Introduction to Federal Student Loans

Federal student loans are loans that are made by the U.S. Department of Education to help students pay for their education at eligible colleges, universities, or trade schools. Unlike grants or scholarships, which do not have to be repaid, federal student loans must be repaid with interest over a period of time after you graduate or leave school. The amount of money you can borrow depends on your level of study, your financial need, and the cost of attendance at your school. You can use federal student loans to pay for tuition, fees, books, supplies, room and board, transportation, and other education-related expenses. 

To receive federal student loans, you must first complete the Free Application for Federal Student Aid (FAFSA). The FAFSA collects information about your income, assets, family size, and other factors that affect your ability to pay for college. Based on this information, your school will determine your financial need and offer you a financial aid package that may include grants, scholarships, work-study, and federal student loans. You can accept or decline any part of the offer. 

If you accept federal student loans, you will have to sign a Master Promissory Note (MPN), which is a legal document that states your promise to repay the loan and its terms and conditions. You will also have to complete entrance counseling, which is an online session that explains your rights and responsibilities as a borrower. Your school will then disburse the loan funds to your account or directly to you.

You will have a grace period of six months after you graduate or leave school before you have to start repaying your federal student loans. During this time, you will receive information from your loan servicer (the company that handles the billing and other services for your loan) about your repayment options and how to make payments. You can choose from several repayment plans that vary in terms of monthly payment amount, duration, and eligibility for forgiveness or cancellation programs. You can also change your repayment plan at any time if your situation changes.

You must make your payments on time every month to avoid defaulting on your loan, which can have serious consequences such as damaging your credit score, losing eligibility for future financial aid, facing collection actions or lawsuits, and having your wages or tax refunds garnished. If you have trouble making payments, you can contact your loan servicer to request deferment or forbearance (temporary suspension or reduction of payments due to certain circumstances) or apply for income-driven repayment plans (which adjust your payments based on your income and family size). You can also consolidate your federal student loans into one loan with a fixed interest rate and a single monthly payment. 

To qualify for federal student loans, you must meet the following criteria: 

• Be a U.S. citizen or an eligible noncitizen (such as a permanent resident or a refugee). 
• Have a valid Social Security number (unless you are from the Republic of the Marshall Islands, the Federated States of Micronesia, or the Republic of Palau). 
• Have a high school diploma or a recognized equivalent (such as a GED certificate or a homeschool completion credential). 
• Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program at an accredited school that participates in the federal student aid programs. 
• Maintain satisfactory academic progress in your course of study. 
• Not be in default on any federal student loan or owe an overpayment on any federal grant. 
• Demonstrate financial need for Direct Subsidized Loans (but not for Direct Unsubsidized or Direct PLUS Loans).