Federal Direct Loan questions

What is the difference between subsidized and unsubsidized loans?

In short, Direct Subsidized Loans have slightly better terms to help out students with financial need.

Here’s a quick overview of Direct Subsidized Loans:

  • Direct Subsidized Loans are available to undergraduate students with financial need.
  • Your school determines the amount you can borrow, and the amount may not exceed your financial need.
  • The U.S. Department of Education pays the interest on a Direct Subsidized Loan
    • while you’re in school at least half-time,
    • for the first six months after you leave school (referred to as a grace period*), and
    • during a period of deferment (a postponement of loan payments).

Here’s a quick overview of Direct Unsubsidized Loans:

  • Direct Unsubsidized Loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need.
  • Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.
  • You are responsible for paying the interest on a Direct Unsubsidized Loan during all periods.
  • If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).

How do I apply for a loan?

To apply for a Direct Loan, you must first complete and submit the Free Application for Federal Student Aid (FAFSA) form. Your school will use the information from your FAFSA to determine how much student aid you are eligible to receive. Direct Loans are generally included as part of your financial aid package.

Are my parents responsible for my educational loans?

No. Parents will only be responsible for your educational loans if you are under 18 and they cosign your loan. In general, you and you alone are responsible for repaying your educational loans. Parents are, however, responsible for the Federal PLUS Loan. This is the only loan where the parent is the “borrower” and not the student.

Who will contact me after I receive my loan?

When you receive your Direct Loan, you will be contacted by your loan servicer (you repay your loan to the loan servicer). Your loan servicer will provide regular updates on the status of your Direct Loan, and any additional Direct Loans that you receive.

When do I have to pay back my loan?

After you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you are required to begin repayment. During this period, you'll receive repayment information from your loan servicer, and you'll be notified of your first payment due date. Payments are usually due monthly. Learn more about repaying your loan.

If I take a leave of absence, do I have to start repaying my loans?

Not immediately. Loans usually have a grace period before you must begin repayment. Grace periods vary in length depending on the type of loan and the lender. When you take a leave of absence you will not have to repay your loan until the grace period is used up. If you use up the grace period, however, when you graduate you will have to begin repaying your loan immediately. It is possible to request an extension to the grace period, but this must be done before the grace period is used up.

What types of loan repayment plans are available?

There are several repayment options available that are designed to meet the individual needs of borrowers. Your loan servicer can help you understand which repayment options are available to you. Generally, you’ll have 10 to 25 years to repay your loan, depending on the repayment plan that you choose. Learn more about your repayment options.

Can my parents, or someone else, help me pay my educational loans?

If someone else wants to help pay off your loan, you can have your billing statements sent to their address. Likewise, if your lender or loan servicer provides an electronic payment service, where the monthly payments are automatically deducted from a bank account, your parents can agree to have the payments deducted from their account. However, your parents are under no obligation to repay your loans. If they forget to pay the bill on time or decide to cancel the electronic payment agreement, you will be held responsible for the payments, not them.

What if I have trouble repaying my loan?

If you are unable to make your scheduled loan payments, contact your loan servicer immediately. Your loan servicer can help you understand your options for keeping your loan in good standing. For example, you may wish to change your repayment plan to lower your monthly payment or request a deferment or forbearance that allows you to temporarily stop or lower the payments on your loan. Learn more about deferment or forbearance options.

Can I cancel a loan if I decide that I don't need it or if I need less than the amount offered?

Yes. Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying your school. After your loan is disbursed, you may cancel all or part of the loan within certain time frames. Your promissory note and additional information you receive from your school will explain the procedures and time frames for canceling your loan.

Can my loan ever be forgiven or discharged?

Under certain conditions, you may be eligible to have all or part of your loan discharged or forgiven (canceled). Find out about loan cancellation, discharge, or forgiveness.

How will I keep track of my loan debt?

Lenders and schools are required to keep you informed of the following:

  • Your accumulating debt.
  • Your eligibility for more loans.
  • Loan amounts that were added to your account.
  • The dates when the loan funds were added to your account.

You will have an opportunity to decline all or part of a new loan within a designated time frame. If you prefer, you may opt out of the multiple-loan process and request a new MPN each year. Taking an active role in approving your loan amounts will help ensure that you borrow no more than you need.

Where can I find information about the student loans I’ve received?

Visit "My Federal Student Aid" to view information about all of the federal student loans and other financial aid you have received and to find contact information for the loan servicer for your loans.