Federal Student Lending

When it comes to college or professional school, whether you’re an adult returning to school or a recent high school graduate, there’s a lot to think about. One of these factors should be how you want to support your education.
Most likely, you’ll need to depend on student loans (money borrowed and repaid with interest*) to help pay for at least some of your education.
Direct Loans (federal government loans) are available to assist you in meeting your educational expenditures. This pamphlet will walk you through the fundamentals of prudent borrowing.

BASICS OF STUDENT LOANS

With careful preparation and knowledge of the fundamentals of student loans, you may assist guarantee that you meet your academic objectives while graduating with a reasonable level of debt.

Understand the Different Types of Direct Loans
The William D. Ford Federal Direct Loan (Direct Loan) Program is administered by the United States Department of Education (ED). Direct Loans come in three varieties that may assist students and parents pay for education beyond high school.

LOAN TYPE	AVAILABLE TO	DETAILS AND UPDATES
Direct Subsidized Loans*	Undergraduate students who have fnancial need	StudentAid.gov/sub-unsub
Direct Unsubsidized Loans*	Undergraduate, graduate, and professional degree students	StudentAid.gov/sub-unsub
Direct PLUS Loans	Graduate and professional degree students, and parents of dependent undergraduate students (you must not have an adverse credit history)	StudentAid.gov/plus

Consider Direct Loans First
Private sources of student loans, such as banks or financial organizations, are also possible. These are often referred to as private student loans. Direct Loans provide many benefits that private loans do not, including: 
• fixed interest rates; 
• flexible repayment plans based on income; 
• loan cancellation, discharge, and forgiveness under certain circumstances (learn more at); 
• loan postponement options, including deferment* and forbearance* if you return to school or experience an economic hardship.

HOW TO GET A DIRECT LOAN

Check Your Eligibility
You must be enrolled (or intend to enroll) at least half-time at a school that participates in the Direct Loan Program to be eligible for a Direct Loan. In addition, you must fulfill standard eligibility criteria for federal student assistance programs.

Complete the FAFSA® Form
Every year, you must fill out the Free Application for Federal Student Aid (FAFSA®) form to apply for Direct Loans.
You’re a student. The FAFSA form is free to complete and submit, and the quickest and simplest method to do so is online at
fafsa.gov

Examine Aid Offers
The schools that you identified on your FAFSA form (and those have accepted you) will send you financial aid offers that contain the kinds and amounts of financial help you may be eligible for. You will be prompted to choose the financial help you want to take.
Accept free money first (scholarships* and grants), then earned money (work-study), and finally borrowed money. Grants, scholarships, and work-study earnings are not required to be repaid (as long as you finish the period for which you were paid). When all other alternatives have been explored, you should consider Direct Loans. Remember that loans are borrowed funds that must be returned with interest, so borrow just what you need.

Complete a Master Promissory Note and Entrance Counseling
Before you can receive a Direct Loan, you’ll have to sign a loan agreement called a Master Promissory Note (MPN).* If
you’re borrowing for the frst time, you’ll also need to receive entrance counseling.* Both requirements can be completed
on StudentAid.g

THINGS TO THINK ABOUT BEFORE APPLYING FOR A LOAN

Direct Loans may help you pay for college, but you must borrow wisely. It is critical that you perform the following before borrowing.
Calculate How Much You Should Borrow
Determine how much money you’ll need to borrow to fund your education costs for each year you’re in school. Any institution that participates in federal student assistance programs is expected to post cost of attendance statistics and a net price* calculation on its website.
The following variables will also have an impact on how much money you need to borrow:

• Where you intend to attend school (the cost of living varies by city)
• •The cost of the school you intend to attend (the more expensive the school, the more likely you will have to borrow)
• •The amount of financial aid your school can offer from its funds (some schools offer significant scholarships and grants to make the net price affordable even if the cost of attendance is high)
• Your estimated graduation date and future borrowing requirements to get you there (a approximate estimate of your overall borrowing needs may be obtained by multiplying the amount you’re borrowing for one year by the duration of your program).

Visit StudentAid.gov/collegecost for ideas on how to cut your college expenditures.

Estimate Your Earning Potential After Graduation
To obtain an idea of how much you could make after graduation, check with your school’s career center for beginning wages of recent graduates in your preferred field(s). Different programs will have varying projected job outcomes, which will impact your earning potential.
Add up your expected total net income (your monthly wage less taxes) and any additional sources of income.

Recognize How Repayment Might Appear
Once you’ve determined your expected monthly loan payment and the total amount you’ll pay for your loan, you’ll want to calculate your prospective income after graduation and the amount you’ll need to borrow to cover your education expenditures. Use the Repayment Estimator at StudentAid.gov/repayment-estimator to obtain an estimate of what your monthly student loan payment will be under various repayment options.

You must repeat this step each time you obtain a student loan to guarantee that your payments are calculated based on your overall loan amount.
You should ensure that you can live comfortably after making your monthly student loan payment. You should strive to restrict your monthly payments to no more than 8% of your monthly income.

Your loan servicer* will contact you and give you with loan payback information if you quit school or drop below half-time enrollment. In most cases, you will be asked to begin paying payments six months after leaving school or dropping below half-time attendance. More information is available at StudentAid.gov/repay.

HOW TO MANAGE YOUR LOANS

Don’t put off reviewing your student loan debt until after you graduate. If you wait, you could discover that you borrowed more than you can afford to repay.

Track Your Borrowing
You can view your federal student aid history at StudentAid.gov/login. If you have private loans, they will not be listed there

Pay Interest As It Comes In
Pay interest on your Direct Loans while you’re in school wherever feasible.

Pay Interest As It Comes In
Pay interest on your Direct Loans while you’re in school, as well as during grace,* deferral, and forbearance periods. You will be able to prevent capitalization* of any unpaid interest as a result of this.

Maintain Contact with Your Loan Servicer

• If you change your address or phone number; 
• change your name (for example, maiden name to married name); or 
• have any change in status that would affect your loan (for example, if you received a deferment but no longer meet the eligibility requirements for the deferment), you must notify your loan servicer.

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