Repaying Your Direct Subsidized and Unsubsidized Loans

You will need to start repaying your direct loans when you are no longer enrolled in school at least half-time (6 credit hours). You can choose from several repayment plans with options ranging from 10 years to 25 years to pay off your loan. Whether you have graduated or are taking a break from full-time education, you will receive one six-month grace period on your subsidized and/or unsubsidized loans. When the grace period ends, you will need to make your first payment. Your loan servicer will notify you when the first payment is due.

If you are having trouble making payments, contact your loan servicer immediately to understand your options. If you stop making payments without a deferment or forbearance, your loan could go into default, with serious consequences.

Exit Counseling

Financial Aid exit counseling is for students who have Federal Direct Subsidized and/or Unsubsidized Loans. This procedure helps you to understand how and when you will have to pay back your loan and options you have for deferment, grace periods and consolidations. It also explains interest rates, repayment options and incentives, as well as the terms and conditions for your specific loans.

If you have difficulty repaying your loans, you have options including deferment and a grace period. Students are only offered a grace period once. If you use your grace period and then return to school, repayment begins immediately upon graduation. Use your only grace period wisely.

Important update: Effective for loans first disbursed on or after July 1, 2012, the Department of Education is no longer able to offer repayment incentives to Direct Loan borrowers to encourage on-time repayment of loans, such as reduction in the interest rate or origination fee. As a result, interest rebates will no longer be provided to Direct Loan borrowers at the time of loan disbursement on any Direct Loan with a first disbursement date that is on or after July 1, 2012. The law still allows the department to offer interest rate reductions to Direct Loan borrowers who agree to have payments automatically electronically debited.

Grace Period

The federal government allows for one six-month grace period before making your first student loan payment. If you have an in-school deferment on a Direct Subsidized or Unsubsidized Loan that entered repayment at an earlier date, you must immediately start making payments on the loan, because the six-month grace period has already been used. There is no second grace period.

If you re-enroll in school at least half-time before the end of the six-month grace period, you will receive the full six-month grace period when you stop attending school or drop below half-time enrollment.

Rates and Fees

The Federal Student Aid website has information on current and historical interest rates and fees.

You may be able to reduce your interest rate by making automatic payments through an electronic debit account (EDA). Through an EDA, your bank sends the monthly loan payments automatically from your checking or savings account. Your loan servicer will provide you information about this option when you receive your first bill.

Payment Plans

You have several payment options to choose from allowing you to make monthly payments up to 10, 20 or 25 years. The plan comparison chart on the Federal Student Aid website provides an overview of all plans and more detail about each one. To help you decide on a plan, you can use their Repayment Estimator to calculate your federal student loan payments or you can talk to your loan servicer to discuss the best plan for your situation. If you don't choose a plan, you will automatically be enrolled in the Standard Repayment plan, with fixed payments each month until the loans are paid in full.

Forbearance and Deferment

If you are in default on a loan, you are not eligible for a deferment or forbearance.

A deferment is a postponement of payment on a loan, during which interest does not accrue if the loan is subsidized.

You may qualify for a deferment if you are:

  • Enrolled at least half-time in an eligible postsecondary school or studying full-time in a graduate fellowship program or an approved disability rehabilitation program.
  • Unemployed or meet the rules for economic hardship (limited to 3 years). Serving on active duty during a war or other military operation or national emergency or 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.
  • 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 six months of having been enrolled. You are also eligible for a deferment during the 13 months following the conclusion of your active duty service, or until you return to enrolled student status, whichever is earlier.

In most cases, you need to submit a deferment request to the Direct Loan Servicing Center along with documentation of eligibility for the deferment. If you have gone back to school and the Direct Loan Servicing Center receives enrollment information that shows you are enrolled at least half-time, they will automatically put your loans into deferment and notify you. You do have the option of canceling the deferment and continuing to make payments on the loans.

If you cannot make scheduled loan payments, but do not qualify for a deferment, you may be eligible for forbearance. Forbearance allows you to temporarily stop making payments on your loan, temporarily make smaller payments, or extend the time for making payments. Some common reasons for getting forbearance are illness, financial hardship, or serving in a medical or dental internship or residency. More information can be found by calling your loan servicer.

Under certain circumstances, forbearance is automatic, for instance, during processing of a deferment, forbearance, cancellation, change in repayment plan or consolidation, or if you are involved in a military mobilization or a local or national emergency.

Loan Forgiveness

There are certain circumstances in which your Stafford loans can be forgiven:

  • Teacher Service: If you are a new borrower* and are a full-time teacher in a low-income elementary or secondary school for 5 consecutive years, you may be able to have as much as $17,500 of their subsidized or unsubsidized loans cancelled. For more information, see Student Aid on the Web or call the Direct Loan Servicing Center at 1-800-848-0979.
    • * Students are considered new borrowers if they did not have an outstanding balance on an Federal Family Education Loan (FFEL) or Direct Loan on Oct. 1, 1998, or on the date they obtained an FFEL or Direct Loan after Oct. 1, 1998.
  • Public Service: 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 is owed 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.


If you have multiple federal education loans, you can consolidate them into a single Direct Consolidation Loan. This may simplify repayment if you are currently making separate loan payments to different loan holders, because consolidation will allow for a single monthly payment. Consolidation generally extends the repayment period, resulting in a lower monthly payment. This may make it easier for you to repay your loans. However, you will pay more interest if you extend your repayment period through consolidation since you will be making payments for a longer period of time. There may be tradeoffs, however, so you will want to learn about the advantages and possible disadvantages before consolidating. To learn more, visit the Direct Consolidation Loan website. The Direct Loans Consolidation website also has an online calculator to estimate monthly payments if loans are consolidated.


If you're in a dispute about your federal student loan, contact the Federal Student Aid Ombudsman Group as a last resort.

The Ombudsman Group is dedicated to helping resolve disputes related to Direct Loans, Federal Family Education Loan (FFEL) Program loans, Guaranteed Student Loans, and Perkins Loans. you can contact the Federal Student Aid Ombudsman through one of the following methods:

Via online assistance

Contact Information:

U.S. Department of Education
FSA Ombudsman Group
P.O. Box 1843 Monticello, KY 42633

Phone: 877-557-2575
Fax: 606-396-4821

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