’ll have to pay collection fees and costs, plus court costs and attorney fees.

	 u You’ll lose eligibility for other federal student aid and most other federal benefit programs.

	 u You’ll no longer be eligible for loan deferments (such as deferments while you’re in 

school, unemployed, or experiencing economic hardship).

PHOTO: ©Jupiter Images Corporation, 2008.
Direct Loans on the Web: www.direct.ed.gov 9

Staying out of default

Make sure you take advantage of deferments and forbearances when you need them. 

A deferment is a temporary suspension of your monthly loan payment. There are many different 

types of deferments available. For more information about deferments, contact the Direct Loan 

Servicing Center.

You may qualify for a deferment if:

	 u You return to school at least half-time at a school that’s eligible to participate 

in the Department’s Federal Student Aid programs. 

	 u You are unemployed or meet our rules for economic hardship. 

	 u You are serving on active duty during a war or other military operation or 

national emergency, or you are performing qualifying National Guard duty during 

a war or other military operation or national emergency, and if you are serving 

on or after Oct. 1, 2007, for the 180-day period following the demobilization date 

for your qualifying service. 

	 u You are a member of the National Guard or other reserve component of the U.S. 

Armed Forces (current or retired) and are called or ordered to active duty while 

enrolled at an eligible school, or within 6 months after having been enrolled. 

For this deferment, the deferment period is after the completion of the active 

duty service.

If you don’t qualify for a deferment but are temporarily unable to make loan payments for such

reasons as illness or financial hardship, we may grant you a forbearance. A forbearance also allows 

you to defer loan payments in certain situations, such as during an illness. We charge interest 

on Direct Unsubsidized and PLUS Loans during all periods of deferment and forbearance. Interest 

on Direct Subsidized Loans is charged only during periods of forbearance. 
10 Entrance Counseling for Student PLUS Borrowers

Estimated Direct Loan Repayment Amounts by

Type of Repayment Plan and Debt Amounts

Direct PLUS Loansa

Initial Debt 

When You Enter 

Repayment

Standard Graduated Extendedc

Per Month Total Per Monthb Total Per Month Total

$5,000 $60 $7,248 $42 $7,694 Not Available

10,000 121 14,496 84 15,388 Not Available

25,000 302 36,240 211 38,472 Not Available

50,000 604 72,480 422 76,942 383 114,781

100,000 1,208 144,960 844 153,882 765 229,561

a The estimated payments were calculated using the maximum interest rate for Direct PLUS Loan borrowers, 7.9%.

b

 This is your beginning payment, which may increase.

c You may choose the Extended Repayment Plan only if (1) you had no outstanding balance on a Direct Loan Program loan as of Oct. 7, 

1998, or on the date you obtained a Direct Loan Program loan after Oct. 7, 1998, and (2) you have an outstanding balance on Direct 

Loan Program loans that exceeds $30,000. Under the Extended Repayment Plan, you may choose to make fixed or graduated monthly 

payments. This example shows fixed monthly payments.

Direct Subsidized and Unsubsidized Loansa

Initial Debt

When You 

Entered

Repayment

Standard Extended

Fixedc

Extended

Graduatedc Graduated

Income Contingent b

Income = $25,000

Single Married/HOHd

Per 

Month Total Per Month Total 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 $37 $8,347 $36 $11,088

10,000 115 13,809 N/A N/A N/A N/A 79 14,550 75 16,699 71 22,158

25,000 288 34,524 N/A N/A N/A N/A 198 36,375 186 41,748 178 55,440

50,000 575 69,048 347 104,109 284 112,678 396 72,749 247 93,322 189 122,083

100,000 1,151 138,096 694 208,217 568 225,344 792 145,498 247 187,553 189 170,153

a

 Payments are calculated using a fixed interest rate of 6.8% for Direct Subsidized and Unsubsidized Loans disbursed on or after July 1, 2006.

b Assumes a 5% annual income growth (Census Bureau). 

c This repayment plan is available only to borrowers who have an outstanding balance on Direct Loan Program loans that exceeds $30,000, and 

who had no outstanding balance on a Direct Loan Program loan as of Oct. 7, 1998 or on the date they obtained a Direct Loan Program loan 

on or after Oct. 7, 1998.

d

 HOH is Head of Household. Assumes a family size of two.
Direct Loans on the Web: www.direct.ed.gov 11

Loan consolidation

You may want to combine multiple federal education loans into a single Direct Consolidation Loan, 

which may allow you to extend the repayment period. The interest rate for a Direct Consolidation 

Loan is based on a weighted average of the loans being consolidated. (Note that while extending the 

repayment period may lower your monthly payments, you may pay more interest over the life of the 

Direct Consolidation Loan.) Use the following chart to estimate the monthly and total amounts you 

will repay if you choose to consolidate your federal education loans.

Consolidation Borrowersa

Initial Debt

When You 

Entered

Repayment

Standard Extended

Fixedc

Extended

Graduatedc Graduated

Income Contingent b

Income = $25,000

Single Married/H0Hd

Per 

Month Total Per Month Total 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 $40 $9,414 $38 $12,294

10,000 97 17,461 N/A N/A N/A N/A 69 19,165 80 18,828 77 24,587

25,000 213 51,123 N/A N/A N/A N/A 172 55,491 201 47,069 189 61,588

50,000 394 118,264 394 118,264 344 126,834 344 126,834 247 106,630 189 137,766

100,000 751 270,452 788 236,528 688 253,660 688 286,305 247 187,553 189 170,153

a

 Payments are calculated using the maximum interest rate for consolidation loans, 8.25%.

b

 Assumes a 5% annual income growth (Census Bureau).

c This repayment plan is available only to borrowers who have an outstanding balance on Direct Loan Program loans that exceeds $30,000, and 

 who had no outstanding balance on a Direct Loan Program loan as of Oct. 7, 1998 or on the date they obtained a Direct Loan Program 

 loan on or after Oct. 7, 1998.

d HOH is Head of Household. Assumes a family size of two. 
12 Entrance Counseling for Student PLUS Borrowers

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

Rights and Responsibilities Summary Checklist—

Entrance Counseling for Student PLUS Borrowers 

I understand that I have a right to the following (check all boxes as you read):

q Written information on my loan obligations and information on my rights and responsibilities as a borrower

q A disclosure statement, received before I begin to repay my loan, that includes information about interest 

rates, fees, the balance I owe, and the number of payments

q	 Deferment of repayment or forbearance for certain defined periods, if I qualify and if I request deferment 

or forbearance

q Prepayment of my loan in whole or in part anytime without an early-repayment penalty

q A copy of my MPN either before or at the time my loan is disbursed

q Documentation that my loan is paid in full 

I understand I am responsible for (check all boxes as you read):

q Completing exit counseling before I leave school or drop below half-time enrollment.

q Repaying my loan 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.

q Notifying my school and the Direct Loan Servicing Center if I:

•	 Move or change my address;

•	 Change my name;

•	 Withdraw from school or drop below half-time enrollment;

•	 Transfer to another school;

•	 Fail to enroll or reenroll in school for the period for which the loan was intended;

•	 Change my expected graduation date; or

•	 Graduate.

q Making monthly payments on my loan, unless I have a deferment or a forbearance.

q Notifying the Direct Loan Servicing Center of anything that might alter my eligibility for an existing deferment 

or forbearance.

I have received entrance counseling materials for Direct Subsidized, Unsubsidized, and student 

PLUS 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 Name (Please Print)

Student’s Signature

Student’s Social Security Number

Date

Direct Loans on the Web: www.direct.ed.gov 15

RESOURCES FOR MORE INFORMATION

General information about student aid and applying for student aid:

Federal Student Aid Information Center 

1-800-4-FED-AID

1-800-433-3243

(TTY 1-800-730-8913)

Student Aid on the Web:

www.studentaid.ed.gov

Visit the Web site or call for general information about student aid. From the

Web site, you can access a variety of student aid publications in English and

Spanish, including Funding Education Beyond High School: The Guide

to Federal Student Aid, a comprehensive overview of the financial aid process.

For information about everything related to Direct Loan Repayment:

Borrower Services at the Direct Loan Servicing Center

1-800-848-0979

(TTY 1-800-848-0983)

Direct Loan Servicing Online:

www.dl.ed.gov

For information about Direct Loans:

Direct Loans on the Web:

www.direct.ed.gov

Track your outstanding federal student loans:

National Student Loan Data System (NSLDS) Web site:

www.NSLDS.ed.gov

Note: NSLDS only tracks federal student loans; you will need to track 

any private education loans you may have using your own records.

For everything you need to know about Direct Consolidation Loans, including an 

online application:

Direct Loan Consolidation Center

1-800-557-7392

(TTY 1-800-557-7395)

Direct Loan Consolidation Web site:

www.loanconsolidation.ed.gov