Federal Direct Loan FAQ

If you have a Direct Subsidized Loan, there will be no interest charges while you are enrolled in school at least half-time or during deferments. Interest for this loan begins once you start your repayments. If you have a Direct Unsubsidized Loan, interest begins accruing the day the loan is disbursed to you and continues until the day you fully repay the loan. You may pay the accumulating interest while you are in school, or you can choose to capitalize the interest.
NOTE: There is also a loan origination fee, which is another expense to borrowing a Direct Loan. This fee is about 1% and is charged for both subsidized and unsubsidized loans. This fee is subtracted from the loan when it is disbursed.

After your first Direct Loan disbursement, you will be sent a loan disclosure statement and be assigned a Federal Direct Loan Servicer.  Your loan servicer will contact you after the first disbursement of your Direct Loan. You can learn more about loan servicers here. 

You can find out how much you borrowed by logging in to StudentAid.gov. Enter your FSA ID to access your federal loan information which includes your loan history, repayment status, and loan servicer.

There are multiple repayment plans. The Loan Simulator provided by the Federal Student Aid website may be helpful when determining which option is best for you.

After you graduate, leave school, or drop below half-time enrollment, you have six months before you must begin repayment. This is called a grace period. The interest for Direct Subsidized Loans begins six months after you are out of school. This interest will not accrue during your grace period. The interest for Direct Unsubsidized Loans beings while you are in school and during the grace period.

You can prepay part or all of the unpaid balance on a loan to your servicer at any time without penalty. If you have more than one Direct Loan, be sure to specify which loan you are prepaying.

You can receive a loan cancelation only under special circumstances such as death, total and permanent disability, and an inability to complete a course of study because your school closed. If your school did something wrong or failed to do something which led to legal action being taken against the school, you may be eligible to have your loans cancelled.

If you cannot make a payment on your loan as scheduled, contact your servicer as soon as possible to help you avoid defaulting on your Direct Loans. You may be eligible for deferment or forberance, which are two options for postponing payments. 

Deferment.  There are different deferment options depending on your situation. You might be able to get a student loan deferment if you are

• undergoing cancer treatment;
• experiencing economic hardship;
• in a graduate fellowship program;
• enrolled in school at least half-time;
• performing qualifying military service;
• a post-active duty service member;
• a Parent PLUS borrower with student enrolled in school;
• enrolled in a rehabilitation training program; or
• unemployed.

Keep in mind, there are eligibility requirements for all the types of deferment, and you will generally have to submit documentation to qualify.

Forbearance If you’re not qualified for deferment, but cannot make your loan payments, you may qualify for forbearance. Under forbearance, your payments can be postponed or reduced for a specified period, or you may receive an extension on the time you have to repay your loans. In these cases, the interest will continue to be charged and be added to your principal balance, unless it is paid. You might be able to get a student loan forbearance if you are

• experiencing financial difficulties, such as medical expenses or changes in income;
• serving in AmeriCorps;
• performing service that would qualify you for partial loan forgiveness through the U.S. Department of Defense;
• working in a medical or dental internship or residency;
• serving in the National Guard;
• have student loan payments that are high in relation to your income; or
• working as a teacher to qualify for Teacher Loan Forgiveness.

Keep in mind, there are eligibility requirements for all the types of forbearance, and you will have to submit documentation to apply.

Several things can happen if you fail to make loan payments on time or if you default on your loans, including:

• Not being eligible for further federal student financial aid.
• Damaging your credit rating.
• The federal government taking your federal tax refunds.
• Your total debt may be increased by late fees, court costs, attorney's fees, etc.
• Your employer withholding part of your wages and giving them to the federal government.
• The repossession and selling of your car and other possessions to pay the loans.
• The federal government suing you.

If you are having trouble making your payments, contact your loan servicer. They will work with you to help you from defaulting on your loan.  

In certain situations, you can have your federal student loans forgiven, canceled, or discharged. That means you won’t have to pay back some or all of your loan(s).

For more information, review the Loan Forgiveness information on Studentaid.gov.

There is an Ombudsman Group established by the Department of Education to specifically work with student borrowers to help resolve any loan disputes or problems. For more information on the Omudsman Group visit Studentaid.gov.