You must repay your student loan even if you don’t complete or can’t find a job related to your program of study, or are unhappy with the education you paid for with your loan. However, we will discharge (forgive) your loan if you have your loan discharged in bankruptcy, if you become totally and permanently disabled (additional conditions apply), or if you die.

We may discharge some or all of your loan if your school closed before you completed the program, if the school forged your signature or falsely certified that you were eligible for aid, or if you dropped out of school and the school did not pay a refund of your loan money that it was required to pay under federal regulations. Check the school’s informational materials to see how refund policies apply to federal aid at that school. You may also qualify for forgiveness of some of your loans if you teach full time for five years in certain low-income schools and meet other requirements.

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■ You must be the biological or adoptive parent (or, in some cases, the stepparent) of the student for whom you are borrowing.
■ Your child must be a dependent student who is enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, your child is considered dependent if he or she is under 24 years of age, has no dependents, and is not married, a veteran, a graduate or professional student, or a ward of the court.
■ You cannot have an adverse credit history (a credit check will be done).
■ In addition, you and your child must be U.S. citizens or eligible noncitizens, must not be in default on
any federal education loans or owe an overpayment on a federal education grant, and must meet other general eligibility requirements for the Federal Student Aid programs.

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You apply for a Direct Subsidized and Unsubsidized Loan and other federal student aid by completing a
Free Application for Federal Student Aid (FAFSA). The information from your application will be shared with
the schools that you have identifi ed on the FAFSA. Some schools have additional application procedures—check with your school’s fi nancial aid offi ce to be sure. After your FAFSA has been processed, the school will notify you, usually through an award letter, of the types of aid for which you are eligible.

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If you fail to make a payment on time, you’re considered delinquent on your Direct Loan. If you do not make payments for 270 days, you are considered to be in default. Default has severe and long-lasting consequences, including the following:

• The Department of Education can immediately demand repayment of the total amount due on the loan.
• The Department will attempt to collect the debt and may charge you for the costs of collecting.
• The default will be reported to national credit bureaus. Your credit rating will be damaged, which will make it difficult for you to make purchases such as a car or house.
• You are ineligible for Title IV student aid.
• You are ineligible for deferments.
• The Internal Revenue Service can withhold your federal income tax refund.
• Your wages may be garnished.

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Generally, you’ll have from 10 to 25 years to repay your student loan, depending on the repayment plan that you choose. Your monthly payment amount will be based on how much you borrowed and how long you take to repay. You may choose one of four repayment plans:

• Standard Repayment Plan - Fixed monthly payments for up to 10 years.
• Extended Repayment Plan - Monthly payments for up to 25 years, depending on the total amount of your Direct Loans. There are fixed and graduated (gradually increasing) payment options.
• Graduated Repayment Plan - Payments that start off lower and then gradually increase, usually every two years. You’ll repay your loan in full within 10 years, depending on the total amount of your Direct Loans.
• Income Contingent Repayment Plan - Your monthly payment is adjusted each year based on your annual income (and your spouse’s income, if you’re married), your family size, and the total amount of your Direct Loans. After 25 years, any unpaid loan amount will be forgiven.

You can change plans at any time. There’s no penalty if you make payments before they are due or pay more than the amount due each month. For more information about these plans see the repayment plan page.

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The amount students can borrow each year for subsidized and unsubsidized Stafford loans depends on their grade level and on whether they are dependent students or independent students.

1This includes dependent students whose parents are unable to borrow a PLUS loan.
2The first number is the base amount, which may be any combination of subsidized and unsubsidized loan funds. The second number is the amount of additional unsubsidized loan funds available. Prior to July 1, 2008, there was no additional amount for dependent students, while for independent undergraduate students the amount was $2,000 less than the above numbers (the amount for graduate students is unchanged).

The amount a student can borrow is also limited by the student’s school costs, other financial aid the student may receive, and (in the case of subsidized loans) the student’s expected family contribution.

These are the aggregate (total) limits for all subsidized and unsubsidized Stafford loans, whether solely from the Direct Loan Program or in combination with FFEL Stafford loans:

• $31,000 for a dependent undergraduate student (no more than $23,000 may be subsidized)
• $57,500 for an independent undergraduate student1 (no more than $23,000 may be subsidized)
• $138,500 for a graduate or professional student (no more than $65,000 may be subsidized; includes loans for undergraduate study)

With a PLUS loan, a graduate/professional student or the parent of a dependent student can borrow up to the cost of the student’s education minus other financial aid the student receives.

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• Subsidized Stafford Loans are for students with financial need as determined by federal regulations. No interest is charged while you are in school at least half-time, during your grace period, and during deferment periods.
• Unsubsidized Stafford Loans are for students and are not based on financial need. Interest is charged during all periods.
• PLUS Loans are low-interest loans for graduate/professional students and for parents to help their children who are dependent students meet college costs.
• Consolidation Loans allow students or parents to combine different eligible federal student loans into one loan.

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Direct Loans are low-interest loans for students and parents to help pay for the cost of a student’s education after high school. The lender is the U.S. Department of Education (the Department) rather than a bank or other fi nancial institution.
Direct Loans are:
■ Simple—You borrow directly from the federal government and have a single contact—the Direct
Loan Servicing Center—for everything related to the repayment of your loans, even if you receive
Direct Loans at different schools.
■ Convenient—You’ll have online access to your Direct Loan account information 24 hours a day,
seven days a week at Direct Loans on the Web at: www.dl.ed.gov.
■ Flexible—You can choose from several repayment plans that are designed to meet the needs of almost
any borrower, and you can switch repayment plans if your needs change.

What are the eligibility
requirements?
You must be enrolled at least half-time at a school that participates in the Direct Loan Program, and you must meet general eligibility requirements for the Federal Student Aid programs. You can find more information about these requirements in Funding Education Beyond High School: The Guide to Federal Student Aid (see the Contacts section of this brochure), or by contacting your school’s financial aid office.

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You may want to consider rehabilitating your defaulted loan(s). Advantages of rehabilitation include:

• Your loan(s) will no longer be considered to be in a default status.
• The default status reported by your loan holder to the national credit bureaus will be deleted.
• You will be eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility.
• Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

If you are a Direct Loan Borrower:

To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.

If you are a FFEL loan borrower:

To rehabilitate a FFEL, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) may be purchased by an eligible lending institution.

If you are a Perkins loan borrower:

To rehabilitate a Perkins Loan, you must make twelve (12) on-time, monthly payments of an agreed amount to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your twelve (12) payments. Once you have made the required payments, your loan(s) will continue to be serviced by the Department until the balance owed is paid in full.

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If you’re a teacher serving in a low-income or subject-matter shortage area, it might be possible for you to cancel or defer your student loans.

If you have a loan from the Federal Perkins Loan Program, you might be eligible for loan cancellation for full-time teaching at a low-income school or teaching in certain subject areas. Find out more here. You can also qualify for deferment for these qualifying teaching services. Check with the school that made your Perkins Loan for more information.

If you received a Stafford Loan on or after October 1, 1998, and you teach full time for five consecutive years in a low-income school, you might be eligible to have a portion of the loan cancelled. This applies to FFEL Stafford Loans, Direct Subsidized and Unsubsidized Loans, and in some cases, Consolidation Loans.

Stafford Loan Deferment/Forbearance Provisions

If you have a FFEL or Direct Stafford Loan and you’re teaching full time in a teacher shortage area, you might be eligible for deferment (postponement of repayment) if you borrowed before July 1, 1993. For more information, click here. If you borrowed on or after July 1, 1993, you might be eligible for forbearance (a temporary postponement or reduction). For more information, click here.

If you have a Paul Douglas Teacher Scholarship, you might be eligible for reduced service obligations. (Note: These scholarships were last awarded in 1995-96.) Recipients of the Paul Douglas Teacher Scholarship may reduce the years of service they must perform by teaching in a shortage area.

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