Federal Student Loans Made Through the
June 21, 2021
William D. Ford Federal Direct Loan Program:
Alexandra Hegji
Terms and Conditions for Borrowers
Analyst in Social Policy

The Wil iam D. Ford Federal Direct Loan (Direct Loan) program is the single largest
source of federal financial assistance to support students’ postsecondary educational

pursuits. The U.S. Department of Education estimates that in FY2022, $91.3 bil ion in
new loans wil be made through the program. As of the end of the fourth quarter of FY2020, $1.3 tril ion in
principal and interest on Direct Loan program loans, borrowed by or on behalf of 35.9 mil ion individuals,
remained outstanding.
For many individuals, borrowing a federal student loan through the Direct Loan program may be among their first
experiences in incurring a major financial obligation. Upon obtaining a loan, a borrower assumes a contractual
obligation to repay the debt over a period that may span a decade or more.
Loans were first made through the Direct Loan program in 1994. Since then, Congress has periodical y made
changes to the program and the terms and conditions of loans. Changes have impacted program aspects such as
the availability of loan types, interest rates, loan repayment, loan discharge and forgiveness, and the consequences
of default. Over time, the accumulation of changes—many of which are differential y applicable to borrowers or
loan types—has resulted in a set of loan terms and conditions that are voluminous and complex. Congress may
contemplate making future changes to loan terms and conditions.
This report has been prepared to provide Congress with a comprehensive description of the terms and conditions
and borrower benefits that are applicable to loans made through the Direct Loan program. Emphasis is placed on
discussing loan types, provisions related to borrower eligibility, amounts that may be borrowed, interest and fees,
loan repayment, repayment relief, loan forgiveness benefits, the consequences of default, and the methods used to
ensure borrowers are informed about the terms and conditions of their loans and their obligation to repay them.
Direct Loan Types
Four types of loans are available through the Direct Loan program. Direct Subsidized Loans are available only to
undergraduate students with financial need. Direct Unsubsidized Loans are available both to undergraduate
students and graduate students. Direct PLUS Loans may be borrowed by graduate students and by the parents of
undergraduate students dependent upon them for financial support. Direct Consolidation Loans al ow borrowers
to combine debt from multiple existing federal student loans into a single new loan.
Eligibility and Amounts That May Be Borrowed
Whether an individual may borrow a loan and the amount he or she may borrow are determined by the interaction
of many factors. Eligibility to borrow varies by loan type, borrower characteristics, program level, and class level.
The amount an individual may borrow is subject to annual and aggregate borrowing limits, and federal need
analysis and packaging procedures. Loans are made available in amounts constrained by program rules, but—with
the exception of Direct PLUS Loans—without consideration of a borrower’s ability to repay. Eligibility to borrow
a Direct PLUS Loan depends on an individual’s creditworthiness.
Interest on Direct Loan Program Loans
Procedures for calculating interest vary by loan type, repayment status, and the period during which a loan was
made. In limited circumstances, the federal government subsidizes, or does not charge, interest that would
otherwise accrue. Interest subsidies are mostly limited to Direct Subsidized Loans; however, certain interest
subsidies may be provided on al loan types.
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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Loan Repayment Plans
Numerous repayment plans, each with different payment structures and maximum durations, are available.
Among the various plans, income-driven repayment (IDR) plans cap monthly payments at a specific percentage
of a borrower’s discretionary income. For most repayment plans, monthly payments must cover the interest that
accrues; however, the IDR plans al ow for negative amortization, in which case monthly payments may be for less
than the interest that accrues.
Deferment and Forbearance
Periods of deferment and forbearance offer a borrower temporary relief from the obligation to make monthly
payments. In certain instances, interest subsidies may be provided during periods of deferment; however, with
limited exceptions, interest subsidies are not available during periods of forbearance.
Loan Discharge and Loan Forgiveness
A borrower may be relieved of the obligation to repay his or her loans in certain circumstances. Student loan debt
may be discharged on the basis of borrower hardship (e.g., death, total and permanent disability, school closure)
or may be forgiven following an extended period of repayment according to an IDR plan or completion of a
period of public service.
Loan Default, Its Consequences, and Resolution
If a borrower defaults, the loan becomes due in full and the borrower loses eligibility for many benefits, as wel as
access to other forms of federal student aid. The government also uses numerous means to collect on defaulted
student loan debt. A limited set of options is available for a borrower to bring a defaulted loan back into good
standing.
Loan Counseling and Disclosures
Student borrowers are required to undergo financial counseling, which is designed to provide them with
comprehensive information on the terms and conditions of their loans as wel as their rights and the
responsibilities they assume as borrowers. Loan terms and conditions are specified in a promissory note, which is
a contract that establishes the borrower’s obligation to repay the loan, and in a plain language disclosure
document that uses simplified terms to explain a loan’s terms and conditions and the borrower’s rights and
responsibilities.
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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Introduction
The Wil iam D. Ford Federal Direct Loan (Direct Loan) program makes several types of federal
student loans available to individuals to assist them with financing postsecondary education
expenses. It represents the single largest source of federal financial assistance to support students’
postsecondary educational pursuits. The U.S. Department of Education (ED) estimates that in
FY2022, 13.8 mil ion new loans, averaging $6,632 each and totaling $91.3 bil ion, wil be made
through the Direct Loan program to undergraduate and graduate students, and to the parents of
undergraduate students.1 In addition, ED estimates that 636,000 Direct Consolidation Loans,
averaging $62,063 each and totaling $39.5 bil ion, wil be made to existing borrowers of federal
student loans.2 As of the end of the fourth quarter of FY2020, $1.3 tril ion in principal and interest
on Direct Loan program loans, borrowed by or on behalf of 35.9 mil ion individuals, remained
outstanding.3
This report presents a comprehensive overview of the terms and conditions that apply to federal
student loans made through the Direct Loan program.4 It begins by providing background
information on the history of the Direct Loan program. This is followed by a brief description of
the various types of loans that are offered through the program. The report then presents a
thorough description of the terms and conditions for loans made through the Direct Loan
program. In identifying and describing loan terms and conditions, it focuses on provisions
applicable to loans that are currently being made or that have been made in recent years.
Emphasis is placed on discussing Direct Loan program provisions that are related to borrower
eligibility, amounts that may be borrowed, interest rates and fees, procedures for loan repayment,
repayment relief, the availability of loan discharge and loan forgiveness benefits, and the
consequences of defaulting. The final section of the report provides a summary of the methods
that are used to ensure that borrowers are informed about the terms and conditions of the loans
they obtain and their obligation to repay them.
This report has been prepared as a resource for Members of Congress, congressional committees,
and congressional staff to support them in their legislative, oversight, and representational roles
related to federal student loan policy. It is intended to provide a thorough, but nonexhaustive,
description of loan terms and conditions and borrower benefits. It is not intended to be relied

1 U.S. Department of Education, FY2022 Justification of Appropriation Estimates to the Congress, Volume II, “Student
Loans Overview,” May 26, 2020, p. R-26, https://www2.ed.gov/about/overview/budget/budget22/justifications/r-
sloverview.pdf. In some instances, more than one loan will be borrowed by a student or on the student’s behalf.
2 Ibid.
3 U.S. Department of Education, Office of Federal Student Aid, Federal Student Aid Data Center, “ Federal Student Aid
Portfolio Summary,” FY2020 Q4,
https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls.
4 T his report focuses on describing the terms and conditions of federal student loans made through the Direct Loan
program as specified by the Higher Education Act of 1965 (HEA) and other laws, and their implementing regulations.
In addition to the generally applicable loan terms and conditions that are summ arized in this report, the Higher
Education Relief Opportunities for Students (HEROES) Act authorizes a number of waivers and regulatory flexibilities
that may be used to extend benefits to certain classes of borrowers. T he waivers and flexibilities made a vailable by the
HEROES Act are beyond the scope of this report. For additional information, see CRS Report R42881, Education-
Related Regulatory Flexibilities, Waivers, and Federal Assistance in Response to Disasters and National Em ergencies.
Additionally, in response to the current COVID-19 pandemic, Congress and the Administration provided additional
student loan relief measures to Direct Loan program borrowers. For additional information, see CRS Report R46314,
Federal Student Loan Debt Relief in the Context of COVID-19.
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upon by borrowers as a resource for validating individual eligibility for specific borrower
benefits.
Appendix A to this report contains a directory of resources from which additional information
may be obtained about loans made available through the Direct Loan program. Appendix B
consists of a glossary of terms.5 Appendix C contains a set of tables that present historical
information on borrowing limits, interest rates, and fees that have applied to loans made through
the Direct Loan program.
Background on the Direct Loan Program
The Direct Loan program is authorized under Title IV, Part D of the Higher Education Act of
1965 (HEA; P.L. 89-329, as amended). It was established by the Student Loan Reform Act of
1993 (SLRA), Title IV of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).6 Federal
student loans were first made through the Direct Loan program in 1994.
In the Direct Loan program, loans are made by the government using federal capital (i.e., funds
from the U.S. Treasury), and once made, outstanding loans constitute an asset of the federal
government. Some important characteristics of loans made through the Direct Loan program are
that the federal government assumes the risk for losses that may occur as a result of borrower
default, and that it pays for the discharge of loans in cases of borrower death, total and permanent
disability, and other limited instances. The federal government also assumes the cost of loans that
are not required to be paid in full due to borrowers satisfying criteria that make them eligible to
have a portion or al of the balance of their loans discharged under any of several loan forgiveness
programs. For federal budgeting purposes, the program is classified as a direct loan program,
which is a type of federal credit program for which mandatory spending authority is provided.7
ED’s Office of Federal Student Aid (FSA) is the primary entity tasked with administering the
Direct Loan program. The institutions of higher education (IHEs) that participate in the Direct
Loan program originate loans to borrowers through FSA’s Common Origination and
Disbursement (COD) system. Contractors hired by ED service and collect on the program’s
loans.8
When the Direct Loan program was first established, it was intended to expand gradually and
then ultimately fully replace the Federal Family Education Loan (FFEL) program, a guaranteed
student loan program authorized under Title IV, Part B of the HEA, and through which most
federal student loans were being made.9 The FFEL program had descended from the Guaranteed

5 In the process of describing loans made through the Direct Loan program, numerous terms with precise meanings are
used. When some of these terms are introduced, it is not always practical to fully describe or define the term, as a
subsequent section in the report may be better suited to providing a detailed description. Definitions for selected terms
are presented in the Glossary in Appe ndix B.
6 A Federal Direct Loan Demonstration Program was enacted under the Education Amendments of 1992 ( P.L. 102-
325); however, prior to being fully implemented, the demonstration program was succeeded by the Direct Loan
program that was enacted under P.L. 103-66.
7 Federal credit may be extended in the form of a direct loan or a loan guarantee. For additional information, see CRS
Report R42632, Budgetary Treatm ent of Federal Credit (Direct Loans and Loan Guarantees): Concepts, History, and
Issues for Congress, archived.
8 For more detailed information on the administration of the Direct Loan program, see CRS Report R44845,
Adm inistration of the William D. Ford Federal Direct Loan Progra m .
9 At the time the Direct Loan program was established, federal student loans were also being made through the Federal
Perkins Loan program, authorized by HEA, T itle IV, Part E, and through several smaller health education loan
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Student Loan (GSL) program, which was enacted under Title IV of the HEA in 1965 to enhance
access to postsecondary education for students from low- and middle-income families by
providing them access to low-interest federal student loans. In the FFEL program, loan capital
was provided by private lenders who also originated and serviced loans. The federal government
guaranteed lenders against loss due to factors such as borrower default, death, total and
permanent disability, and in limited instances, bankruptcy. State and nonprofit guaranty agencies
administered the federal guarantee. The federal government was also responsible for making
several different types of payments to lenders and guaranty agencies to support the operation of
the program. The FFEL program was administratively complex and the Direct Loan program was
established with the aims of streamlining the federal student loan delivery system and achieving
cost savings.10
Several years into the implementation of the Direct Loan program, statutory provisions specifying
that it ultimately succeed the FFEL program were repealed by the Higher Education Amendments
of 1998 (P.L. 105-244).11 From 1994 to 2010, the Direct Loan program and the FFEL program
operated side-by-side. During this period, IHEs could elect to participate in the program of their
choice. As this decision was made at the institutional level, the program through which an
individual could borrow federal student loans was dependent upon the program participation
decisions made by the institution a student attended.
During the period while loans were being made through both the FFEL and Direct Loan
programs, from the perspective of the borrower, the terms and conditions of loans offered through
the programs were similar in most respects. However, the degree of similarity varied over time.
Notable differences included certain characteristics of the repayment plans offered and, beginning
in 2008, the availability of the Public Service Loan Forgiveness (PSLF) program only to
borrowers of loans made through the Direct Loan program.12
The authority to make loans through the FFEL program was terminated, effective July 1, 2010, by
the SAFRA Act, Title II of the Health Care and Education Reconciliation Act of 2010 (HCERA;
P.L. 111-152).13 While loans are no longer being made through the FFEL program, as of the end

programs authorized under the Public Health Services Act (PHSA). T hese other loan programs are beyond the scope of
this report. For additional information on the loan programs authorized under the PHSA, see CRS Report R46720,
Student Loan Program s Authorized by the Public Health Service Act: An Overview.
10 See CRS Report 95-110 EPW, The Federal Direct Student Loan Program , October 16, 1996 (available to
congressional clients upon request).
11 During the early years of implementation of the Direct Loan program, concerns were raised about the capacit y of ED
to transition from overseeing lending through the FFEL guaranteed loan program to lending completely through the
Direct Loan program. For additional information, see U.S. Congress, Senate Committee on Labor and Human
Resources, Subcommittee on Education, Arts and Humanities, Oversight of the Direct Student Loan Program , 104th
Cong., 1st sess., March 30, 1995, S.Hrg. 104-28 (Washington: GPO, 1995).
12 When the PSLF program was enacted, it was made available only through the Direct Loan program, with the
expectation that it would encourage increased borrowing through the Direct Loan program at the expense of the FFEL
program. T he legislative history of the College Cost Reduction and Access Act of 2008 (CCRAA; P.L. 110-84) shows
that when the establishment of a program of “loan forgiveness for certain public service jobs” was approved in the
House-passed version of H.R. 2669, it was estimated that the costs of establishing such a program would be offset with
savings that would result from borrowers switching from the FFEL program to the Direct Loan program for purposes of
taking advantage of loan forgiveness benefits. U.S. Congress, House Committee on Education and Labor, College Cost
Reduction Act of 2007, H.R. 2669, 110th Cong., 1st sess., June 25, 2007, H.Rept. 110-210 (Washington: GPO, 2007),
pp. 71-72.
13 For additional information on changes made to the FFEL and Direct Loan programs by the SAFRA Act, see CRS
Report R41127, The SAFRA Act: Education Program s in the FY2010 Budget Reconciliation (available to congressional
clients upon request).
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of the fourth quarter of FY2020, $245.9 bil ion in principal and interest on FFEL program loans,
borrowed by or on behalf of 11.0 mil ion students, remained outstanding and due to be repaid
over the coming years.14
Over the history of the Direct Loan program, Congress has periodical y made changes to loan
terms and conditions. Such changes have often been made as part of comprehensive amendments
to the HEA, which authorizes the Direct Loan program; as part of amendments contained in
budget reconciliation measures; or as part of amendments included in annual appropriations
measures. Congress may wel contemplate making future changes to loan terms and conditions.
Direct Loan Types
The following types of loans are currently made available to borrowers through the Direct Loan
program:
 Direct Subsidized Loans. These loans are available only to undergraduate
students15 who demonstrate financial need. Direct Subsidized Loans are
characterized by having an interest subsidy that applies during an in-school
period when a borrower is enrolled in an eligible program on at least a half-time
basis, during a six-month grace period, during periods of authorized deferment,
and during certain other periods. The Direct Subsidized Loans currently being
made have a fixed interest rate that remains constant for the duration of the loan.
 Direct Unsubsidized Loans. These loans are available to undergraduate
students, graduate students, and professional students, without regard to the
student’s financial need. Direct Unsubsidized Loans general y do not have an
interest subsidy. The Direct Unsubsidized Loans currently being made have a
fixed interest rate that remains constant for the duration of the loan. The interest
rate on loans made to graduate and professional students is higher than the rate
on loans made to undergraduate students.
 Direct PLUS Loans. These loans are available to graduate and professional
students, and to the parents of undergraduate students who are dependent upon
them for financial support. They are made without regard to financial need and
general y do not have an interest subsidy. The Direct PLUS Loans currently
being made have a fixed interest rate, which remains constant for the duration of
the loan; and the interest rate is higher than the rate on both Direct Subsidized
Loans and Direct Unsubsidized Loans.
 Direct Consolidation Loans.16 These loans al ow individuals who have at least
one loan borrowed through either the Direct Loan program or the FFEL program

14 U.S. Department of Education, Office of Federal St udent Aid, Federal Student Aid Data Center, “ Location of Federal
Family Education Loan (FFEL) Program Loans,” FY2020 Q4,
https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/LocationofFFELPLoans.xls. Of this amount,
$159.8 billion in principal and interest on FFEL program loans is held by commercial lenders and guaranty agencies,
while the remaining $86.1 billion is held by ED.
15 Direct Subsidized Loans were once available to graduate and professional students for periods of instruction
beginning prior to July 1, 2012. T he Budget Control Act of 2011 (BCA; P.L. 112-25) eliminated the availability of
Direct Subsidized Loans to graduate and professional students for periods of instruction beginning on or after July 1,
2012.
16 A number of variations of Direct Consolidation Loans were once available. Married individuals who both had federal
student loans were once able to obtain Joint Direct Consolidation Loans for purposes of repaying their combined
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to refinance their eligible federal student loan debt by borrowing a new loan and
using the proceeds to pay off their existing federal student loan obligations,
including loans that are in default. Direct Consolidation Loans may be obtained
without regard to financial need. The Direct Consolidation Loans currently being
made have fixed interest rates, which are determined by calculating the weighted
average of the interest rates on the loans that are consolidated, rounded up the
result to the next higher one-eighth of a percentage point. Upon an individual
obtaining a Direct Consolidation Loan, a new repayment period begins, which
may be for a longer term than applied to the loans original y borrowed.17 A Direct
Consolidation Loan may have a subsidized component18 and an unsubsidized
component.19
Eligibility and Amounts That May Be Borrowed
Eligibility for an individual to borrow a loan through the Direct Loan program and the amount
that he or she may borrow are governed by provisions in the HEA and by policies and procedures

student loan debt. Borrowers of these loans became jointly and severally liable for the debt —even in the event of
divorce. T he authority to make new Joint Direct Consolidation Loans was repealed effective July 1, 2006 , under the
Higher Education Reconciliation Act of 2005 (HERA; P.L. 109-171). Also, Special Direct Consolidation Loans were
available during a limited period from January 17, 2012, through June 30, 2012, to borrowers who had both (1) one or
more student loans made through the FFEL program and held by a commercial lender, and (2) one or more loans made
through either the Direct Loan program or made through the FFEL program and held by ED. Eligible borrowers were
afforded the opportunity to consolidate their commercially held FFEL program loans into a Special Dir ect
Consolidation Loan, and in doing so simplify the repayment of their loans by having them all serviced by a single
entity. A number of special repayment incentives were available to borrowers who consolidated their loans under this
program. U.S. Department of Education, Office of Postsecondary Education, “ Special Direct Consolidation Loan
Information - Short -Term Consolidation Opportunity Offered from January - June 30, 2012,” October 26, 2011,
https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2011-10-26/loans-subject-special-direct-
consolidation-loan-information-short-term-consolidation-opportunity-offered-january-june-30-2012.
17 Loan consolidation is essentially a form of debt refinancing. Under current law, borrowers may use the proceeds of a
Direct Consolidation Loan to pay off debt owed on one or more previously borrowed federal student loans and to begin
a new repayment term of up to 30 years. Doing so may allow borrowers to lower their required monthly payment
amount. Borrowers may not, however, obtain a lower interest rate on their federal student loan debt as a result of loan
consolidation.
18 T he subsidized component of a Direct Consolidation Loan (also referred to as a Direct Subsidized Consolidation
Loan) is the portion of a Direct Consolidation Loan attributable to the following loan types (some of which may have
been made through programs authorized under T itle IV, Part B of the HEA): (1) Subsidized Federal Stafford Loans, (2)
Guaranteed Student Loans, (3) Federal Insured Student Loans, (4) Direct Subsidized Loans, (5) Direct Subsidized
Consolidation Loans, and (6) the portion of a Federal Consolidation Loan that is eligible for interest benefits during a
period of deferment. 34 C.F.R. §685.220(c)(1).
19 T he unsubsidized component of a Direct Consolidation Loan (also referred to as a Direct Unsubsidized Consolidation
Loan) is the portion of a Direct Consolidation Loan attributable to the following loan types (some of which may have
been made through programs authorized under T itle IV, Part B and Part E of the HEA and T itle VII and T itle VIII of
the Public Health Service Act [PHSA]): (1) Federal Perkins Loans, (2) National Direct Student Loans, (3) National
Defense Student Loans, (4) Federal PLUS Loans, (5) Parent Lo ans for Under Graduate Students (PLUS), (6) Direct
PLUS Loans, (7) Direct PLUS Consolidation Loans, (8) Unsubsidized Federal Stafford Loans, (9) Federal
Supplemental Loans for Students (SLS), (10) Direct Unsubsidized Loans, (11) Direct Unsubsidized Consoli dation
Loans, (12) Auxiliary Loans to Assist Students (ALAS), (13) Health Professions Student Loans (HPSL), (14) Loans for
Disadvantaged Students (LDS), (15) Health Education Assistance Loans (HEAL), (16) Nursing Loans, and (17) t he
portion of a Federal Consolidation Loan that is ineligible for interest benefits during a period of deferment. 34 C.F.R.
§685.220(c)(2). Furthermore, the term Direct PLUS Consolidation Loan refers to the portion of a Direct Consolidation
Loan attributable to (1) Direct PLUS Loans, (2) Direct PLUS Consolidation Loans, (3) Federal PLUS Loans, and (4)
Parent Loans for Undergraduate Students that were repaid by the Direct Consolidation Loan.
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implemented by ED. Al loan types except Direct PLUS Loans are made available without
consideration of a borrower’s ability to repay the loan. Eligibility to borrow a Direct PLUS Loan
depends on an individual’s creditworthiness.
The section that follows identifies and describes factors that determine an individual’s eligibility
to borrow one or more types of loans made available through the Direct Loan program. This is
followed by a section that describes policies and procedures for determining amounts that may be
borrowed.
Factors Affecting Eligibility to Borrow
For an individual to be eligible to borrow a loan through the Direct Loan program, the student
borrower, or the student on whose behalf a parent borrower would obtain a Direct PLUS Loan,
must meet a number of eligibility requirements. A broad set of general eligibility criteria applies
to students who may benefit from a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a
Direct PLUS Loan. An additional set of requirements applies specifical y to applicants seeking to
borrow a Direct PLUS Loan. Stil other requirements apply to applicants for Direct Consolidation
Loans. Eligibility to borrow various types of loans is also affected by a student’s dependency
status, program level (e.g., undergraduate, graduate, or professional), undergraduate class level,
financial need, cost of attendance (COA)20 of the academic program, estimated financial
assistance (EFA) he or she expects to receive from other sources, and certain other factors.
Factors that affect eligibility to borrow through the Direct Loan program are discussed below.
General Student-Based Eligibility Criteria
In general, for a student to be eligible to borrow a Direct Subsidized Loan, a Direct Unsubsidized
Loan, or a Direct PLUS Loan, or for a parent to borrow a Direct PLUS Loan on behalf of a
student, the student must
 be enrolled on at least a half-time basis as a regular student in either an eligible
program at a participating eligible IHE, a preparatory program necessary for
enrollment in an eligible program (for up to one year), or a teacher certification
program;21
 not be incarcerated;
 be a U.S. citizen or national, U.S. permanent resident, or other eligible
noncitizen;22
 maintain satisfactory academic progress as defined by the school;23

20 Cost of attendance is defined at HEA §472. COA is determined by the IHE attended and generally includes tuition
and fees, an allowance for books, supplies and transportation, room and board, and other expenses related to school
attendance.
21 Loans may be obtained through the Direct Loan program for purposes of financing postsecondary expenses a t both
domestic and foreign institutions. T he Direct Loan program is the only HEA, T itle IV program that makes federal
student aid available for purposes of enrolling in a foreign institution.
22 Individuals who are citizens of the Freely Associated States (the Federated States of Micronesia, the Republic of
Palau, and the Republic of the Marshall Islands) are ineligible to borrow Direct Loans. 34 C.F.R. §668.33(b).
23 See also 34 C.F.R. §668.34. For example, in part, “if a student is enrolled in an educational program of more than
two academic years, the policy specifies that at the end of the second academic year, the student must have a GPA of at
least a ‘C’ or its equivalent, or have academic standing consistent with the institution’s requirements for graduation.”
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 not be in default on a federal student loan, nor owing a refund on a grant or loan
made under HEA, Title IV without having made satisfactory repayment
arrangements;
 have on file at the IHE attended a statement of educational purpose stating that
the loan wil be used solely for educational expenses;
 meet applicable Selective Service System registration requirements;24 and
 not have been convicted of a federal or state offense of sel ing or possessing
il egal drugs that occurred during a period of enrollment for which the student
was receiving federal student aid, unless eligibility is regained under specified
circumstances including the passage of specified periods of time or the student’s
completing a qualified drug rehabilitation program.25
The FAFSA Simplification Act of 2020 (Title VII of Division FF of P.L. 116-260, Consolidated
Appropriations Act, 2021) eliminated the latter two restrictions on aid eligibility. Beginning with
the 2021-2022 award year, the latter two restrictions wil no longer impact a student’s eligibility
for Direct Loans.26
Student Dependency Status
For purposes of awarding federal student aid, dependency status determines whether a student is
deemed to be dependent upon his or her parents’ financial support, or is independent of their
support. Dependency status is determined by a student’s responses to questions on the Free
Application for Federal Student Aid (FAFSA), which he or she must complete and submit to ED
when applying for federal student aid.
A student is deemed to be an independent student if he or she
 is, or wil be, 24 years of age or older before January 1 of the award year;
 is married at the time of completing the FAFSA;
 wil be a graduate or professional student at the start of the award year;
 is currently serving on active duty in the Armed Forces for other than training
purposes;
 is a veteran of the Armed Forces;
 has legal dependents other than a spouse;
 was an orphan, in foster care, or a ward of the court, at any time since age 13;
 is an emancipated minor or is in legal guardianship as determined by a court of
competent jurisdiction in the individual’s state of legal residence, or was when
reaching the age of majority;

24 For additional information on the Selective Service System, see CRS Report R44452, The Selective Service System
and Draft Registration: Issues for Congress.
25 For additional information, see U.S. Department of Education, Office of Federal Student Aid, 2020-2021 Federal
Student Aid Handbook [hereinafter FSA Handbook], vol. 1, pp. 1-29–1-31.
26 IHEs may implement these changes as early as June 17, 2021, but must implement them no longer than 60 days
thereafter. U.S Department of Education, Early Implementation of the FAFSA Simplification Act’s Removal of
Requirements for T itle IV Eligibility Related to Selective Service Registration and Drug-Related Convictions, 86 Federal
Register, 32252-32253, June 17, 2021.
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 is an unaccompanied youth who is homeless, or self-supporting and at risk of
being homeless; or
 is a student for whom a financial aid administrator makes a documented
determination of independence by reason of other unusual circumstances or
based upon a documented determination of independence that was previously
made by another financial aid administrator in the same award year.27
A student who does not satisfy any of the criteria to qualify as an independent student is classified
as a dependent student.28
Dependency status determines the types of loans available to be borrowed by students and their
families, which in turn affects the amounts that may be borrowed. Of particular importance with
regard to undergraduate students is the fact that Direct PLUS Loans—the loans with the most
flexible borrowing limits—are available to the parents of dependent students but not to the
parents of independent students. However, independent undergraduate students are extended
higher personal borrowing limits than are dependent students.29 These differential borrowing
limits are predicated on the expectation that the postsecondary education expenses of dependent
students wil be financed by some combination of students and their parents, whereas the
postsecondary education expenses of independent students wil typical y be financed without
parental assistance.
Dependency status also determines which individuals in a student’s family wil have their income
and assets considered in need analysis calculations for the student (discussed below). Need
analysis calculations for a dependent student are based on the income and assets of both the
student and the student’s parents,30 whereas need analysis calculations for an independent student
are based on the income and assets of the student (and if applicable, the student’s spouse).
Program Level
The academic level of the program in which a student is enrolled impacts both the types of loans
that he or she may borrow and certain terms and conditions of such loans.
Undergraduate Studies
Undergraduate students may borrow Direct Subsidized Loans and Direct Unsubsidized Loans,
and the parents of undergraduate students who are dependent upon them for financial support
may borrow Direct PLUS Loans on the student’s behalf. Direct PLUS Loans may not be

27 HEA, §480(d); FSA Handbook, Application and Verification Guide, pp. AVG-26 – AVG-27.
28 34 C.F.R. §668.2(b).
29 Dependent undergraduates may be eligible to borrow additional amounts in the form of Direct Unsubsidized Loans
up to the larger loan limits available to independent undergraduate students (displayed in Table 1) in instances where a
financial aid administrator determines that the student’s parents are unable to borrow Direct PLUS Loans due to certain
exceptional circumstances. Exceptional circumstances may apply in instances of a student whose parent is unable to
qualify to borrow Direct PLUS Loans due to having an adverse credit history, whose parent’s only income is from
public assistance or disability benefits, whose parent is incarcerated, whose parent’s whereabouts are unknown, or
whose parent is not a U.S. citizen or permanent resident.
30 Parental income and assets can be defined in a variety of ways in cases where a student’s parents are not married to
each other. For additional information, see CRS Report R44503, Federal Student Aid: Need Analysis Form ulas and
Expected Fam ily Contribution.
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borrowed by undergraduate students nor by parents on behalf of undergraduate independent
students.
Graduate and Professional Studies
Graduate and professional students may borrow Direct Unsubsidized Loans and Direct PLUS
Loans. To be eligible to borrow as a graduate or professional student, an individual must be
enrolled in a program above the baccalaureate level or in one that leads to a first professional
degree, must have completed at least the equivalent of three years of full-time study either prior
to entering the program or as part of it, and must not be concurrently receiving Title IV aid as an
undergraduate student.31 Graduate and professional students, al of whom are classified as
independent students, are extended higher borrowing limits than undergraduate students.
Undergraduate Class Level
For undergraduates, a student’s class level determines the maximum amount the student may
borrow on an annual basis. A student’s class level is based on his or her progression according to
the academic standards of the school the student attends. For undergraduate students, progression
to a higher grade level for purposes of awarding a loan through the Direct Loan program does not
necessarily correspond to the start of a new academic year (AY). For instance, a student who
continues to make satisfactory academic progress but does not progress to the next grade level
due to having completed an insufficient number of credits could borrow a loan through the Direct
Loan program more than once as a first-year student. Once the student accrues enough credits to
progress to the next higher grade level, he or she would become eligible for the higher borrowing
limits available to second-year students, and so on.32
Financial Need
Direct Subsidized Loans are need-based and may only be borrowed by students who demonstrate
having financial need according to federal need analysis procedures. Applicants seeking to
borrow Direct Subsidized Loans must undergo a need test through which the expected family
contribution (EFC) to be made by the student, and, if applicable, the student’s family, toward
paying the student’s postsecondary education expenses is determined on the basis of the financial
resources available to the student.33 According to federal student aid need analysis procedures, the
sum of the student’s EFC and the amount of estimated financial assistance (EFA) he or she
expects to receive from sources other than programs authorized under Title IV of the HEA is
subtracted from the estimated cost of attendance (COA) of the institution the student attends to
determine the amount of need-based financial aid that he or she is eligible to receive.
Additional procedures are followed to determine the composition of the student’s federal student
aid package. For instance, undergraduate students must receive a determination of their eligibility
to receive a Federal Pel Grant34 (a form of need-based aid available only to undergraduates) prior
to being certified by their school as being eligible to borrow a Direct Subsidized Loan. This
procedure is designed to first provide maximum grant aid to needy students before they incur

31 34 C.F.R. §668.2(b).
32 For additional information on the impact of grade-level progression on annual borrowing limits, see FSA Aid
Handbook, vol. 3, Chapter 5—Direct Loan Periods and Amounts.
33 For additional information on need analysis, see CRS Report R44503, Federal Student Aid: Need Analysis Formulas
and Expected Fam ily Contribution.
34 For additional information on the Federal Pell Grant program, see CRS Report R45418, Federal Pell Grant Program
of the Higher Education Act: Prim er.
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student loan debt. The amount a student may borrow with a Direct Subsidized Loan may not
exceed the amount of the student’s unmet financial need after other forms of need-based federal
student aid available under HEA, Title IV have been awarded. (For additional information, see
the section on “Limits on Borrowing Determined by Need Analysis and Packaging” below.) Since
July 1, 2012, only undergraduate students have been eligible to borrow Direct Subsidized Loans.
Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time
Borrowers35
Since July 1, 2013, a student who is a first-time borrower36 may only borrow Direct Subsidized
Loans for a period that may not exceed 150% of the published length of the academic program in
which he or she is currently enrolled. This is referred to as the Direct Subsidized Loan maximum
eligibility period. For undergraduates subject to this provision, a student enrol ed in a two-year
associate degree program may receive Direct Subsidized Loans for a maximum eligibility period
of no more than three years, while a student enrolled in a four-year bachelor’s degree program
may receive Direct Subsidized Loans for a maximum eligibility period of no more than six
years.37
Subsidized usage periods are used to measure a borrower’s progress toward the maximum
eligibility period. They are the quotient of dividing the number of days in the borrower’s loan
period (e.g., semester, quarter) for a Direct Subsidized Loan by the number of days in the
academic year for which the borrower receives the Direct Subsidized Loan, rounded to the
nearest tenth of a year. Subsidized usage periods are prorated based on intensity of enrollment
(i.e., multiplied by 0.75 or 0.50 for three-quarter or half-time enrollment, respectively). A
borrower’s remaining eligibility period is determined by subtracting a borrower’s cumulative
subsidized usage periods from the maximum eligibility period.
This provision also limits a borrower’s eligibility for the interest subsidy on Direct Subsidized
Loans. If a Direct Subsidized Loan borrower subject to this provision remains enrolled in the
same program for which the loan was obtained, or another undergraduate academic program of
equal or shorter length, beyond the applicable maximum eligibility period, the borrower wil lose
the interest subsidy and wil become responsible for paying the interest that accrues on his or her
Direct Subsidized Loans after the date that the maximum eligibility period was exceeded.
Two recently enacted laws affect Direct Subsidized Loan limitations for post-July 1, 2013, first-
time borrowers. First, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and
Economic Security (CARES) Act (P.L. 116-136), specifies that ED shal exclude from the
maximum eligibility period any semester (or equivalent) that a student does not complete due to a
qualifying emergency.38

35 T he provisions discussed herein are often referred to as “Subsidized Usage Limit Applies,” or SULA.
36 For this provision, first-time borrower means “an individual who has no outstanding balance of principal or interest
on a Direct Loan Program or FFEL Program loan on July 1, 2013, or on the date the borrower obtains a Direct Loan
Program loan after July 1, 2013.” 34 C.F.R. §685.200(f)(1)(i).
37 A student who borrows Direct Subsidized Loans to complete an associate’s degree program may subsequently
borrow Direct Subsidized Loans to attend a bachelor’s degree program and still have remaining eligibility. For
information on other program types, proration based on other than full-time enrollment intensities, and other
requirements, see 34 C.F.R. §685.200(f).
38 T he CARES Act defines a qualifying emergency as (1) “a public health emergency related to the coronavirus
declared by the Secretary of Health and Human Services pursuant to section 319 of the Public Health Service Act”; (2)
“an event related to the coronavirus for which the President declared a major disaster or an emergency under section
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Second, the FAFSA Simplification Act of 2020 repealed these Direct Subsidized Loan limitations
for post-July 1, 2013, first-time borrowers. Recently published ED regulations effectuate this
repeal.39 Specifical y, effective August 13, 2021, the Direct Subsidized Loan Limitations for Post-
July 1, 2013, First-Time Borrowers wil not apply to any borrower who receives a Direct
Subsidized Loans first disbursed on or after July 1, 2021. In addition, for borrowers who have a
Direct Subsidized Loan that is outstanding as of July 1, 2021, and on which the borrower has
been responsible for paying interest because they exceeded the maximum eligibility period, ED
wil “adjust their account to remove the interest that accrued and reapply the borrower’s payments
accordingly.”40
Eligibility Requirements for Direct PLUS Loans
In addition to satisfying the general student-based eligibility criteria, an individual must meet
certain other eligibility criteria specifical y applicable to Direct PLUS Loans.
Parent Borrower Eligibility Criteria
Direct PLUS Loans may be borrowed by one or both parents of an undergraduate dependent
student who meets the general student-based eligibility criteria described above. Eligible parents
include biological parents, adoptive parents, and stepparents (if the stepparent’s income and
assets are taken into account in determining a student’s EFC). A legal guardian may not borrow a
Direct PLUS Loan on behalf of a student as a parent borrower. Parent borrowers must also meet
the same citizenship and residency requirements as student borrowers; may not be in default on a
federal student loan, nor owe a refund on a grant or loan made under Title IV without having
made satisfactory repayment arrangements; and may not be incarcerated.
For a parent to be eligible to borrow a Direct PLUS Loan on behalf of an undergraduate
dependent student, the student must have completed a FAFSA. There is no requirement that a
parent borrower complete a separate FAFSA. The eligibility of a noncustodial parent to borrow a
Direct PLUS Loan on behalf of his or her child is not impacted by that parent’s financial
information not appearing on the student’s FAFSA.41
Creditworthiness Requirements to Borrow Direct PLUS Loans
Eligibility for an individual to borrow a Direct PLUS Loan also depends on that individual’s
creditworthiness. Only individuals who do not have an adverse credit history, as determined
according to procedures specified in regulations, may borrow Direct PLUS Loans.42 The
creditworthiness criteria apply to both parent borrowers and to graduate and professional student
borrowers. Creditworthiness is assessed on the basis of a credit report on the applicant obtained
from at least one consumer reporting agency. An applicant is considered to have an adverse credit
history if he or she either

401 or 501, respectively, of the Robert T . Stafford Disaster Relief and Emergency Assistance Act”; or (3) “a national
emergency related to the coronavirus declared by the President under section 201 of the National Emergencies Act.”
39 U.S. Department of Education, “Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage
Limit Restriction,” 86 Federal Register 31432-31438, June 14, 2021.
40 Ibid., p. 31433.
41 FSA Handbook, vol. 1, p. 1-108.
42 34 C.F.R. §685.200.
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 has one or more debts totaling more than $2,085 that are 90 days or more
delinquent as of the date of the credit report, or that have been placed in
collection or been charged off by the creditor as a loss within the two years prior
to the credit report;43 or
 has been the subject of a default determination, bankruptcy discharge,
foreclosure, repossession, tax lien, wage garnishment, or write-off of a debt under
HEA, Title IV within the five years prior to the credit report.
An applicant who is determined to have an adverse credit history may not obtain a Direct PLUS
Loan unless he or she either obtains an endorser44 or demonstrates that extenuating circumstances
exist with regard to the applicant’s credit history.45 Extenuating circumstances may include an
updated credit report or a letter from a creditor stating that the applicant has made satisfactory
repayment arrangements on a derogatory debt. In addition, to obtain a Direct PLUS Loan an
applicant who has an adverse credit history must also complete credit counseling. (See the section
on “PLUS Loan Credit Counseling For Borrowers with Adverse Credit.”) An applicant may not,
however, be rejected for a Direct PLUS Loan on the basis of having no credit history.
A dependent undergraduate student whose parents are unable to obtain a Direct PLUS Loan due
to their having an adverse credit history may borrow a larger amount in the form of a Direct
Unsubsidized Loan. In such a case, the student may borrow up to the borrowing limit applicable
to a similarly situated independent undergraduate student. (These amounts are discussed below in
the section on “Amounts That May Be Borrowed.”)
Eligibility Requirements for Direct Consolidation Loans
To be eligible to obtain a Direct Consolidation Loan, a borrower must have an outstanding
principal balance on at least one loan that was made through either the Direct Loan program or
the FFEL program. In addition, with respect to the loans being consolidated, the applicant must
be (1) in the grace period prior to entering repayment; (2) in repayment status, but not in default;
or (3) in default, but having made satisfactory repayment arrangements.
For the purposes of including a defaulted loan in a Direct Consolidation Loan, making
“satisfactory repayment arrangements” means that the defaulted borrower has made at least three
consecutive voluntary full monthly payments within 20 days of the due date, or has agreed to
repay according to one of the Income-Driven Repayment (IDR) plans (described below). A
borrower of a defaulted loan who is subject to a court judgment or wage garnishment is ineligible
to obtain a Direct Consolidation Loan.
In general, a set of loans may be consolidated only once. However, in select circumstances a
Direct Consolidation Loan may be used to repay a previously obtained Direct Consolidation Loan
or a FFEL Consolidation Loan. Loans made to borrowers within 180 days prior to or after the
date of obtaining a Direct Consolidation Loan may be added to that Direct Consolidation Loan. A
borrower who has an existing Direct Consolidation Loan and also has other eligible loans that
have not been consolidated, or who subsequently obtains other eligible loans, may consolidate
those loans with his or her existing loans for purposes of obtaining a new Direct Consolidation
Loan. A borrower who has an existing FFEL Consolidation Loan and whose loan is in default or

43 T he $2,085 threshold will periodically be adjusted for inflation. 34 C.F.R. §685.200(c)(2).
44 An endorser is an individual who does not have an adverse credit history , who signs a promissory note, and who
agrees to repay the loan should the borrower not do so. 34 C.F.R. §685.102(b).
45 A dependent student on whose behalf the loan would be made to a parent borrower may not be an endorser.
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has been referred to a guaranty agency for default aversion assistance46 may consolidate his or her
loan into a Direct Consolidation Loan for purposes of repaying according to one of the IDR plans.
Final y, a borrower who has an existing FFEL Consolidation Loan may consolidate that loan into
a Direct Consolidation Loan for the purposes of applying for loan forgiveness through the Public
Service Loan Forgiveness (PSLF) Program or to receive the No Accrual of Interest on Loans of
Certain Active Duty Servicemembers benefit that is only available to borrowers of loans made
through the Direct Loan program.
A Direct Consolidation Loan must consist of at least one eligible loan made through either the
Direct Loan or FFEL programs, and may also contain other types of federal student loans. The
eligible types of federal student loans made through the Direct Loan and FFEL programs include
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Direct Consolidation
Loans, FFEL Subsidized Stafford Loans, FFEL Unsubsidized Stafford Loans, FFEL PLUS Loans,
and FFEL Consolidation Loans.47 The eligible types of federal student loans made outside of the
Direct Loan and FFEL programs are Federal Perkins Loans, Guaranteed Student Loans, Federal
Insured Student Loans, National Direct Student Loans, National Defense Student Loans,
Supplemental Loans for Students (SLS), Auxiliary Loans to Assist Students (ALAS), Health
Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Loans for
Disadvantaged Students (LDS), and Nurse Faculty Loans, and Nursing Student Loans.48
Amounts That May Be Borrowed
The maximum amounts that a student or a parent may borrow in loans made through the Direct
Loan program are determined by the interaction of annual and aggregate borrowing limits and
federal need analysis and packaging procedures. Limitations on borrowing vary by loan type,
borrower characteristics, program level, and class level.
Annual Loan Limits
For undergraduate students, annual loan limits cap both the maximum amount that may be
borrowed in Direct Subsidized Loans and the total combined amount that may be borrowed
through Direct Subsidized Loans and Direct Unsubsidized Stafford Loans during a single
academic year. Annual loan limits for Direct Subsidized Loans vary by undergraduate class level;
however, at any particular class level these limits are the same for both undergraduate dependent
students and undergraduate independent students. Annual loan limits for the total combined
amount of Direct Subsidized Loans and Direct Unsubsidized Loans that may be borrowed by
undergraduate students vary by both undergraduate class level and by student dependency status.
For graduate and professional students, annual loan limits cap the maximum that may be
borrowed in Direct Unsubsidized Loans, irrespective of class level. However, higher exceptional
annual loan limits are extended to students enrolled in certain health professions programs. There
is no specified limit to the amount that may be borrowed in Direct PLUS Loans by either parent
borrowers or by graduate and professional students.

46 Default aversion activities are means of assistance provided by a guaranty agency to a lender that holds a delinquent
loan prior to the loan legally entering default status. HEA §§422(h)(8) and 422B(d).
47 Over the history of the Direct Loan program and the FFEL program, the terminology used to refer to various types of
loans has changed. A complete listing of loan types eligible for inclusion in a Direct Consolidation Loan is specified in
regulations at 34 C.F.R. §685.220(b).
48 Several of these loan types were once made through programs that have since been discontinued.
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The annual loan limits apply to the maximum principal amount that may be borrowed in an
academic year. Any loan origination fees that the borrower is required to pay (see the “Loan
Origination Fees” below) are included in the amount to be borrowed that is subject to these limits.
Borrowing limits for a student who is enrolled for less than one year are prorated based on the
fraction of the academic year for which the student is enrolled. An academic year is defined in
statute as a minimum of 30 weeks of instruction for courses of study measured in credit hours, or
26 weeks for courses of study measured in clock hours and during which a full-time student is
expected to complete a minimum of 24 semester or trimester hours, 36 quarter hours, or 900
clock hours.
Aggregate Loan Limits
Aggregate loan limits cap the total cumulative amount of outstanding loans that a student may
borrow through certain loan types. One limit applies to the total amount that may be borrowed in
Direct Subsidized Loans and another limit applies to the total combined amount that may be
borrowed in Direct Subsidized Loans and Direct Unsubsidized Loans.49 No aggregate limits are
placed on Direct PLUS Loan borrowing. The aggregate loan limits apply only to the aggregate
outstanding principal balance (OPB) of the loans a student has borrowed. They do not apply to
accrued or capitalized interest.50 Annual and aggregate limits that have applied to loans made
through the Direct Loan program since July 1, 2012, are presented in Table 1.
Table 1. Annual and Aggregate Loan Limits,
by Borrower Type and Program Level: July 1, 2012, to Present
(dol ars)
Direct
Direct Subsidized Loans and
Direct

Subsidized
Direct Unsubsidized Loans,
PLUS
Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Undergraduate Students
Annual Loan Limits

Preparatory coursework for an
2,625
2,625
8,625a
n.a.
undergraduate program
1st year
3,500
5,500
9,500a
n.a.
2nd year
4,500
6,500
10,500a
n.a.
3rd year and above
5,500
7,500
12,500a
n.a.
Preparatory coursework for a
5,500
5,500
12,500a
n.a.
graduate programb
Teacher certificationb
5,500
5,500
12,500a
n.a.
Aggregate Loan Limitsc,d

n.a.

49 Aggregate loan limits for Direct Subsidized Loans also include Subsidized Stafford Loan amounts borrowed through
the FFEL program. Aggregate loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans, combined, also
include Subsidized Stafford Loans and Unsubsidized Stafford Loans, combined, borrowed through the FFEL program.
50 In addition, recipients of T EACH Grants who fail to meet the requirements of the program may be required to repay
the amount of their T EACH Grant award in the form of a Direct Unsubsidized Loan. For such individuals, this Direct
Unsubsidized Loan amount is determined separately from otherwise applicable annual borrowing limits.
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Direct
Direct Subsidized Loans and
Direct

Subsidized
Direct Unsubsidized Loans,
PLUS
Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
In generale
23,000
31,000
57,500a
n.a.
Graduate Students
Annual Loan Limits

In general
n.a.
n.a.
20,500f
COA-EFAg
Health professions programsh
n.a.
n.a.
40,500
COA-EFAg
to 47,167f
Health professions programsi
n.a.
n.a.
33,000
COA-EFAg
to 37,167f
Aggregate Loan Limitsc,d,j

In general
65,000k
n.a.
138,500
Not limitedg
Health professions
65,000k
n.a.
224,000
Not limitedg
programse,h,i
Parents of Dependent Undergraduate Students
Annual Loan Limits

Al
n.a.
n.a.
n.a.
COA-EFAg
Aggregate Loan Limitsc,d

In general
n.a.
n.a.
n.a.
Not limitedg
Source: HEA, §§428, 428H, 451, and 455; 34 C.F.R. §685.203; and U.S. Department of Education, Office of
Postsecondary Education, Dear Col eague Letters GEN-05-09, GEN-08-04, and GEN-08-08.
Notes: “n.a.” means not applicable.
a. These loan limits also apply to dependent undergraduate students whose parents are unable to obtain a
Direct PLUS Loan.
b. Applies to individuals who have obtained a baccalaureate degree.
c. Accrued interest and capitalized interest do not count toward aggregate loan limits.
d. If a borrower has a Direct Consolidation Loan, any Direct Subsidized Loans or Direct Unsubsidized Loans
that have been included in the Direct Consolidation Loan remain attributable to the aggregate limit s for
Direct Subsidized Loans and Total Direct Subsidized Loans and Direct Unsubsidized Loans combined, in
accordance with their proportionate share of the Direct Consolidation Loan. Aggregate loan limits also
include amounts of comparable loan types borrowed through the FFEL program (e.g., Subsidized Stafford
Loans, Unsubsidized Stafford Loans).
e. Includes Subsidized Stafford Loans and Unsubsidized Stafford Loans borrowed through the FFEL program.
f.
Direct Subsidized Loans are not currently available to graduate students.
g. There is no statutory borrowing limit for Direct PLUS Loans; however, al aid combined may not exceed
COA.
h. Students enrol ed in programs in the fol owing disciplines are eligible to annual y borrow an additional
$20,000 more than regular students in Direct Unsubsidized Loans for programs with 9-month academic
years, and an additional $26,667 for programs with 12-month academic years: Doctor of Al opathic
Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry, Doctor of Veterinary Medicine, Doctor of
Optometry, Doctor of Podiatric Medicine; and, effective May 1, 2005, Doctor of Naturopathic Medicine and
Doctor of Naturopathy. Amounts are prorated for 10- and 11-month programs.
i.
Students enrol ed in programs in the fol owing disciplines are eligible annual y to borrow an additional
$12,500 more than regular students in Direct Unsubsidized Loans for programs with 9 -month academic
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years, and an additional $16,667 for programs with 12-month academic years: Doctor of Pharmacy,
Graduate in Public Health, Doctor of Chiropractic, Doctoral Degree in Clinical Psychology, and Masters or
Doctoral Degree in Health Administration. Amounts are prorated for 10- and 11-month programs.
j.
Aggregate loan limits for graduate and professional students include amounts borrowed for undergraduate
study.
k. The aggregate loan limit for Direct Subsidized Loans to graduate and professional students applies to loans
borrowed for programs of instruction beginning before July 1, 2012.
A listing of the annual and aggregate loan limits that have applied throughout the history of the
Direct Loan program is presented in Appendix C in Table C-1.
Limits on Borrowing Determined by Need Analysis and Packaging
The process of awarding one or more forms of federal student aid to a student in accordance with
federal student aid need analysis procedures and individual program rules is referred to as
packaging. Financial aid administrators at IHEs are afforded a degree of discretion in determining
how aid is packaged. The packaging of aid may affect the amounts that may be borrowed by a
student or by a parent on behalf of a student through the various types of loans offered through
the Direct Loan program. The process for packaging aid provided through the Direct Loan
program is briefly described below. The following terms are instrumental in describing this
process.
 Cost of Attendance (COA). This is an institution-determined amount indicative
of a student’s educational expenses for a period of enrollment (e.g., an academic
year) at the IHE. It is determined by the institution a student attends and may
include tuition and fees, and al owances for room and board, books, supplies,
transportation, loan fees, personal expenses, child or dependent care, etc.51 For
the Direct Loan program, a student’s COA represents an absolute limit on the
maximum amount of aid he or she may receive during an academic year.
 Expected Family Contribution (EFC). This is the dollar amount a student and
the student’s family (e.g., parents or spouse) are expected to contribute toward
his or her education expenses for a year.52 A student’s EFC is calculated
according to procedures specified in law using information supplied by the
student on the FAFSA.53 The formula for calculating a student’s EFC takes into
account myriad factors including taxed and untaxed income, financial assets,
certain benefits (e.g., Social Security, unemployment compensation), family size,
and the number of family members to be enrolled in college during an academic
year.
 Estimated Financial Assistance (EFA). This is the amount of aid anticipated to
be made available to a student from federal, state, institutional, or other sources
for a period of enrollment. It includes grant, scholarship, fel owship, loan, and
need-based employment assistance. For purposes of need analysis and packaging,
two variations of EFA are relevant: (1) EFA not received under HEA, Title IV
programs, and (2) EFA from al sources. EFA does not include Iraq and

51 HEA §§472 and 479A. For additional information on COA, see FSA Handbook, vol. 3, Chapter 2—Cost of
Attendance (Budget).
52 HEA T itle IV, Part F—Need Analysis. For additional information on the EFC, see CRS Report R44503, Federal
Student Aid: Need Analysis Form ulas and Expected Fam ily Contribution .
53 For additional information, see HEA, T itle IV, Part F, and FSA Handbook, Application and Verification Guide,
Chapter 3—Expected Family Contribution (EFC).
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Afghanistan Service Grants; federal veterans’ education benefits; or, for purposes
of awarding Direct Subsidized Loans, Segal AmeriCorps Education Awards.54
 Financial Need. This is the amount determined by subtracting a student’s EFC
and EFA not received under HEA, Title IV from the student’s COA.55
 Unmet Financial Need. This is the amount determined by subtracting the sum of
a student’s EFC and EFA from the student’s COA.56
When packaging Title IV aid, the total amount of need-based aid awarded to a student may not
exceed the amount of the student’s financial need. A common packaging strategy is to award
need-based aid that is not required to be repaid (e.g., Federal Pel Grant, Federal Supplemental
Educational Opportunity Grant [FSEOG], and Federal Work-Study [FSW] awards) before
awarding loan aid, which must be repaid. With respect to loans made through the Direct Loan
program, only Direct Subsidized Loans are need-based; however, Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans may al be awarded to satisfy a student’s unmet
financial need. Additional y, once a student’s unmet financial need has been satisfied, non-need-
based aid, such as Direct Unsubsidized Loans and Direct PLUS Loans, may be awarded to
replace some or al of a student’s EFC. Overal , when packaging Title IV aid, the total amount
awarded (including both need-based and non-need-based aid) may not exceed the student’s COA,
less EFA. Processes for determining the amount of aid that may be awarded through the various
types of loans offered through the Direct Loan program are described below.
Direct Subsidized Loans
Direct Subsidized Loans are need-based. They may be awarded to satisfy a student’s unmet
financial need. The maximum Direct Subsidized Loan amount a student is eligible to borrow is
determined by summing the student’s EFC and EFA, and then subtracting that amount from the
student’s COA for the school attended. As discussed above, Direct Subsidized Loan borrowing is
also capped by applicable annual loan limits. The calculation shown in the text box below is used
to determine the amount that a student may borrow through a Direct Subsidized Loan.
Direct Subsidized Loan Eligibility
Direct Subsidized Loan eligibility = min[(COA - (EFC + EFA)), Direct Subsidized Loan limit57]
Direct Unsubsidized Loans
Direct Unsubsidized Loans are non-need-based. Students are eligible to borrow Direct
Unsubsidized Loans irrespective of the amount of their EFC, in amounts up to the lesser of (1) the
result of subtracting the student’s EFA (including, for undergraduate students, any amount
borrowed through a Direct Subsidized Loan) from COA, or (2) the result of subtracting the
amount borrowed through a Direct Subsidized Loan from the annual Direct Subsidized Loan and
Direct Unsubsidized Loan combined borrowing limit applicable to the student’s program level

54 For additional information on the EFA, see HEA, §§428(a)(2)(C)(ii) and 480(j), 34 CFR §685.102(b), and FSA
Handbook, vol. 3, Chapter 7—Packaging Aid.
55 For additional information on unmet financial need, see HEA §471, and FSA Handbook, Appendix A: Federal
Student Aid Glossary and Acronyms, p. A-34.
56 For additional information, see FSA Handbook, vol. 3, pp. 3-121, 3-191.
57 For information on Direct Subsidized Loan limits, see Table 1.
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and class level. The calculation shown in the text box below is used to determine the amount that
a student may borrow through a Direct Unsubsidized Loan.
Direct Unsubsidized Loan Eligibility
Direct Unsubsidized Loan eligibility = min[(COA - EFA), (total Direct Loan limit58 - Direct Subsidized Loan amt.)]
Direct PLUS Loans
Direct PLUS Loans are non-need-based. Graduate and professional students and the parents of
dependent undergraduate students may borrow Direct PLUS Loans irrespective of the student’s
EFC. The amount that may be borrowed through a Direct PLUS Loan is limited to the result of
subtracting the EFA (including any amount borrowed through a Direct Subsidized Loan or a
Direct Unsubsidized Loan) of the student on whose behalf the loan wil be made from the COA of
the institution attended. The calculation shown in the text box below is used to determine the
amount that a student or a parent may borrow through a Direct PLUS Loan.
Direct PLUS Loan Eligibility
Direct PLUS Loan eligibility = COA - EFA
With regard to parent borrowing, the total Direct PLUS Loan eligibility amount may be borrowed
by one parent, or it may be divided among more than one parent (including noncustodial parents)
and borrowed in separate amounts by each.
Interest on Direct Loan Program Loans
Interest is charged on loans made through the Direct Loan program. It constitutes a charge for the
use of borrowed money over a specified period of time. In the Direct Loan program, interest is
calculated based on rates that are set according to formulas specified in the HEA. Interest accrual
is calculated using a simple daily interest formula. The federal government offers several types of
interest subsidies that may limit the amount of interest that accrues on the outstanding principal
balance of a loan. In certain circumstances, a borrower may be permitted to defer paying some or
al of the interest that has accrued on his or her loan(s) until a later point in time. If a borrower
does not pay the interest that has accrued, it may, in certain circumstances, be capitalized (i.e.,
added to the outstanding principal balance of the borrower’s loan).
Interest Rates
Interest rates on loans made through the Direct Loan program are set according to procedures
specified by statute. Since the inception of the Direct Loan program in 1994, a variety of different
procedures have been used for setting student loan interest rates. The loans currently being made
through the Direct Loan program have fixed interest rates that remain constant from the time a
loan is made until it is paid in full. Since July 1, 2013, Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans, have been made with fixed interest rates that are
indexed to the interest rates on 10-year U.S. Treasury notes that are auctioned just prior to the
start of the academic year during which the loans are made. Since February 1, 1999, Direct
Consolidation Loans have been made with fixed interest rates that are based on the weighted
average of the interest rates on the loans that are included in the Direct Consolidation Loan.

58 For information on loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans, combined, see Table 1.
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Previously, other procedures had been used for setting student loan interest rates, and a number of
loans that had been made according to these prior procedures remain outstanding.
Procedures for Setting Student Loan Interest Rates
The various procedures that have been used for setting interest rates on loans made through the
Direct Loan program can be broadly categorized as follows: (1) variable interest rates that are
indexed to the interest rates on short-term U.S. Treasury securities that are auctioned just prior to
the start of the academic year during which the rate wil be in effect, (2) fixed interest rates that
are set according to the weighted average of the interest rates of the loans included in a Direct
Consolidation Loan, (3) fixed interest rates that are specified in statute, and (4) fixed interest rates
that are indexed to the interest rates on long-term U.S. Treasury securities that are auctioned just
prior to the start of the academic year during which the loans are made. Because loans with
interest rates that have been set according to each of these categories stil remain outstanding,
each is briefly discussed below. Appendix C presents a detailed history of the various procedures
that have been used to set the interest rates that apply to Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans (Table C-2); the procedures that have been used to
set the interest rates that apply to Direct Consolidation Loans (Table C-3); and the interest rates
that have been in effect on these loans on a year-by-year basis (Table C-4).
Variable Interest Rates Indexed to Short-Term U.S. Treasury Securities
At the inception of the Direct Loan program in 1994, al loan types were made with variable
interest rates that would adjust once per year on July 1. On variable rate loans, the applicable
interest rate is determined according to a formula specified in statute. For each 12-month period
that extends from July 1 through June 30, the applicable interest rate is indexed to the bond
equivalent rate of 91-day U.S. Treasury bil s (or other short-term U.S. Treasury securities)
auctioned at the final auction held prior to the preceding June 1.59 An interest rate add-on
increases the rate above the rate of the index. Different interest rate add-ons may apply to loans
depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the status of the
loan (e.g., in school, grace, repayment), and when the loan was made. An interest rate cap of
8.25% applies to variable rate Direct Subsidized Loans and Direct Unsubsidized Loans and the
portion of a variable rate Direct Consolidation Loan attributable to such loans. An interest rate
cap of 9.0% applies to variable rate Direct PLUS Loans and the portion of a variable rate Direct
Consolidation Loan attributable to a PLUS Loan. Direct Consolidation Loans were made with
variable interest rates through January 31, 1999, while al other types of Direct Loan program
loans continued to be made with variable interest rates through June 30, 2006.
Fixed Interest Rates on Direct Consolidation Loans
Since February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that
remain in effect for the duration of the loan.60 The applicable interest rate on a Direct
Consolidation Loan is determined by calculating the weighted average of the interest rates in

59 T he practice of using the rate of the final auction held prior to the preceding June 1 provides approximately one
month of lead time for ED to establish interest rates for particular loan types and to communicate this informati on to
current and prospective borrowers and to loan servicers.
60 For Direct Consolidation Loans, the determination of whether certain terms and conditions apply to a given loan
(e.g., which interest rate setting formula applies) is based on the date when t he application for the Direct Consolidation
Loan is received by the loan servicer.
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effect on the loans being consolidated, and rounding the result up to the nearest higher one-eighth
of 1%.61 If a borrower obtains a Direct Consolidation Loan to repay one or more loans having a
variable interest rate, the weighted average of the interest rates in effect on the loans being
consolidated wil be used to set the fixed rate that wil apply for the duration of the new Direct
Consolidation Loan.62 For Direct Consolidation Loans made during the period from February 1,
1999, through June 30, 2013, the maximum interest rate was capped at 8.25%.63 There is no
maximum interest rate for Direct Consolidation Loans made on or after July 1, 2013.
Fixed Interest Rates Specified in the HEA
During the period from July 1, 2006, through June 30, 2013, al loans made through the Direct
Loan program, with the exception of Direct Consolidation Loans, were made with fixed interest
rates that were determined by Congress and specified in statute. Different fixed interest rates
applied depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the
program level for which it was borrowed (e.g., undergraduate, graduate), and the academic year
for which the first disbursement of the loan was made (e.g., AY2007-2008, AY2008-2009). For
these loans, the interest rate that was in effect when the loan was made remains in effect for the
duration of the loan.
Fixed Interest Rates Indexed to Long-Term U.S. Treasury Securities
With the exception of Direct Consolidation Loans, all loans made through the Direct Loan
program on or after July 1, 2013, have market-indexed fixed interest rates. For these loans, the
applicable interest rate is set according to a formula specified in statute and remains in effect for
the duration of the loan. For new loans made during each 12-month period that extends from July
1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 10-year
U.S. Treasury notes auctioned at the final auction held prior to the preceding June 1.64 An interest
rate add-on increases the applicable borrower rate above the rate of the index. Different interest
rate add-ons apply depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS
Loan) and the program level for which it was borrowed (e.g., undergraduate, graduate). An
interest rate cap of 8.25% applies to Direct Subsidized Loans and to Direct Unsubsidized Loans
made to undergraduate students; a cap of 9.5% applies to Direct Unsubsidized Loans made to

61 For variable rate loans made through the FFEL program and the Direct Loan program during the period from July 1,
1995, through June 30, 2006, interest rates are 0.6 percen tage points lower during in-school and grace periods than
during repayment periods. A borrower may apply to obtain a Direct Consolidation Loan during the six-month grace
period after ceasing to be enrolled on at least a half-time basis, and by doing so may lock in the lower grace period
interest rate.
62 During the period when Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans were made
with variable rates and Direct Consolidation Loans were made with fixed interest rates, the availability of fixed rate
Direct Consolidation Loans provided borrowers with an option essentially to lock in rates determined according to the
variable interest rate formula (rounded to the nearest higher one-eighth of 1%) that a borrower may have considered to
be advantageous. T he approximate one-month lead between when future interest rates become known and when they
go into effect provided borrowers a window during which they could evaluate whether to obtain a Direct Consolidation
Loan at the then-current rate (should rates for the next year be scheduled to increase) or defer the option to consolidate
for another year (should rates for the next year be scheduled to decrease).
63 During the period when the 8.25% interest rate cap was in effect, a borrower who had one or more loans with an
interest rate that was greater than the cap (e.g., a FFEL PLUS Loan made with an 8.5% interest rate) could lower the
applicable interest rate by including the loan(s) in a Direct Consolidation Loan.
64 T he final auction held prior to the preceding June 1 is generally held in May. See U.S. Department of the T reasury,
T reasury Direct, “General Auction T iming,”
https://www.treasurydirect.gov/instit/auctfund/work/auctime/auctime.htm#:~:text=20%2Dyear%20bond%20and%2030
,September%2C%20October%2C%20and%20December, accessed May 17, 2021.
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graduate and professional students; and a cap of 10.5% applies to al Direct PLUS Loans. The
interest rates applicable to loans being made through the Direct Loan program for loans first
disbursed July 1, 2020, through June 30, 2021, and for loans first disbursed July 1, 2021, through
June 30, 2022, are presented below in Table 2.
Table 2. Interest Rates on Loans Made Through the Direct Loan Program:
July 1, 2020, through June 30, 2021, and July 1, 2021, through June 30, 2022
(percentage)

Fixed Interest Rate in Effect
Direct
Direct
Direct
Subsidized
Unsubsidized
PLUS
Borrower Type
Loans
Loans
Loans
Direct Loans disbursed July 1, 2020-June 30, 2021
Undergraduate students
2.75
2.75
n.a.
Graduate and professional students
n.a.
4.30
5.30
Parents of dependent undergraduate students
n.a.
n.a.
5.30
Direct Loans disbursed July 1, 2021-June 30, 2022
Undergraduate students
3.73
3.73
n.a.
Graduate and professional students
n.a.
5.28
6.28
Parents of dependent undergraduate students
n.a.
n.a.
6.28
Source: HEA §455(b); (20 U.S.C. §1087e(b)); and U.S. Department of Education, Office of Federal Student Aid,
“Interest Rates for Direct Loans First Disbursed Between July 1, 2020 and June 30, 2021,” May 15,2020 and U.S.
Department of Education, Office of Federal Student Aid, LOANS-21-06, “Interest Rates for Direct Loans First
Disbursed Between July 1, 2021 and June 30, 2022, May 19, 2021.
Note: “n.a.” means not applicable.
Interest Accrual
Interest accrual is the process through which interest accumulates over time. In the Direct Loan
program, the accrual of interest is calculated using a simple daily interest formula.65 With this
formula, interest accrues only on the outstanding principal balance (OPB) of the loan. This is in
contrast to a compound interest formula, in which interest accrues on both the OPB of the loan
and any interest that has accrued during a prior period. In a limited set of circumstances, accrued
interest that has not been paid by a borrower may be capitalized, or added to the OPB of the loan.
This is discussed below in the “Interest Capitalization” section.
According to the simple daily interest formula used in the Direct Loan program, the amount of
interest that accrues over a certain period of time is the product of (1) the number of days of
interest being calculated (e.g., days since the last payment was made), (2) the OPB of the loan,
and (3) an interest rate factor. The interest rate factor is the quotient of the applicable interes t rate

65 U.S. Department of Education, Office of Federal Student Aid, “ Understand how int erest is calculated and what fees
are associated with your federal student loan: How is interest calculated?”,
https://studentaid.ed.gov/sa/types/loans/interest-rates#how-calculated, accessed May 17, 2021.
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of the loan66 divided by the number of days in a year (365.25).67 An example of the calculation of
accrued interest over a 30-day period is provided in the text box below.
Simple Daily Interest Formula: Example of the Calculation of Accrued Interest
Days since last payment: 30
Outstanding principal balance: $4,500
Interest rate factor:
Applicable interest rate: 0.0373
Days in a year: 365.25
Accrued Interest = [30 x $4,500 x (0.0373 ÷ 365.25)] = $13.79
For loans made through the Direct Loan program, interest begins to accrue on the OPB once the
first instal ment of a loan is disbursed. Unless it is subsidized (see “Subsidized Interest”), interest
accrues during the entirety of the period that a loan is in effect, irrespective of whether the
borrower is expected to be making payments on it.
Subsidized Interest
In a limited set of circumstances, the federal government subsidizes some or al of the interest
that would otherwise accrue on loans made through the Direct Loan program.68 During periods
when an interest subsidy is provided, borrowers are relieved of the requirement to pay the interest
that would accrue. The availability of an interest subsidy depends on factors such as the type of
loan borrowed, eligibility for an authorized deferment, the repayment plan selected, and the
borrower’s status as a servicemember in the Armed Forces.69 Interest subsidies that may be
available on loans made through the Direct Loan program are described below.70

66 In the simple daily interest formula, the applicable interest rate is expressed in decimal form. For example, 3.73% is
expressed in decimal form as 0.0373.
67 In the current loan servicing environment, ED loan servicers utilize established standards to calculate daily interest.
T he interest rate factor is determined by dividing the applicable interest rate by either 365.25 or 365 days, depending on
the loan servicer platform. (CRS email communication with U.S. Department of Education, Office of Legislation and
Congressional Affairs, September 25, 2018.)
68 In this report, the terms subsidized interest and interest subsidy refer to the government not charging a borrower for
some or all of the interest that would ot herwise accrue on a loan during a specified period of time. T hese terms are not
used to refer to the interest rate on a loan made through the Direct Loan program being below the market rate that
would typically be available on unsecured credit extended to a borrower without regard to the borrower’s employment,
income, assets, or credit history. T hese terms are also in contrast to the term loan subsidy, which is used for budgeting
purposes and is the estimated present value of the cash flows from the governm ent (e.g., loan disbursements),
excluding administrative expense, less the estimated present value of the cash flows to the government (e.g.,
repayments of principal and interest), resulting from a direct loan or loan guarantee, discounted to the time when the
loan is disbursed, and taking into account estimated effects of defaults, prepayments, fees, penalties, loan deferments,
loan forgiveness, etc.
69 In addition, in response to the COVID-19 pandemic, for March 13, 2020 through at least September 30, 202 1, the
accrual of interest on all types of Direct Loan program loans is suspended. T his can be viewed as a limited-time interest
subsidy.
70 In addition to the Direct Loan program interest subsidies described here, a student loan interest deduction is made
available through the federal tax code. For information on this interest subsidy, see CRS Report R41967, Higher
Education Tax Benefits: Brief Overview and Budgetary Effects.
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Interest Subsidy on Direct Subsidized Loans
On Direct Subsidized Loans, and on the subsidized component of Direct Consolidation Loans,
interest is subsidized by the government (i.e., interest does not accrue) during in-school periods
while a borrower is enrolled in an eligible program on at least a half-time basis, during a six-
month grace period, and during periods of authorized deferment. Due to amendments to the HEA
made by the Consolidated Appropriations Act, 2012 (P.L. 112-74), interest is not subsidized
during the grace period on Direct Subsidized Loans disbursed between July 1, 2012, and June 30,
2014.
Limit on Direct Subsidized Loan Interest Subsidy if 150% of Published Academic
Program Length is Exceeded
For a borrower to whom the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time
Borrowers applies, eligibility both to borrow a Direct Subsidized Loan and to receive the interest
subsidy on Direct Subsidized Loans previously obtained is limited to a period that may not
exceed 150% of the published length of the academic program in which the student is enrolled. If
a Direct Subsidized Loan borrower subject to this provision remains enrolled beyond the
applicable maximum eligibility period, the borrower wil lose the interest subsidy and wil
become responsible for paying the interest that accrues on his or her Direct Subsidized Loans
after the date that the maximum eligibility period is exceeded.71
The FAFSA Simplification Act of 2020 repealed these Direct Subsidized Loan limitations for
post-July 1, 2013, first-time borrowers. Effective August 13, 2021, these limitations wil not
apply to any borrower who receives a Direct Subsidized Loans first disbursed on or after July 1,
2021.72 For borrowers who have a Direct Subsidized Loan that is outstanding as of July 1, 2021,
and on which the borrower has been responsible for paying interest because they exceeded the
maximum eligibility period, ED wil “adjust their account to remove the interest that accrued and
reapply the borrower’s payments accordingly.”73
Interest Rate Reduction for Automatic Debit Repayment
The HEA authorizes the Secretary of Education (the Secretary) to offer borrowers of loans made
through the Direct Loan program an interest rate reduction as an incentive for having loan
payments automatical y debited from a bank account.74 The Secretary currently offers a 0.25
percentage point interest rate reduction for automatic debit repayment. This option helps ensure
that borrowers make their student loan payments on time. The interest rate reduction for
automatic debit repayment does not apply during in-school, grace, deferment, or forbearance
periods.

71 34 C.F.R. §685.200(f).
72 U.S. Department of Education, "Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage
Limit Restriction," 86 Federal Register 31432-31438, June 14, 2021.
73 Ibid., p. 31433.
74 HEA, §455(b)(9); 34 C.F.R. §685.211(b). Until June 30, 2012, the Secretary was authorized to offer a variety of
interest rate reductions to borrowers as a means of encouraging on -time repayment . T hese incentives were required to
be cost neutral to the government .
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Interest Subsidies on Eligible Loans Repaid According to Certain Income-
Driven Repayment (IDR) Plans During Negative Amortization
Interest subsidies are provided on certain types of loans repaid according to the Income-Based
Repayment (IBR) plans, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As
You Earn (REPAYE) repayment plan during periods when a borrower’s loans are in negative
amortization. (Details of these income-driven repayment plans are described below in “Loan
Repayment Plans” section.) A common characteristic of these IDR plans is that an interest
subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct
Consolidation Loans for a maximum of the first three consecutive years that the borrower repays
according to the applicable IBR plan. In addition, in the REPAYE plan an extended, partial
interest subsidy is provided on al eligible loan types. These IDR plan interest subsidies are
described in greater detail below.
Three-Year Interest Subsidy on Direct Subsidized Loans Repaid According to
Certain IDR Plans During Negative Amortization
The structure of the IBR, PAYE, and REPAYE plans provide that in certain instances, a
borrower’s required monthly payment amount may be insufficient to pay al of the interest that
has accrued on the borrower’s Direct Subsidized Loans, or on the subsidized component of a
Direct Consolidation Loan. In such instances, the Secretary does not charge the borrower for the
amount of the accrued interest that is in excess of the applicable monthly payment amount
(referred to as the remaining accrued interest) for a period of up to the first three years from the
date the borrower began repaying according to the IDR plan. For borrowers who switch
repayment plans and repay their loans sequential y according to more than one of the IDR plans
under which a subsidized loan interest subsidy is provided, a cumulative three-year limit on
receipt of the interest subsidy applies to periods of repayment made under any of the
aforementioned IDR plans.75 Any periods during which the borrower receives an economic
hardship deferment and during which an interest subsidy is provided on Direct Subsidized Loans
and on the subsidized component of Direct Consolidation Loans are excluded from the three-year
eligibility limit.
50% Interest Subsidy on All Eligible Loan Types Repaid According to the
REPAYE Plan During Negative Amortization
In addition to the three-year interest subsidy of the remaining accrued interest on Direct
Subsidized Loans and the subsidized component of Direct Consolidation Loans described above,
the REPAYE plan includes a 50% subsidy of the remaining accrued interest on al loans.76
Beyond the three-year period for Direct Subsidized Loans and the subsidized component of
Direct Consolidation Loans (described above), and during al periods of repayment on other
eligible loans, in the instance that a borrower’s required monthly payment amount is insufficient
to pay al of the interest that has accrued on his or her loans, the Secretary charges the borrower

75 With regard to Direct Consolidation Loans, the three-year period also includes periods during which an interest
subsidy was provided on the underlying loans while they were being repaid according to an IDR plan during periods of
negative amortization.
76 34 C.F.R. §685.209(c)(2)(iii). Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans that
repaid either a Direct PLUS Loan or a FFEL PLUS Loan made to a parent borrower are ineligible to be repaid
according to the REPAYE plan.
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for only 50% of the remaining accrued interest.77 There is no time limit on receipt of the REPAYE
plan 50% interest subsidy.
No Accrual of Interest on Loans of Certain Active Duty Servicemembers
For al types of loans made through the Direct Loan program that were first disbursed on or after
October 1, 2008, no interest accrues during a period of up to 60 months while the borrower is
serving on active duty in the Armed Forces or is performing qualifying National Guard duty in an
area of hostilities during a war or national emergency. For Direct Consolidation Loans, the no
accrual of interest subsidy applies only to the portion of the loan that was used to repay other
loans that were first disbursed on or after October 1, 2008.
SCRA 6% Interest Rate Cap on Loans of Borrowers Who Enter Military Service
The Servicemembers Civil Relief Act (SCRA) provides that for individuals who borrow loans
after August 14, 2008, but prior to their entrance into military service, the interest rate on their
loans must be capped at a rate of 6% for the duration of their military service.78 The federal
government, as the creditor on loans made through the Direct Loan program, must forgive interest
above the 6% rate and may not accelerate repayment of the loans. Loan servicers are required to
regularly check with the U.S. Department of Defense Manpower Data Center (DMDC) to
determine whether borrowers qualify for the SCRA 6% interest rate cap and to extend the benefit
to borrowers. Borrowers also have the option of completing an SCRA Interest Rate Limitation
Request and submitting it to their loan servicer to document their eligibility for the 6% interest
rate cap.79
SCRA 6% Interest Rate Cap and Direct Consolidation Loans
If a borrower repays one or more loans on which the interest rate has been reduced to 6% under
the SCRA with a Direct Consolidation Loan, the 6% interest rate is required to be used as the
applicable interest rate on those loans for purposes of determining the weighted average interest
rate of the new Direct Consolidation Loan.80 In such an occurrence, because Direct Consolidation
Loans are currently being made with fixed interest rates, the 6% rate would essential y be locked
in and would remain in effect beyond the end of the borrower’s period of military service.
Interest Subsidy on All Loan Types During Cancer Treatment Deferment
A Cancer Treatment Deferment is provided during periods while a borrower is receiving
treatment for cancer and for the six months thereafter. During periods while a borrower receives
this deferment, no interest accrues on his or her qualifying loans. The Cancer Treatment

77 T he borrower is not relieved of responsibility for payment of t he 50% of the remaining accrued interest that is
charged.
78 For additional information on the SCRA, see CRS Report R45283, The Servicemembers Civil Relief Act (SCRA):
Section-by-Section Sum mary.
79 U.S. Department of Education, Office of Federal Student Aid, Servicemembers Civil Relief Act (SCRA): Interest Rate
Lim itation Request, OMB No. 1845-0135, https://fsapartners.ed.gov/sites/default/files/attachments/2020-
01/011020RenewalSCRAIntRateLimitRequestAttach.pdf .
80 34 C.F.R. §685.202(a); U.S. Department of Education, Dear Colleague Letter GEN-16-20, “Retroactive Adjustments
for Servicemembers Civil Relief Act (SCRA) from August 14, 2008, Onward,” November 15,
2016,https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2016-11-15/gen-16-20-subject-
retroactive-adjustments-servicemembers-civil-relief-act-scra-august-14-2008-onward.
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Deferment is available on al types of Direct Loan program loans that are either made on or after
September 28, 2018, or that had entered repayment status on or before September 28, 2018.81
This benefit does not appear to be available for loans that were made prior to September 28,
2018, but had not yet entered repayment prior to that date.
No Accrual of Interest During COVID-19
In response to the COVID-19 pandemic, for March 13, 2020 through at least September 30, 2021,
the accrual of interest on al types of Direct Loan program loans is suspended.82 Thus, borrowers
wil not be responsible for paying interest on their Direct Loan program loans during this
period.83
Deferred Payment of Accrued Interest
In certain instances, the obligation of a borrower to pay the interest that accrues on the
outstanding principal balance of loans made through the Direct Loan program may be deferred.
For instance, during in-school, grace, deferment, and forbearance periods, borrowers are not
required to make payments of either principal or the interest that accrues on the OPB. Also, for a
borrower whose loans are in repayment status and who is repaying according to an IDR plan, if
the amount of his or her required monthly payment is less than the amount of interest that has
accrued on the loans, the payment of any accrued interest owed that is in excess of the required
monthly payment amount may be deferred. Nonetheless, except to the extent that a borrower is
receiving an interest subsidy, interest continues to accrue on his or her loans during periods while
repayment of accrued interest is deferred.
Negative Amortization
The term negative amortization describes the situation in which the amount of interest that
accrues on a loan over a given period of time is greater than the amount of payments that are
made on it. In a case of negative amortization, the accumulation of unpaid accrued interest leads
to the outstanding balance of principal and interest on the loan increasing over time. The deferred
payment of accrued interest during periods of repayment according to the IDR plans (see
“Income-Driven Repayment (IDR) Plans”) may lead to negative amortization.
Interest Capitalization
On certain occasions, any interest that has accrued but not been paid by a borrower may be added
to the outstanding principal balance of the borrower’s loans. This is cal ed interest capitalization.
When interest is capitalized, it becomes part of the OPB and interest begins to accrue on that new,
larger loan amount. Over time, interest capitalization increases the total amount a borrower is
required to repay. Interest is capitalized in the following situations:

81 HEA, §455(f)(3)); U.S. Department of Education, Office of Federal Student Aid, Cancer Treatment Deferment
Request, OMB No. 1845-0154, https://studentaid.gov/sites/default/files/CancerT reatmentDeferment.pdf.
82 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students,
Borrowers, and Parents,” https://studentaid.gov/announcements-events/coronavirus#forbearance-questions, accessed
May 21, 2021.
83 For additional information, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19.
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 Entering Repayment Status. Any unpaid interest that has accrued on a
borrower’s loans during the in-school and grace periods is capitalized at the time
a borrower’s loan enters repayment status.
 Loan Consolidation. Any interest that has accrued on a borrower’s loan and
remains unpaid when the borrower includes the loan in a Direct Consolidation
Loan is capitalized upon consolidation.
 Annually, in ICR and Alternative Repayment Plans. Any unpaid interest that
has accrued on a borrower’s loan while the borrower is repaying according to the
income-contingent repayment (ICR) plan or one of the alternative repayment
plans is capitalized annual y.
 End of Partial Financial Hardship. Any unpaid interest that has accrued on a
borrower’s loans during a period when he or she was repaying according to either
of the IBR plans or the PAYE repayment plan and had a partial financial
hardship is capitalized when the borrower is determined to no longer have a
partial financial hardship.84
 Exit from IBR, PAYE, or REPAYE Repayment Plan. Any unpaid interest that
has accrued on a borrower’s loan during a period when he or she was repaying
according to the IBR, PAYE, or REPAYE repayment plans is capitalized at the
time the borrower changes to a different repayment plan.
 End of Deferment or Forbearance. In general, any unpaid interest that has
accrued on a borrower’s loan during a period of deferment or forbearance is
capitalized at the expiration of the respective period. However, interest that
accrues during specified periods of administrative forbearance is not capitalized
at the end of the administrative forbearance.85 If during the period of deferment
or forbearance a borrower was repaying according to either of the IBR plans or
the PAYE repayment plan and was experiencing a partial financial hardship, any
interest that accrued during the period of deferment or forbearance wil not be
capitalized so long as the borrower continues to have a partial financial
hardship.86
 Default. Any unpaid interest that has accrued on a borrower’s loan prior to the
borrower defaulting (e.g., during periods of negative amortization, during
delinquency) is capitalized at the time of default.
Limit on Interest Capitalization in the IDR and Alternative Repayment Plans
For borrowers who are repaying their loans according to some of the IDR plans or an alternative
repayment plan, the amount of interest that may be capitalized is capped. For borrowers repaying

84 Under the IBR and PAYE repayment plans, a borrower is determined to have a partial financial hardship if the total
annual payments for all of his or her eligible loans, as calculated according to a standard 10 -year repayment period, are
greater than a specified percentage (15% or 10%) of the borrower’s income that is in excess of 150% of the poverty
guideline applicable to his or her family size. For additional information, see the discussion of the IBR and PAYE
repayment plans in the “ Income-Driven Repayment (IDR) Plans” section.
85 T he administrative forbearance must have been granted (for up to 60 days) for purposes of processing a borrower’s
request for deferment, forbearance, a change in repayment plan, or loan consolidation. As interest is not accruing on
loans during the COVID-19 loan payment suspension period (in practice, ED has placed loans in administrative
forbearance), it cannot be capitalized at the end of the period.
86 34 C.F.R. §§685.209(a)(2)(iv) and 685.221(b)(4).
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their loans according to the ICR plan, the PAYE repayment plan, or the alternative repayment
plans, interest may be capitalized until the outstanding principal balance reaches a maximum of
110% of the amount of the OPB owed at the time the borrower entered repayment.87 Once the
limit is reached, interest wil continue to accrue and accumulate, but it wil no longer be
capitalized as long as the borrower remains in the same repayment plan.
Loan Origination Fees
Loan origination fees are charged to borrowers of Direct Subsidized Loans, Direct Unsubsidized
Loans, and Direct PLUS Loans. No fees are charged to borrowers of Direct Consolidation Loans.
These fees help offset federal loan subsidy costs by passing along some of the costs to
borrowers.88 Loan origination fees are calculated as a proportion of the loan principal borrowed
and are deducted proportionately from the proceeds of each loan disbursement to the borrower.
The amount to be charged for loan origination fees is specified in statute. For Direct Subsidized
Loans and Direct Unsubsidized Loans made on or after July 1, 2010, the HEA specifies a loan
origination fee of 1%. (Higher loan origination fees were charged on loans made prior to July 1,
2010.) Since the inception of the Direct Loan program, the HEA has specified a loan origination
fee of 4% for Direct PLUS Loans.
During periods when a budget sequestration order that applies to direct (or mandatory) spending
programs is in effect, such as for the Direct Loan program, special rules apply to loan origination
fees.89 In instances where the first disbursement of a loan is made during a period that is subject
to a sequestration order, the loan origination fee is required to be increased by the uniform
percentage sequestration amount that is applicable to nondefense, mandatory spending programs.
Loan origination fees that apply to loans made during FY2021 and FY2022 (periods of budget
sequestration) are presented below in Table 3. A history of loan origination fees that previously
applied to loans made through the Direct Loan program is presented in Appendix C in
Table 3. Origination Fees on Loans Made Through the Direct Loan Program,
FY2021 and FY2022
(percentage)
Direct
Direct
Direct
Subsidized
Unsubsidized
PLUS
Disbursement Period
Loans
Loans
Loans
October 1, 2020 - September 30, 2021
1.057
1.057
4.228
October 1, 2021 - September 30, 2022
1.057
1.057
4.228
Source: HEA, §455(c); Balanced Budget and Emergency Deficit Control Act (BBEDCA), §256(b); and U.S.
Department of Education, Office of Federal Student Aid, Electronic Announcement GENERAL-21-31, “FY22
Sequester-Required Changes to the Title IV Student Aid Programs,” May 17, 2021,

87 34 C.F.R. §§685.208(l)(5) and 685.209(a)(2)(iv)(B) and (b)(3)(iv).
88 When the Direct Loan program was established, the terms and conditions of loans were designed to be substantially
similar to those of loans that were being offered through the FFEL program. At that time, borrowers of FFEL program
loans were responsible for paying a loan origination fee and a default fee (which at one time had been referred to as a
loan insurance fee). In the Direct Loan program, the loan origination fee was initially set at 4%, which equaled the sum
of the FFEL loan origination fee and the FFEL default fee.
89 For additional information on how budget sequestration affects federal student loans, see CRS Report R42050,
Budget “Sequestration” and Selected Program Exemptions and Special Rules, archived.
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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

https://fsapartners.ed.gov/knowledge-center/library/elect ronic-announcements/2021-05-17/fy-22-sequester-
required-changes-title-iv-student-aid-programs-ea-id-general-21-31.
Loan Repayment
Borrowers are required to make payments on loans made through the Direct Loan program during
a repayment period that, depending on the loan type, commences either upon the loan being fully
disbursed (Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006) or
after a six-month grace period (Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-
July 1, 2006, Direct Consolidation Loans). Borrowers are afforded the opportunity to choose from
among a selection of numerous loan repayment plan options to repay their loans. The repayment
plan selected is a determining factor in the duration of the repayment period. Borrowers may
prepay al or any part of a loan made through the Direct Loan program at any time without being
subject to a prepayment penalty.
Grace Period
A grace period is a six-month period beginning immediately after a borrower of a Direct
Subsidized Loan, a Direct Unsubsidized Loan, or a pre-July 1, 2006, Direct Consolidation Loan
first ceases to be enrolled in an eligible program on at least a half-time basis. The grace period
excludes any period of up to three years during which a borrower who is a member of a reserve
component of the Armed Forces is cal ed or ordered to active duty for a period of more than 30
days and thus ceases to be enrolled on at least a half-time basis, as wel as any additional period
necessary for such a borrower to resume enrollment at the next available regular enrollment
period.
The grace period is distinct from and not part of the repayment period. A loan on which a grace
period is provided does not enter repayment status until the day after the grace period ends. If a
borrower desires to enter repayment on loans that have a grace period immediately after
completing school or ceasing to be enrolled on at least a half-time basis, he or she may
consolidate those loans into a Direct Consolidation Loan during the grace period and enter
repayment on the Direct Consolidation Loan upon its disbursement.90
Loan Repayment Period
In the Direct Loan program, the repayment period is the period during which borrowers are
obliged to repay their loans. The repayment period for Direct Subsidized Loans, Direct
Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loan begins the day after the
grace period ends. Thus, for these types of loans the loan repayment period begins six months and
one day after the borrower first ceases to be enrolled in an eligible program on at least a half-time
basis. The repayment period for Direct PLUS Loans and Direct Consolidation Loans made on or
after July 1, 2006, begins the day the loan is fully disbursed. (This would be the day of the last
disbursement if the loan has multiple disbursements.) For al loan types, the first payment is due
no later than 60 days after the start of the repayment period.
In general, the repayment period excludes any periods of authorized deferment and forbearance;
however, in certain instances of a borrower repaying a loan according to an IDR plan, periods

90 U.S. Department of Education, Office of Federal Student Aid, Public Service Loan Forgiveness Questions and
Answers, “ Can I waive the six-month grace period on my Direct Subsidized Loans and Direct Unsubsidized Loans and
begin making qualifying PSLF payments early?”, https://studentaid.ed.gov/sa/repay-loans/forgiveness-
cancellation/public-service/questions#qualifying-payments, accessed May 17, 2021.
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during which the borrower is receiving an economic hardship deferment may be considered as
part of the repayment period. In instances where a borrower has entered a period of deferment or
forbearance, the next subsequent payment is due no later than 60 days after the end of the
deferment or forbearance period.
Loan Repayment Plans
Borrowers may choose from among numerous loan repayment plan options to repay their loans.
The available repayment plans fal into five broad categories: standard repayment plans, extended
repayment plans, graduated repayment plans, income-driven repayment (IDR) plans, and
alternative repayment plans.
The particular repayment plans available to any individual borrower may depend on the type(s) of
loans borrowed, the date of becoming a new borrower, or the date of entering repayment status.
In general, al of a borrower’s loans made through the Direct Loan program must be repaid
together according to the same repayment plan. However, if a borrower seeking to repay
according to one of the IDR plans has some types of loans that may be repaid according to an
IDR plan and some that may not, the borrower may repay the eligible loans according to an IDR
plan and the ineligible loans according to a non-IDR plan. If a borrower fails to actively select a
repayment plan, he or she is placed into the standard repayment plan that is applicable to the
loans.
In general, a borrower may change from one plan to another eligible plan at any time and may not
change to a repayment plan that has a maximum repayment period of fewer than the number of
years that the borrower’s loans have already been in repayment status. If a borrower changes
plans to any of the standard repayment plans, graduated repayment plans, extended repayment
plans, or alternative repayment plans, the beginning of the applicable repayment period wil be
measured from the date that the borrower’s loan initial y entered repayment status. If a borrower
changes to one of the IDR plans, the beginning of the repayment period wil be measured from
the date the borrower satisfied certain plan-specific criteria, as described below, for the applicable
IDR plans.
Under the standard repayment plans, graduated repayment plans, extended repayment plans, and
most alternative repayment plans, payment amounts may not be less than the amount of accrued
interest that is due. Negative amortization is permitted in the IDR plans and as part of one
alternative repayment plan option. Also, for loans with variable interest rates (which had been
made prior to July 1, 2006), monthly payment amounts or the length of the repayment period may
be adjusted under the standard repayment plans, graduate repayment plans, and extended
repayment plans to take into account the effects of annual changes in the variable interest rate.
Table 4 provides a summary of selected characteristics of the various loan repayment plans that
are made general y available to borrowers. Following the table, the various repayment plans are
described in detail.

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Table 4. Selected Characteristics of Loan Repayment Plans Generally Available to Borrowers: Standard Repayment Plans,
Extended Repayment Plans, Graduated Repayment Plans, and Income-Driven Repayment Plans
Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Standard Repayment Plans
Standard Repayment None
Level payments
No
No
No
No
10 years
No
Plan with a Maximum
10-year Term
Standard Repayment Direct
Level payments
No
No
No
No
10 to 30 years, No
Plan for Direct
Consolidation
based on
Consolidation Loans
Loans only
combined loan
with 10-year to 30-
balanceb
year Terms
Extended Repayment Plans
Extended Fixed
Loan balance must Level payments
No
No
No
No
25 years
No
Repayment Plan with exceed $30,000
a Maximum 25-Year
Term
Extended Graduated Loan balance must Payments increase
No
No
No
No
25 years
No
Repayment Plan with exceed $30,000
incremental y every
a Maximum 25-Year
2 years
Term
Extended Repayment None
Level payments
No
No
No
No
12 to 30 years, No
Plan with 12-year to
based on loan
30-year Terms
balancec
(Pre-July 1, 2006)
CRS-31

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Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Graduated Repayment Plans
Graduated
None
Payments increase
No
No
No
No
10 years
No
Repayment Plan with
incremental y every
a Maximum 10-year
2 years
Term
Graduated
Direct
Payments increase
No
No
No
No
10 to 30 years, No
Repayment Plan for
Consolidation
incremental y every
based on
Direct Consolidation Loans only
2 years
combined loan
Loans with 10-year to
balanceb
30-year Terms
Graduated
None
Payments increase
No
No
No
No
12 to 30 years, No
Repayment Plan with
incremental y every
based on loan
12-year to 30-year
2 years
balancec
Terms
(Pre-July 1, 2006)
Income-Driven Repayment Plans
Income-Contingent
Direct PLUS
Lesser of:
Yes. Upon failure to
No
Yes
Yes. Accrued interest 25 years
Yes
Repayment (ICR) Plan Loans to parents • 12-year
certify, accrued
is capitalized once per
excluded, unless
amortization,
interest is capitalized
year; and
consolidated into multiplied by an
and payment reverts
capitalized interest
a Direct
income percentage to Standard
may not result in
Consolidation
factor,d or
Repayment Plan with a
balance exceeding
Loan
Maximum 10-year
• 20% of AGIe that
110% of original OPB
Term
exceeds 100% of
federal poverty
guideline
CRS-32

link to page 41 link to page 41 link to page 41 link to page 41 link to page 41
Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Original Income-
Must initial y have Lesser of:
Yes. Upon failure to
Yes. Remaining
Yes
Yes. Accrued interest 25 years
Yes
Based Repayment
a partial financial
• 15% of AGIe that certify, accrued
accrued interest
is general y capitalized
(IBR) Plan
hardship;
exceeds 150% of
interest is capitalized
on Direct
only if a borrower no
Direct PLUS
federal poverty
and payment reverts
Subsidized Loans
longer has a partial
Loans to parents guideline while
to Standard
during negative
financial hardship.
and Direct
borrower has a
Repayment Plan with a amortization for
Consolidation
partial financial
Maximum 10-year
first 3 years,
Loans that
hardship, or
Term
excluding periods
consolidated a
of economic
• 10-year
parent PLUS Loan
hardship
amortization based
excluded
defermentf
on original OPB
IBR Plan for Post-July Must initial y have Lesser of:
Yes. Upon failure to
Yes. Remaining
Yes
Yes. Accrued interest 20 years
Yes
1, 2014, New
a partial financial
• 10% of AGIe that certify, accrued
accrued interest
is general y capitalized
Borrowers
hardship;
exceeds 150% of
interest is capitalized
on Direct
only if a borrower no
Direct PLUS
federal poverty
and payment reverts
Subsidized Loans
longer has a partial
Loans to parents guideline while
to Standard
during negative
financial hardship.
and Direct
borrower has a
Repayment Plan with a amortization for
Consolidation
partial financial
Maximum 10-year
first 3 years,
Loans that
hardship, or
Term
excluding periods
consolidated a
of economic
• 10-year
parent PLUS Loan
hardship
amortization based
excluded
defermentf
on original OPB
CRS-33

link to page 41 link to page 41 link to page 41 link to page 41 link to page 42 link to page 41
Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Pay As You Earn
Must initial y have Lesser of:
Yes. Upon failure to
Yes. Remaining
Yes
Yes. Accrued interest 20 years
Yes
(PAYE) Repayment
a partial financial
• 10% of AGIe that certify, accrued
accrued interest
is general y capitalized
Plan
hardship;
exceeds 150% of
interest is capitalized
on Direct
only if a borrower no
Direct PLUS
federal poverty
and payment reverts
Subsidized Loans
longer has a partial
Loans to parents guideline while
to Standard
during negative
financial hardship; and
and Direct
borrower has a
Repayment Plan with a amortization for
capitalized interest
Consolidation
partial financial
Maximum 10-year
first 3 years,
may not result in
Loans that
hardship, or
Term
excluding periods
balance exceeding
consolidated a
of economic
• 10-year
110% of original OPB
parent PLUS Loan
hardship
amortization based
excluded
defermentf
on original OPB
Revised Pay As You
Direct PLUS
10% of AGIg that
Yes. Upon failure to
Yes. Remaining
Yes
Yes. Accrued interest 20 years for
Yes
Earn (REPAYE)
Loans to parents exceeds 150% of
certify income,
accrued interest
is not capitalized as
borrowers
Repayment Plan
and Direct
federal poverty
accrued interest is
on Direct
long as a borrower
with only
Consolidation
guideline; and
capitalized and
Subsidized Loans
remains in the
undergraduate
Loans that
payment may be
borrower is placed in during negative
REPAYE Repayment
debt; and
consolidated a
adjusted for
the REPAYE
amortization for
Plan
25 years for
parent PLUS Loan borrowers who
Alternative Repayment first 3 years,
borrowers
excluded
return to the plan
Plan; and
excluding periods
with any
from the REPAYE
upon failure to certify of economic
graduate debt
Alternative
family size, a family
hardship
Repayment Planh
size of 1 is assumed
deferment;f and
50% of remaining
accrued interest
on al other loans,
and on Direct
Subsidized Loans
beyond the first 3
years
CRS-34

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Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
REPAYE Alternative
Must have
Level payments,
No
No
No
No
Shorter of:
Noi
Repayment Plan
previously repaid amortized over the
• 10 years from
according to the
shorter of:
placement into
REPAYE
• 10 years from
the plan; or
Repayment Plan;
placement into the
• remainder of
Direct PLUS
plan; or
the 20 year or
Loans to parents • remainder of the
25 year
and Direct
20 year or 25 year
REPAYE
Consolidation
REPAYE
Repayment
Loans that
repayment term, as
Plan term, as
consolidated a
applicable
applicable
parent PLUS Loan
excluded
Source: HEA, §§455 and 493C; 34 C.F.R. §§685.208, 685.209, and 685.221.
Notes: This table excludes the Alternative Repayment Plans. Details about the Alternative Repayment Plans are communicated to borrowers by loan services and are
general y not made publicly available. AGI = adjusted gross income; OPB = outstanding principal balance.
a. Eligibility for certain plans may be contingent upon when an individual became a new borrower, the period during which a borrower obtained a loan, or when a
borrower’s loan entered repayment status. For details, see the section on “Loan Repayment Plans.”
b. The combined loan balance represents the sum of (1) the outstanding balances on al of the borrower’s loans eligible to be included in the Direct Consolidation
Loan, plus (2) the outstanding balance of other federal education loans and private education loans to the extent that the ba lance of the other education loans is not
greater than the balance of the Direct Consolidation Loan, the other education loans are not in default, and the other education loans were not borrowed from an
individual. For additional details, see Table 5.
c. The loan balance represents the total amount of the borrower’s loans made through the Direct Loan program. For additional det ails, see Table 6.
d. Income percentage factors range from 50.52% to 200%, depending on a borrower’s AGI and income tax filing status.
e. For a married borrower who files a joint federal tax return with his or her spouse, the AGI for both spouses is used; for a married borrower who files a separate
federal tax return, only the AGI of the borrower is used.
f.
Periods during which a borrower has received an interest subsidy while qualifying for an economic hardship deferment (during which an interest subsidy is provided
on Direct Subsidized Loans and on the subsidized component of a Direct Consolidation Loan) are excluded from the three-year period.
g. For a borrower who is unmarried, his or her AGI is used. If the borrower is married, and unless certain exceptions apply, the AGI of both the borrower and his or
her spouse is used irrespective of whether the borrower files a joint or separate federal tax return with his or her spouse. If a borrower is married and certifies that
he or she is separated or is unable to access information on the income of his or her spouse, then the AGI of only the borrower is used.
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h. For a borrower who returns to the REPAYE repayment plan after having repaid according to the REPAYE Alternative repayment pla n, if it is determined that the
borrower paid less under the REPAYE Alternative repayment plan than would have been required under the REPAYE repayment plan, payment amounts may be
adjusted upwards to recoup the difference.
i.
Periods of repayment according to the Alternative REPAYE Repayment Plan may count toward the maximum repayment term to qualify for loan forgiveness under
other IDR plans. However, such periods do not qualify for loan forgiveness under the PSLF program.

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Standard Repayment Plans
Standard repayment plans al ow borrowers to make predictable, level payments on their loans
over a defined period of time. Two standard repayment plans are offered.
Standard Repayment Plan with a Maximum 10-Year Term
Al borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans,
and borrowers of Direct Consolidation Loans that entered repayment prior to July 1, 2006, may
select a standard repayment plan that has a maximum repayment period of 10 years. According to
this plan, borrowers make fixed monthly payments of not less than $50 over a period of 10 years;
however, loans with smal balances may be repaid in a period that is shorter than 10 years.91
Standard Repayment Plan for Direct Consolidation Loans
with 10-Year to 30-Year Terms
Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a
standard repayment plan that has a repayment period of between 10 and 30 years. Under this plan,
borrowers make fixed monthly payments of not than less than $50.92 The duration of the
repayment period is based on the combined balances of the Direct Consolidation Loan and al
other federal and private education loans owed by the borrower.93 However, for purposes of
determining the repayment period, the combined balance of the other education loans may not be
greater than the balance of the Direct Consolidation Loan. Repayment periods for the Standard
Repayment Plan for Direct Consolidation Loans are shown in Table 5. (The repayment periods
shown also apply to the Graduated Repayment Plan for Direct Consolidation Loans, which is
discussed in a later section.)
Table 5. Repayment Periods: Standard Repayment Plan for Direct Consolidation
Loans and Graduated Repayment Plan for Direct Consolidation Loans
(Borrowers who entered repayment on or after July 1, 2006)
Combined Loan Balancea
Maximum
at Start of Repayment
Repayment Period
Less than $7,500
10 years
$7,500, but less than $10,000
12 years
$10,000, but less than $20,000
15 years
$20,000, but less than $40,000
20 years
$40,000, but less than $60,000
25 years
$60,000 or more
30 years
Source: 34 C.F.R. §§685.208(c)(h) and (j), and 685.220(i).
a. The combined loan balance represents the sum of (1) the outstanding balances on al of the borrower’s
loans eligible to be included in the Direct Consolidation Loan, plus (2) the outstanding balance of other

91 T he last payment may be for less than $50.
92 T he last payment may be for less than $50.
93 For additional details, see 34 C.F.R. §§685.208(c) and (j), 685.220(i), and U.S. Department of Education, Office of
Federal Student Aid, “ Repayment Plans: Standard Plan.” https://studentaid.gov/manage-
loans/repayment/plans/standard, accessed May 19, 2021.
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federal education loans and private education loans to the extent that the balance of the other education
loans is not greater than the balance of the Direct Consolidation Loan, the other education loans are not in
default, and the other education loans were not borrowed from an individual.
Extended Repayment Plans
Al borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and
Direct Consolidation Loans may elect to repay according to an extended repayment plan. The
extended repayment plans afford borrowers with large total loan balances the opportunity to make
lower monthly payments in return for extending the repayment of their loans for a longer
duration. By extending the repayment term, interest accrues over a longer period of time; as a
consequence, a larger amount of interest is paid under an extended repayment plan than would be
paid according to a standard repayment plan with a 10-year term. There are three extended
repayment plans. Eligibility to select an extended repayment plan is limited based on when a
borrower’s loans entered repayment and the total outstanding principal balance owed on loans
made through the Direct Loan program.
Extended Fixed Repayment Plan with a Maximum 25-Year Term
This repayment plan is available to individuals who are new borrowers on or after October 7,
1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance
of more than $30,000 on loans made through the Direct Loan program. The Extended Fixed
Repayment Plan al ows borrowers to make monthly payments in equal amounts over a period of
25 years from the date their loans entered repayment status.94 This results in monthly payment
amounts being lower than they would be under a standard repayment plan with a 10-year term.
Extended Graduated Repayment Plan with a Maximum 25-Year Term
Like the above plan, this repayment plan is available to individuals who are new borrowers on or
after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an
outstanding balance of more than $30,000 on loans made through the Direct Loan program. The
Extended Graduated Repayment Plan al ows borrowers to make monthly payments that are
initial y low and increase in amount every two years over a repayment period of 25 years from
the date the borrower’s loans entered repayment status.95 Under this plan, monthly payment
amounts increase from an initial payment amount that must be at least $50 to an amount that may
not be greater than three times the initial monthly payment amount.
Extended Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)
This extended repayment plan is available to borrowers of loans made through the Direct Loan
program who entered repayment prior to July 1, 2006. Under this plan, borrowers make monthly
payments in equal amounts over a period that may range from 12 to 30 years from the date their
loans entered repayment status.96 The minimum monthly payment amount is $50, and the
duration of the repayment term is dependent upon the outstanding principal balance of the

94 For additional details, see 34 C.F.R. §685.208(e) and U.S. Department of Education, Office of Federal Student Aid,
“Repayment Plans: Extended Plan,” https://studentaid.gov/manage-loans/repayment/plans/extended, accessed May 19,
2021.
95 Ibid.
96 For additional details, see 34 C.F.R. §685.208(d).
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borrower’s loans made through the Direct Loan program.97 The extension of the repayment term
results in monthly payment amounts being lower than they would be under a standard repayment
plan with a 10-year term. Repayment periods for the extended repayment plan, by loan amount,
are shown below in Table 6. (The repayment periods shown in this table also apply to the
graduated repayment plan for borrowers who entered repayment prior to July 1, 2006, which is
discussed in the next section.)
Table 6. Repayment Periods: Extended Repayment Plan
and Graduated Repayment Plan
(Borrowers who entered repayment prior to July 1, 2006)
Outstanding
Maximum
Principal Balancea
Repayment Period
Less than $10,000
12 years
$10,000, but less than $20,000
15 years
$20,000, but less than $40,000
20 years
$40,000, but less than $60,000
25 years
$60,000 or more
30 years
Source: 34 C.F.R. §§685.208(d), (f) and (i).
Notes: These repayment plans are available to borrowers of Direct Subsidized Loans, Direct Unsubsidized
Loans, Direct PLUS Loans, and Direct Consolidation Loans who entered repayment prior to July 1, 2006.
a. Total OPB of loans made through the Direct Loan program.
Graduated Repayment Plans
Loan repayment according to the graduated repayment plans is structured so that a borrower’s
monthly payment amount wil periodical y change over the course of the repayment period. In
general, borrowers wil be required to make smal er payments at first and larger payments later.
Monthly payment amounts may be less than $50; however, in no instance may they be less than
the amount of interest that accrues. There are three graduated repayment plans. A borrower’s
eligibility to select one of the graduated repayment plans depends on loan type and when the
borrower’s loans entered repayment.
Graduated Repayment Plan with a Maximum 10-Year Term
Al borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans
that entered repayment after July 1, 2006, may select a graduated repayment plan that has a
maximum repayment period of 10 years. Under this plan, monthly payment amounts increase
incremental y every two years from an initial amount that may be less than $50 to an amount that
may not be greater than three times the initial monthly payment amount.98

97 In contrast to the Standard Repayment plan for Direct Consolidation Loans, amounts owed on other federal student
loans and private education loans are not considered for purposes of determining the duration of the repayment term
under this plan.
98 For additional details, see 34 C.F.R. §685.208(g) and U.S. Department of Education, Office of Federal Student Aid,
“Repayment Plans: Graduated Plan,” https://studentaid.ed.gov/sa/repay-loans/understand/plans/graduated, accessed
May 19, 2021.
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Graduated Repayment Plan for Direct Consolidation Loans
with 10-Year to 30-Year Terms
Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a
graduated repayment plan that has a repayment period of between 10 and 30 years. Under this
plan, monthly payment amounts increase incremental y every two years from an initial amount
that may be less than $50 to an amount that may not be greater than three times the initial
monthly payment amount.99 The duration of the repayment period is based on the combined
balances of the Direct Consolidation Loan and al other federal and private education loans owed
by the borrower. However, for purposes of determining the repayment period, the combined
balance of the other education loans may not be greater than the balance of the Consolidation
Loan. Repayment periods for the Graduated Repayment Plan for Direct Consolidation Loans are
shown above in Table 5.
Graduated Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)
Borrowers of loans made through the Direct Loan program who entered repayment prior to July
1, 2006, may repay their loans according to a graduated repayment plan with a term that can
range from 12 to 30 years. Under this plan, monthly payment amounts increase incremental y
every two years from an initial amount that may not be less than either $25 or 50% of the amount
that would be required under the Standard Repayment Plan with a Maximum 10-Year Term to an
amount that may be no more than 150% of the amount that would be required under the Standard
Repayment Plan with a Maximum 10-Year Term.100 The duration of the repayment term is
determined based on the total outstanding principal balance of the borrower’s loans made through
the Direct Loan program. Repayment periods for this graduated repayment plan vary by loan
balance, and are shown above in Table 6.
Income-Driven Repayment (IDR) Plans
Since its establishment, the Direct Loan program has included a requirement that a repayment
plan be made available to borrowers (other than to parent borrowers of Direct PLUS Loans)
under which monthly payment amounts would vary according to the income of the borrower.101
For the first 15 years that the Direct Loan program was in operation, an Income-Contingent
Repayment (ICR) plan fulfil ed this requirement. Over time, additional repayment plans that
served this purpose became available. Collectively, these plans have come to be referred to as
income-driven repayment (IDR) plans.
Several IDR plans are currently available to borrowers: the Income-Contingent Repayment plan,
the Income-Based Repayment (IBR) plan (one version of which is available to individuals who
qualify as a new borrower on or after July 1, 2014, and another which is available to individuals
who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment
plan, and the Revised Pay As You Earn (REPAYE) repayment plan.
The IDR plans afford borrowers the opportunity to make monthly payments in amounts that are
capped at a specified share or proportion of their discretionary income over a repayment period

99 For additional details, see 34 C.F.R. §685.208(h) and U.S. Department of Education, Office of Federal Student Aid,
“Repayment Plans: Graduated Plan,” https://studentaid.ed.gov/sa/repay-loans/understand/plans/graduated, accessed
May 19, 2021.
100 For additional details, see 34 C.F.R. §685.208(f).
101 HEA, §455(d)(1)(D).
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that may not exceed a specified duration. Discretionary income is defined as the portion of a
borrower’s adjusted gross income (AGI) that is in excess of a specified multiple of the federal
poverty guidelines applicable to the borrower’s family size. In general, a borrower’s family size
includes the borrower, the borrower’s spouse, and the borrower’s children, and may include other
individuals who both live with the borrower and receive more than half of their support from the
borrower.102 The portion of a borrower’s income that is below the federal poverty guideline
multiple that is applicable to a particular IDR plan may be considered nondiscretionary income,
or income that may be needed for purposes of meeting certain basic needs such as food and
shelter. Multiples of the federal poverty guidelines that are applicable to the IDR plans are
presented below in Table 7 for family sizes of one through eight persons.
Table 7. 2021Poverty Guidelines for the 48 Contiguous States and the
District of Columbia
(Selected multiples)

Number of Persons in Family or Household
Multiple
1
2
3
4
5
6
7
8
100%
$12,880
$17,420
$21,960
$26,500
$31,040
$35,580
$40,120
$44,660
150%
$19,320
$26,130
$32,940
$39,750
$46,560
$53,370
$60,180
$66,990
Source: U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and
Evaluation, “U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal
Programs,” January 26, 2021, https://aspe.hhs.gov/2021-poverty-guidelines.
Notes: For families/households with more than eight persons, add $4,540 for each additional person.
Separate, higher poverty guidelines apply to Alaska and Hawai . For example, 100% of the poverty guideline for a
one person family/household is $16,090 in Alaska, and $14,820 in Hawai . If a borrower is not a resident of a
state, the poverty guidelines applicable to the 48 contiguous states and the District of Columbia are used.
Poverty guidelines are adjusted annual y based on the percentage change in the Consumer Price Index for Al
Urban Consumers (CPI-U).
The various IDR plans are primarily distinguished by (1) the multiple (e.g., 100%, 150%) of the
federal poverty guidelines used to define discretionary income, (2) the percentage of a borrower’s
discretionary income (e.g., 10%, 15%, 20%) that is assessed as being available for purposes of
making student loan payments, and (3) the maximum duration of the repayment term (e.g., 20
years, 25 years). The IDR plans also share other common characteristics that include the
following:
 Required certification of income and family size. The processes for
determining IDR plan monthly payment amounts take into account a borrower’s
income and family size. Consequently, on an annual basis borrowers must
provide documentation of their income and must certify their family size to

102 34 C.F.R. §§685.209(a)(1(iv); 685.209(c)(1)(iii), and 685.221(a)(3). Borrowers are required to certify their family
size once per year. A borrower’s children may include unborn children expected to be born during the year the
borrower certifies family size.
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become and remain eligible for IDR plan repayment.103 In addition, borrowers
may update their income and family size at any time if either changes.104
 Potential negative amortization. IDR plan payment amounts are capped at no
more than a certain proportion of a borrower’s discretionary income. As a result,
in some circumstances required payment amounts may be less than the amount of
interest that accrues, which may lead to a borrower’s loan(s) becoming
negatively amortized.105
 Potential availability of loan forgiveness. Al the IDR plans make available the
prospect of eventual loan forgiveness if a borrower, after making payments
according to one or more of the IDR plans, has been unable to fully repay his or
her student loan debt by the end of the maximum repayment term.106 Payments
made on defaulted loans repaid according to the IDR plans do not count toward a
borrower’s eligibility for loan forgiveness.
Each of the IDR plans are described in detail below.
Income-Contingent Repayment (ICR) Plan
The Income-Contingent Repayment plan permits borrowers to make payments on eligible student
loans in amounts that are determined according to procedures that take into account a borrower’s
adjusted gross income and family size. Any loan balance that remains unpaid after 25 years of
repayment according to the ICR plan and other qualified plans wil be forgiven. Specifications for
the ICR plan are established by the Secretary and are codified in regulations. An income-
contingent repayment plan has been available to borrowers since the establishment of the Direct
Loan program in 1994.107
Eligibility. The ICR plan is available to al borrowers of Direct Subsidized Loans, Direct
Unsubsidized Loans, Direct PLUS Loans made to graduate and professional students, and Direct
Consolidation Loans.108 Direct PLUS Loans made to parent borrowers are not eligible to be

103 U.S. Department of Education, Office of Federal Student Aid, “In come-Driven Repayment (IDR) Plan Request,”
OMB No. 1845-0102. In response to the COVID-19 pandemic, ED has stated that borrowers will not be required to
recertify their income through at least September 30, 2021, regardless of whether their recertification date would have
happened prior to that date. U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and
Forbearance Info for Students, Borrowers, and Parents,” https://studentaid.gov/announcements-
events/coronavirus#income-driven-repayment, accessed May 21, 2021.
104 T he Fostering Undergraduate T alent by Unlocking Resources for Education Act (the FUT URE Act; P.L. 116 -91),
among other provisions, authorizes the Internal Revenue Service (with borrower approval) to disclose relevant tax
return information to ED for the purpose of determining a Direct Loan borrower's eligibility for and repayment
obligations under IDR plans. Authorized disclosures include (1) taxpayer identity information, (2) filing status, (3)
adjusted gross income, (4) total number of claimed exemptions, (5) the number of dependents taken into account for
determining the Child T ax Credit under IRC Section 24, and (6) the fact that no return was filed (if applicable). As of
the publication date of this report, it appears these procedures have not yet been operationalized.
105 T o offset some of the adverse effects of negative amortization, all of the IDR plans except the ICR plan offer some
form of interest subsidy to borrowers whose loans are in a period of negative amortization.
106 Forgiven, or discharged, indebtedness may be subject to being included as part of a borrower’s gross income for
federal, and possibly state, income tax purposes. For additional information, see the section on “ Tax Treatment of
Discharged and Forgiven Debt ” below.
107 T he ICR plan has been modified several times since the Direct Loan program was established. In general, the
regulations in effect at the time a borrower selects the ICR plan govern the method for determining the borrower’s
monthly payment amounts. 34 C.F.R. §685.208(k)(3). T his description is based on provisions for the ICR plan
specified in current regulations. 34 C.F.R. §685.209(b).
108 T he repayment of Direct Consolidat ion Loans according to the ICR plan is not restricted based on the types of loans
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repaid according to the ICR plan; however, parent borrowers of Direct PLUS Loans may qualify
to repay those loans according to the ICR plan by consolidating them into a Direct Consolidation
Loan. There are no specific income restrictions that limit a borrower’s eligibility to repay
according to the ICR plan.
Payment Amounts. Under the ICR plan, monthly payment amounts are calculated according to
procedures that take into account factors including the outstanding loan balance at the time the
borrower’s loans enter repayment status, the interest rates applicable to those loans, the amount of
any unpaid accrued interest, the borrower’s adjusted gross income (AGI) and family size, and an
income percentage factor. For a married borrower who files a joint federal tax return with his or
her spouse, the AGI for both spouses is used; for a married borrower who files a separate federal
tax return, only the AGI of the borrower is used. Consistent with these criteria, monthly payment
amounts are the lesser of
 a monthly payment amount calculated according to a 12-year amortization
schedule, multiplied by an income percentage factor that corresponds to the
borrower’s AGI and tax filing status;109 or
 one-twelfth of 20% of the amount by which the borrower’s AGI exceeds 100% of
the federal poverty guideline applicable to the borrower’s family size (see Table
7).
Monthly payment amounts may range from $0 for a borrower with an income at or below 100%
of the federal poverty guideline to amounts more than sufficient to repay the borrower’s loans in
12 years or less. For a borrower whose calculated monthly payment results in an amount that is
greater than $0 but less than $5, a minimum monthly payment amount of $5 is required. Monthly
payment amounts are recalculated annual y to take into account changes (e.g., borrower AGI, the
amount of any unpaid accrued interest) that may have occurred over the past year.
Joint ICR Plan Repayment for Married Borrowers. Borrowers of loans made through the
Direct Loan program who are married to each other may elect to repay their loans jointly. Married
borrowers must file a joint federal tax return to qualify for Joint ICR plan repayment. Under this
option, the sum of the outstanding loan balances of each borrower, as of the time they elect joint
repayment, is used to determine their combined monthly payment amount according to the
procedures described above for the ICR plan. Payments made by married borrowers repaying
jointly are applied to each borrower’s loans in proportion to each borrower’s share of the
combined outstanding balance.110
Subsidized Interest. No special interest subsidies are made available to borrowers as part of the
ICR plan.
Application of Payments. Payments made by borrowers under the ICR plan are first applied to
any outstanding charges or collection costs, then to outstanding interest due on the loan, and then
to principal. Under the ICR plan formula, it is possible that a borrower’s monthly payment
amount may be for less than the amount of interest that has accrued since the last payment.

that have been included in a Direct Consolidation Loan.
109 Income percentage factors range from 50.52% to 200%, depending on a borrower’s AGI and income tax filing
status. Income percentage factors for selected AGI amounts and tax filing statuses are specified in a table published
annually by ED; and for borrowers whose AGI falls between amounts listed in the table, linear interpolation is used to
determine their income percent age factor. See U.S. Department of Education, Office of Federal Student Aid, “ Annual
Updates to the Income Contingent Repayment (ICR) Plan Formula for 20 21—William D. Ford Federal Direct Loan
Program,” 86 Federal Register, 19607-19611, April 14, 2021.
110 34 C.F.R. §685.209(b)(2).
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Should this occur, interest wil continue to accrue on the outstanding principal balance and unpaid
interest that has accumulated; it wil be capitalized into the principal balance of the loan once per
year. However, unpaid accrued interest may only be capitalized until the outstanding principal
balance reaches 110% of the amount of the original principal balance as of when the borrower’s
loan(s) entered repayment. Once the OPB has reached 110% of the original principal balance,
unpaid accrued interest may continue to accumulate but wil no longer be capitalized.
Failure to Certify Income and Family Size. To qualify and remain eligible to repay according to
the ICR plan, borrowers must annual y provide certification of their income and family size to
ED. Certification of income is normal y satisfied by providing the borrower’s AGI. However, if
the borrower’s AGI does not reflect his or her current income, alternative documentation of
income may be provided. If the borrower fails to provide certification of income, his or her
monthly payment amount wil be recalculated to equal the amount the borrower would have paid
according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount
owed at the time he or she first elected to repay according to the ICR plan. The repayment period
based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify
his or her family size, a family size of one wil be assumed and used for the year.
Maximum Repayment Period and Loan Forgiveness. The ICR plan has a maximum
repayment period of 25 years. If a borrower repays according to the ICR plan and obtains an
additional loan that is eligible to be repaid according to the plan, a new, separate repayment
period wil begin for the new loan when it enters repayment. If after 25 years of having repaid a
nondefaulted loan or loans according to the ICR plan or certain other repayment plans, or having
qualified for and received an economic hardship deferment, a borrower stil has an outstanding
loan balance, the remaining unpaid balance wil be discharged (i.e., forgiven). The maximum 25-
year repayment period for the ICR plan, after which loan forgiveness may be granted, includes
periods during which the borrower
 made monthly payments (including payments of $0) according to the ICR plan,
 made monthly payments (including payments of $0) according to an IBR plan
while experiencing a partial financial hardship;
 made monthly payments, either as part of an IBR plan after no longer having a
partial financial hardship or after leaving an IBR plan, in amounts calculated
according to the Standard Repayment Plan with a Maximum 10-Year Term,
based on the outstanding balance as of when the borrower first began repaying
according to an IBR plan;
 made monthly payments (including payments of $0) according to the PAYE
repayment plan or the REPAYE repayment plan;
 made monthly payments according to the REPAYE Alternative Repayment plan
prior to changing to an IBR plan;
 made monthly payments on a Direct Subsidized Loan, a Direct Unsubsidized
Loan, or a Direct PLUS Loan according to the Standard Repayment Plan with a
Maximum 10-Year Term during the portion of the maximum 10-year repayment
period that remains after the borrower ceases to repay according to an IBR plan;
 made payments on a Direct Consolidation Loan according to the Standard
Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms
or the Graduate Repayment Plan for Direct Consolidation Loans with 10-Year to
30-Year Terms during the portion of the maximum 10-year to 30-year repayment
period that remains after the borrower ceases to repay according to an IBR plan;
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 made monthly payments according to the Standard Repayment Plan with a
Maximum 10-Year Term;
 made monthly payments during periods after October 1, 2007, according to any
repayment plan in amounts not less than the amount required under the Standard
Repayment Plan with a Maximum 10-Year Term;
 only for borrowers who entered repayment prior to October 1, 2007, and only if
the applicable repayment term is for not more than 12 years, made payments
according to the Standard Repayment Plan for Direct Consolidation Loans with
10-Year to 30-Year Terms, the Extended Repayment Plan for Direct
Consolidation Loans with 10-Year to 30-Year Terms, or the Graduated
Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms
(see Table 5);
 received an economic hardship deferment;111 or
 had monthly payments suspended under the COVID-19 payment suspension (see
section on “COVID-19 Loan Payment Suspension”).
Income-Based Repayment (IBR) Plans
The Income-Based Repayment plans permit borrowers to repay eligible student loans according
to procedures that limit monthly payment amounts based on criteria that take into account a
borrower’s adjusted gross income, family size, and monthly payment amount as calculated
according to a standard 10-year repayment period, based on the greater of the amount owed at the
time the borrower initial y entered repayment or the amount owed at the time the borrower elects
to repay according to the IBR plan. Any loan balance that remains after the maximum repayment
period of the plan wil be forgiven. There are two IBR plan versions that function similarly. They
are differentiated by (1) the date used to delimit borrower eligibility (July 1, 2014), (2) the
percentage of discretionary income used to determine borrower eligibility for the plan and
monthly payment amounts (15% or 10%), and (3) the maximum repayment period (25 years or 20
years). The description that follows distinguishes between the two IBR plan versions as
applicable.
The initial version of the IBR plan was established under the College Cost Reduction and Access
Act of 2008 (CCRAA; P.L. 110-84), and on July 1, 2009, it became available to borrowers of
loans made through the Direct Loan program and the FFEL program, irrespective of when an
individual had borrowed a loan through either program. (Hereinafter, this version is referred to as
the Original IBR plan.) Amendments to the IBR plan were enacted in 2010 under the SAFRA Act
(Title II of the HCERA; P.L. 111-152), and a revised version of the IBR plan was made available
to individuals who, on or after July 1, 2014, became new borrowers of loans made through the
Direct Loan program. (Hereinafter, this version is referred to as the IBR Plan for Post-July 1,
2014, New Borrowers.)
Eligibility. With certain exceptions, federal student loans made through both the Direct Loan
program and the FFEL program are considered eligible loans for purposes of repayment
according to the Original IBR plan,112 while only loans made through the Direct Loan program
are eligible for repayment according to the IBR plan for Post-July 1, 2014, New Borrowers. In

111 34 C.F.R. §685.209(b)(3)(iii)(B).
112 For borrowers with loans made through both the Direct Loan program and the FFEL program, repayment is
coordinated for those who wish to repay both types of loans according to the Original IBR plan. In such cases, payment
amounts are calculated in proportion to the outstanding balance of eligible loans owed under the respective programs.
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both cases, exceptions pertain to loans made to parent borrowers. Direct PLUS Loans and FFEL
PLUS Loans that were made to a parent borrower and Direct Consolidation Loans and FFEL
Consolidation Loans that that were used to repay either a Direct PLUS Loan or a FFEL PLUS
Loan that was made to a parent borrower are ineligible to be repaid according to either of the IBR
plans. These loans to parent borrowers are also excluded from being considered when
determining a borrower’s eligibility for IBR plan repayment. This discussion addresses the IBR
plans available through the Direct Loan program.
Partial Financial Hardship. To be eligible to begin repaying according to an IBR plan, a
borrower must be determined to have a partial financial hardship. The criteria for determining
whether a borrower has a partial financial hardship take into account the borrower’s federal
income tax filing status (e.g., single, married filing jointly), AGI, family size, multiples of the
federal poverty guidelines applicable to the borrower’s family size, and monthly payment
amounts as calculated according to a standard 10-year repayment period based on the greater of
the amount owed at the time the borrower initial y entered repayment or the amount owed at the
time the borrower elects to repay according to the IBR plan.
If a borrower is single, or is married and files an individual federal tax return, he or she is
determined to have a partial financial hardship if the total annual payments for al of the
borrower’s eligible loans, as calculated according to a standard 10-year repayment period, are
greater than the applicable percentage (15% or 10%) of his or her discretionary income. If a
borrower is married and files a joint federal tax return, he or she is determined to have a partial
financial hardship if the total annual payments for al of the eligible loans of the borrower and, if
applicable, the eligible loans of the borrower’s spouse, as calculated according to a standard 10-
year repayment period, are greater than the applicable percentage of the combined discretionary
income of the borrower and the borrower’s spouse. Discretionary income is defined as the portion
of a borrower’s adjusted gross income that is in excess of 150% of the poverty guideline that is
applicable to his or her family size. If the total annual payments for al of the borrower’s eligible
loans, as calculated according to a standard 10-year repayment period, do not exceed 15% or 10%
of his or her discretionary income, as applicable, the borrower is no longer considered as having a
partial financial hardship.
Payment Amounts. During periods while a borrower has a partial financial hardship and repays
according to an IBR plan, monthly amounts due on his or her loans may range from $0, for a
borrower with an AGI that is at or below 150% of the poverty guideline, to a maximum of one-
twelfth of the specified percentage factor (15% or 10%) of a borrower’s discretionary income.
For example, based on the 2021 HHS Poverty Guidelines, 150% of the poverty guideline for a
family of one in the 48 contiguous states and the District of Columbia is $19,320. (See Table 7)
 In the Original IBR plan, a single borrower with an adjusted gross income of $40,000
would have a partial financial hardship if his or her annual student loan payments were
greater than $3,102, or $258.50 per month. ($3,102 is 15% of the result of subtracting
$19,320 from $40,000.)
 In the IBR plan for post-July 1, 2014, New Borrowers, a single borrower with an adjusted
gross income of $40,000 would have a partial financial hardship if his or her annual
student loan payments were greater than $2,068, or $172.33 per month. ($2,068 is 10% of
the result of subtracting $19,320 from $40,000.)
For a borrower whose calculated monthly payment results in an amount that is greater than or
equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated
monthly payment results in an amount that is less than $5, the monthly payment is set at $0.
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Monthly payment amounts are recalculated annual y to take into account changes that may have
occurred over the past year.
If a borrower who is repaying according to an IBR plan no longer demonstrates having a partial
financial hardship or no longer desires to make payments based on income, he or she may remain
in the IBR plan; however, the borrower’s maximum required monthly payment amount wil no
longer be calculated according the formula described above. Nonetheless, the required payment
amount may not exceed the monthly amount due, as calculated according to a standard 10-year
repayment period based on the borrower’s loan balance at the time he or she elected to begin
repaying according to the IBR plan. However, in such a case the duration of the repayment period
may exceed 10 years.
Joint IBR Plan Repayment for Married Borrowers. Since July 1, 2010, the IBR plan has
provided for the joint repayment of loans by married borrowers who both have eligible loans and
who file a joint federal tax return. Individual payment amounts are proportional to each spouse’s
share of the couple’s combined loan balances and combined AGI.
Subsidized Interest. As part of the IBR plans, an interest subsidy is available on subsidized loans
during periods of negative amortization for a maximum of the first three years from the start of a
borrower’s repayment according to an IBR plan. If a borrower’s required monthly payment is not
sufficient to cover al of the interest that accrues on a Direct Subsidized Loan (or the subsidized
component of a Direct Consolidation Loan), the portion of the accrued interest not covered by the
borrower’s monthly payment is subsidized, or paid by the Secretary. Any periods during which
the borrower has received an interest subsidy under either the PAYE plan or the REPAYE plan are
applied toward this three-year period. However, any periods during which a borrower has
received an interest subsidy while qualifying for an economic hardship deferment (during which
an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of a
Direct Consolidation Loan) are excluded from the three-year period. Final y, while a loan would
not be in negative amortization during the COVID-19 interest suspension period, as no interest is
accruing, it is unclear whether the COVID-19 interest suspension period is excluded from the
IBR three-year interest subsidy period.
Application of Payments. Payments made by borrowers repaying under an IBR plan are first
applied to interest due on the loan, then to any fees, and then to principal. If a borrower’s required
monthly payment is for an amount that is less than the amount of interest that accrues on a loan
other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan,
or that accrues on a subsidized loan type after the three-year interest subsidy period described
above, the unpaid accrued interest wil accumulate, but not be capitalized, so long as the borrower
remains in the IBR plan and continues to have a partial financial hardship. If a borrower’s
required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the
amount of principal due, then the payment of any principal due in excess of the monthly payment
amount owed wil be postponed until the borrower no longer has a partial financial hardship or
leaves the IBR plan. Upon a borrower either no longer having a partial financial hardship or
electing to no longer repay according to an IBR plan, any accumulated accrued interest that has
not been paid wil be capitalized.
If a borrower chooses to leave an IBR plan, he or she must change to the Standard Repayment
Plan that is applicable to the loans—either the Standard Repayment Plan with a Maximum 10-
Year Term or the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-
Year Terms. (The borrower may subsequently change to another repayment plan; however, he or
she may not change to a repayment plan—other than a different IDR plan—that has maximum
term that is less than the number of years the borrower’s loans have already been in
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repayment.113) The monthly payment amount due on the borrower’s loans must be calculated
according to the applicable standard repayment plan based on the time remaining in the
repayment period under such plan and the outstanding balance owed at the time the borrower
ceased repaying according to the IBR plan. A borrower who changes from the IBR plan to a
standard repayment plan must make at least one monthly payment according to the standard
repayment plan before changing to another repayment plan for which the borrower may be
eligible. Borrowers may request a forbearance that permits the making of a smal er payment
amount than otherwise would be required for purposes of making that one required monthly
payment according to the Standard Repayment Plan.
Failure to Certify Income and Family Size. To qualify and remain eligible to repay according to
the IBR plans, borrowers must annual y provide certification of their income and family size to
ED. Certification of income is normal y satisfied by providing the borrower’s AGI. However, if
the borrower’s AGI does not reflect his or her current income, alternative documentation of
income may be provided. If the borrower fails to provide certification of income, any unpaid
accrued interest wil be capitalized and his or her monthly payment amount wil be recalculated to
equal the amount the borrower would have paid according to the Standard Repayment Plan with a
Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay
according to the IBR plan. The repayment period based on the recalculated payment amount may
exceed 10 years. If the borrower fails to certify his or her family size, a family size of one wil be
assumed and used for the year.
Maximum Repayment Period and Loan Forgiveness. The maximum repayment period for the
Original IBR plan is 25 years, whereas the maximum repayment period for the IBR plan for post-
July 1, 2014, New Borrowers is 20 years. If after having repaid according to an IBR plan a
borrower obtains additional loans that are eligible to be repaid according to that IBR plan, a new
repayment period wil begin for the new loans when they enter repayment. A borrower who has
participated in one of the IBR plans and has satisfied any combination of the following conditions
for the duration of the applicable repayment period becomes eligible to have any balance that
remains at the end of the maximum repayment period forgiven:
 made reduced monthly payments (including payments of $0) according to an IBR
plan while experiencing a partial financial hardship;
 made monthly payments in amounts calculated according to the Standard
Repayment Plan with a Maximum 10-Year Term after no longer having a partial
financial hardship;
 made monthly payments on Direct Subsidized Loans, Direct Unsubsidized
Loans, or Direct PLUS Loans according to the Standard Repayment Plan with a
Maximum 10-Year Term, or on Direct Consolidation Loans according to the
Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-
Year Terms, as applicable, after choosing to no longer repay according to an IBR
plan;
 made monthly payments according to any repayment plan in amounts not less
than the amount required under the Standard Repayment Plan with a Maximum
10-Year Term;
 made monthly payments according to the Standard Repayment Plan with a
Maximum 10-Year Term based on the amount owed at the time the borrower
initial y selected an IBR plan;

113 34 C.F.R. §§685.210(b)(2) and 685.221(d).
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 made monthly payments (including payments of $0) according to the ICR plan,
the PAYE repayment plan, or the REPAYE repayment plan;
 made monthly payments according to the REPAYE Alternative Repayment Plan
prior to changing to an IDR plan;
 received an economic hardship deferment; or114
 had monthly payments suspended under the COVID-19 payment suspension (see
section on “COVID-19 Loan Payment Suspension”).
Pay As You Earn (PAYE) Repayment Plan
The Pay As You Earn (PAYE) repayment plan is substantial y similar to the IBR plan for post-
July 1, 2014, New Borrowers (see above). The plan permits borrowers to repay eligible loans
according to procedures that limit monthly payment amounts based on criteria that take into
account a borrower’s AGI, family size, and monthly payment amount as calculated according to a
standard 10-year repayment period based on the greater of the amount owed at the time the
borrower initial y entered repayment or the amount owed at the time he or she elects to repay
according to the PAYE plan. For borrowers who repay according to this plan, any loan balance
that remains after 20 years of repayment wil be forgiven. The plan became available to eligible
borrowers on December 21, 2012.
The PAYE repayment plan was established by the Obama Administration through the rulemaking
process under authority provided in the HEA for the Secretary to establish an income-contingent
repayment plan.115 With the establishment of the PAYE repayment plan, a set of benefits
substantial y similar to those that had been extended to a specific class of borrowers through the
enactment of legislation (the IBR Plan for post-July 1, 2014, New Borrowers) was extended to a
broader class of borrowers through the rulemaking process.
Eligibility. The PAYE repayment plan is available to individuals who are new borrowers on or
after October 1, 2007, and have received a disbursement on a Direct Subsidized Loan, a Direct
Unsubsidized Loan, or a Direct PLUS Loan to graduate and professional students on or after
October 1, 2011, or a Direct Consolidation Loan based on an application received by ED on or
after October 1, 2011, and who are identified as having a partial financial hardship. Eligible
borrowers may use the plan to repay loans made through the Direct Loan program, with the
exceptions of Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used
to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers.
Partial Financial Hardship. A borrower is considered as having a partial financial hardship if
the total of his or her annual payments on al eligible loans,116 as calculated according to a
standard 10-year repayment period based on the greater of the amount owed at the time the
borrower initial y entered repayment or the amount owed at the time he or she elects to repay
according to the PAYE plan, is greater than 10% of the amount by which the borrower’s AGI
exceeds 150% of the poverty line applicable to his or her family size.

114 34 C.F.R. §§685.221(d) and (f); 685.208.
115 HEA, §455(d)(1)(D) and (e); 34 C.F.R. §685.209(a).
116 While loans made through the FFEL program may not be repaid according to the PAYE repayment plan, all loans
made on or after October 1, 2007, through the Direct Loan program and the FFEL program (with the exceptions of
Direct PLUS Loans or FFEL PLUS Loans made to parent borrowers, an d Direct Consolidation Loans or FFEL
Consolidation Loans that include such loans) are considered eligible loans for purposes of determining whether a
borrower has a partial financial hardship and for adjusting monthly payment amounts.
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If a borrower is single, or is married and files an individual federal tax return, he or she is
determined to have a partial financial hardship if the total annual payments for al of the
borrower’s eligible loans, as calculated according to a standard 10-year repayment period, are
greater than 10% of his or her discretionary income. If a borrower is married and files a joint
federal tax return, he or she is determined to have a partial financial hardship if the total annual
payments for al of the borrower’s eligible loans and, if applicable, the borrower’s spouse’s
eligible loans, as calculated according to a standard 10-year repayment period, are greater than
10% of the combined discretionary income of the borrower and his or her spouse. If the total
annual payments for al of the borrower’s eligible loans, as calculated according to a standard 10-
year repayment period, do not exceed 10% of his or her discretionary income, the borrower is no
longer considered as having a partial financial hardship.
Payment Amounts. While repaying according to the PAYE repayment plan, monthly amounts
due on borrowers’ loans may range from $0, for those with incomes at or below 150% of the
poverty line, to a maximum of one-twelfth of 10% of any amount by which the borrower’s AGI
exceeds 150% of the poverty line. If a borrower who is repaying according to the plan no longer
demonstrates having a partial financial hardship or no longer desires to make payments based on
income, the monthly payment amount wil be recalculated. In such a case, the maximum monthly
payment amount may not exceed the amount due as calculated according to the Standard
Repayment Plan with a Maximum 10-Year Term based on the borrower’s loan balance at the time
he or she elected to begin repaying according to the PAYE repayment plan. However, the duration
of the repayment period may exceed 10 years.
For a borrower whose calculated monthly payment results in an amount that is greater than or
equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated
monthly payment results in an amount that is less than $5, the monthly payment is set at $0.
Monthly payment amounts are recalculated annual y to take into account changes that may have
occurred over the past year.
Joint PAYE Repayment for Married Borrowers. The PAYE repayment plan provides for the
joint repayment of loans by married borrowers who both have eligible loans and who file a joint
federal tax return. For married borrowers repaying jointly according to the plan, individual
payment amounts are proportional to each spouse’s share of the couple’s combined loan balances
and combined AGI.
Subsidized Interest. An interest subsidy is available on subsidized loans during periods of
negative amortization for a maximum of the first three years from the start of repayment
according to the PAYE repayment plan. If a borrower’s calculated monthly payment is
insufficient to pay al of the interest that accrues on a Direct Subsidized Loan (or the subsidized
component of a Direct Consolidation Loan), the portion of the accrued interest that is not covered
by his or her monthly payment is subsidized for a period not to exceed three years. Periods during
which a borrower is receiving an economic hardship deferment are excluded from the three-year
eligibility period. In general, the terms of this interest subsidy for subsidized loans are the same as
the terms that apply to the IBR plans (see above). Final y, while a loan would not be in negative
amortization during the COVID-19 interest suspension period, as no interest is accruing, it is
unclear whether the COVID-19 interest suspension period is excluded from the PAYE three-year
interest subsidy period.
Application of Payments. Payments made by borrowers repaying according to the PAYE
repayment plan are credited first to interest due on the loan, then to any fees, and then to
principal. If a borrower’s required monthly payment is for an amount that is less than the amount
of interest that accrues, the unpaid accrued interest wil accumulate, but not be capitalized, so
long as the borrower remains in the plan and continues to have a partial financial hardship. If a
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borrower’s required monthly payment is sufficient to pay the accrued interest but is insufficient to
repay the amount of principal due, then the payment of any principal due in excess of the monthly
payment amount owed wil be postponed until he or she no longer has a partial financial hardship
or leaves the plan.
If a borrower no longer has a partial financial hardship but remains in the PAYE repayment plan,
accumulated accrued interest is capitalized into the principal balance of the loan. In such a case,
the amount of accrued interest that may be capitalized is limited to 10% of the outstanding
principal balance at the time the borrower began repaying according to the plan. Any accrued
interest beyond the 10% limit wil remain due but wil not be capitalized as long as the borrower
remains in the plan.
If a borrower chooses to leave the PAYE repayment plan, he or she may change to any other
repayment plan for which he or she is eligible, as long as the new repayment plan has a maximum
term that is not less than the number of years the borrower’s loans have already been in
repayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to
the PAYE repayment plan, any accumulated accrued interest that has not been paid wil be
capitalized.
Failure to Certify Income and Family Size. To qualify and remain eligible to repay according to
the PAYE repayment plan, borrowers must annual y provide certification of their income and
family size. Certification of income is normal y satisfied by providing the borrower’s AGI.
However, if the borrower’s AGI does not reflect his or her current income, alternative
documentation of income may be provided. If the borrower fails to provide certification of
income, any unpaid accrued interest wil be capitalized and his or her monthly payment amount
wil be recalculated to equal the amount the borrower would have paid according to the Standard
Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she
first elected to repay according to the plan. The repayment period based on the recalculated
payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a
family size of one wil be assumed and used for the year.
Maximum Repayment Period and Loan Forgiveness. In the PAYE repayment plan, the
maximum repayment period is 20 years. A borrower who at any time participates in the plan
becomes eligible to have any balance that remains on his or her eligible loans forgiven if during
the 20-year repayment period the borrower meets the loan forgiveness eligibility criteria specified
in regulations at 34 C.F.R. Section 685.209(a)(6) or had monthly payments suspended under the
COVID-19 payment suspension. (These criteria are substantial y similar to the provisions that are
applicable to the IBR plan for post-July 1, 2014, New Borrowers, as described above.) If after
having repaid according to the PAYE repayment plan a borrower obtains additional loans that are
eligible to be repaid according to the plan, a new repayment period wil begin for the new loans
when they enter repayment.
Revised Pay As You Earn (REPAYE) Repayment Plan
The Revised Pay As You Earn (REPAYE) repayment plan permits borrowers to repay eligible
loans made through the Direct Loan program according to procedures that limit monthly payment
amounts based on criteria that take into account a borrower’s AGI and family size. For borrowers
whose student loan debt was obtained exclusively for undergraduate education, the maximum
repayment period is 20 years; for borrowers whose student loan debt includes any amounts
obtained for graduate education, the maximum repayment period is 25 years. Any loan balance
that remains after the maximum repayment period wil be forgiven. The REPAYE repayment plan
became available to eligible borrowers on December 17, 2015.
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Like the PAYE repayment plan, the REPAYE repayment plan was established by the Obama
Administration through the rulemaking process under authority provided in the HEA for the
Secretary to establish an income-contingent repayment plan.117 The REPAYE repayment plan has
a number of characteristics that are similar to the other IDR plans. It also has an enhanced interest
subsidy that is unique to the plan.
Eligibility. The REPAYE repayment plan is available to borrowers of loans made through the
Direct Loan program except for Direct PLUS Loans made to parent borrowers and Direct
Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been
made to parent borrowers. The plan is available to borrowers irrespective of when an individual
became a new borrower. A borrower’s eligibility to repay according to the REPAYE repayment
plan is not limited based on factors that take into account the relationship between his or her
student loan debt and discretionary income (i.e., borrowers need not demonstrate anything akin to
having a partial financial hardship to repay according to the REPAYE repayment plan).
Payment Amounts. While repaying according to the REPAYE repayment plan, monthly amounts
due on borrowers’ loans may range from $0, for those with incomes at or below 150% of the
poverty line, to a maximum of one-twelfth of 10% of any amount by which a borrower’s AGI
exceeds 150% of the poverty line. For a borrower whose calculated monthly payment results in
an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10.
For a borrower whose calculated monthly payment results in an amount that is less than $5, the
monthly payment is set at $0. Monthly payment amounts are recalculated annual y to take into
account changes that may have occurred over the past year.
For purposes of calculating monthly payment amounts under the REPAYE repayment plan, if the
borrower is unmarried his or her AGI is used. If the borrower is married, and unless certain
exceptions apply, the AGI of both the borrower and his or her spouse is used irrespective of
whether the borrower files a joint or separate federal tax return with his or her spouse. If a
borrower is married and certifies that he or she is separated from his or her spouse, or is unable to
access information on the income of his or her spouse, then the AGI of only the borrower is used.
Joint REPAYE Repayment for Married Borrowers. The REPAYE repayment plan provides for
the joint repayment of loans by married borrowers who both have eligible loans and who file a
joint federal tax return. For married borrowers repaying jointly according to an IBR plan,
individual payment amounts are proportional to each spouse’s share of the couple’s combined
loan balances and combined AGI.
Subsidized Interest. Under the REPAYE repayment plan, an interest subsidy is available on both
subsidized loans and unsubsidized loans during periods of negative amortization. During the first
three years from the start of repayment under the plan, for Direct Subsidized Loans and the
subsidized component of Direct Consolidation Loans, if a borrower’s calculated monthly
payment is not sufficient to pay al of the interest that accrues, 100% of the portion of the accrued
interest that is not covered by his or her monthly payment is subsidized. Periods during which a
borrower receives an interest subsidy during an economic hardship deferment are excluded from
the consecutive three-year period. While a loan would not be in negative amortization during the
COVID-19 interest suspension period, as no interest is accruing, it is unclear whether the
COVID-19 interest suspension period is excluded from the REPAYE three-year interest subsidy
period. After the three-year period for subsidized loans, and during al periods for Direct
Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized component of Direct

117 HEA, §455(d)(1)(D) and (e).
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Consolidation Loans, 50% of the portion of the accrued interest that is not covered by the
borrower’s monthly payment is subsidized.118
Graduate students who are borrowers of Direct PLUS Loans may be able to qualify for the 50%
interest subsidy while they are in school in lieu of receiving an in-school deferment while interest
accrues at the otherwise applicable interest rate. For Direct PLUS Loans, the repayment period
begins the day the loan is fully disbursed. However, borrowers who are enrolled on at least a half-
time basis qualify for and typical y receive an in-school deferment during which they are not
required to make payments, but during which interest accrues. Student borrowers are placed in an
in-school deferment upon requesting such a deferment or the Secretary receiving notification
from the borrower’s school or the National Student Loan Data System (NSLDS) that the student
is enrolled on at least a half-time basis. Nonetheless, borrowers who receive an in-school
deferment have the option to cancel it. Borrowers whose AGI while in school is low enough that
it would result in the calculation of a monthly payment amount according to the REPAYE
repayment plan that would be insufficient to pay al of the interest that accrues on their loan may
consider choosing to cancel receipt of an in-school deferment in favor of receiving a 50% interest
subsidy on the portion of the interest that would not be covered by his or her monthly payment
amount.
Application of Payments. Payments made by borrowers repaying according to the REPAYE
repayment plan are credited first to interest due on the loan, then to any fees, and then to
principal. If a borrower’s required monthly payment is for an amount that is less than the amount
of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized
component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the
three-year interest subsidy period described above, the unpaid accrued interest wil accumulate,
but not be capitalized, so long as the borrower remains in the plan. If a borrower’s required
monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of
principal due, then the payment of any principal due in excess of the monthly payment amount
owed wil be postponed.
If a borrower chooses to leave the REPAYE repayment plan, he or she may change to any other
repayment plan for which he or she is eligible, as long as the new repayment plan has a maximum
term that is not less than the number of years the borrower’s loans have already been in
repayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to
the REPAYE repayment plan, any accumulated accrued interest that has not been paid wil be
capitalized.
Failure to Certify Income and Family Size. To qualify and remain eligible to repay according to
the REPAYE repayment plan, borrowers must annual y provide certification of their income and
family size. Certification of income is normal y satisfied by providing the borrower’s AGI.
However, if the borrower’s AGI does not reflect his or her current income, alternative
documentation of income may be provided. If the borrower fails to provide certification of
income, any unpaid accrued interest wil be capitalized and he or she wil be placed in the
REPAYE Alternative Repayment plan. If the borrower fails to certify his or her family size, a
family size of one wil be assumed and used for the year.
REPAYE Alternative Repayment Plan. Borrowers repaying according to the REPAYE
repayment plan who fail to provide timely certification of their income are subject to being placed
into the REPAYE Alternative Repayment plan. Under the REPAYE Alternative Repayment plan,

118 34 C.F.R. §685.209(c)(2)(iii).
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monthly payment amounts are calculated to equal the amount necessary to repay the borrower’s
loans in full within the earlier of 10 years from placement into the REPAYE Alternative
Repayment plan or the ending of the maximum repayment period of 20 years or 25 years, as
applicable.119 Payments made during periods of repayment according to the REPAYE Alternative
Repayment plan count as qualifying payments for loan forgiveness under the various IDR plans;
however, they do not count as qualifying payments for the Public Service Loan Forgiveness
program.120
Maximum Repayment Period and Loan Forgiveness. In the REPAYE repayment plan, the
maximum repayment period is 20 years for borrowers whose student loan debt was obtained
exclusively for undergraduate education; and 25 years for borrowers whose student loan debt
includes any amounts obtained for graduate education. A borrower who at any time participates in
the REPAYE repayment plan becomes eligible to have any balance that remains on his or her
eligible loans forgiven if for 20 years or 25 years, as applicable, the borrower meets the loan
forgiveness eligibility criteria specified in regulations at 34 C.F.R. Section 685.209(c)(5) or had
monthly payments suspended under the COVID-19 payment suspension. (These criteria are
substantial y similar to the provisions that are applicable to the IBR plans, as described above.) If
after having repaid according to the REPAYE repayment plan a borrower obtains additional loans
that are eligible to be repaid according to the plan, a new repayment period wil begin for the new
loans when they enter repayment.
Adjusted Payment Amounts for Borrowers Who Return to the REPAYE Repayment Plan. If
a borrower seeks to return to the REPAYE repayment plan after having left and repaid according
to any other repayment plan (including the REPAYE Alternative Repayment plan), he or she must
provide documentation of income for the entire period that he or she repaid according to another
plan. If it is determined that the borrower paid a lesser amount under the other repayment plan (or
plans) than he or she would have been required to repay according to the REPAYE repayment
plan, upon returning to the REPAYE repayment plan the borrower’s monthly payment amounts
wil be adjusted upward to ensure that the difference between the two amounts wil be paid before
the end of the maximum repayment period of 20 or 25 years, as applicable.
Alternative Repayment Plans
Alternative repayment plans are available in more limited situations, on a case-by-case basis, to
borrowers who demonstrate that due to exceptional circumstances they are unable to repay
according to other available repayment plans.121 Loan servicers have discretion in determining
what constitutes “exceptional circumstances” for purposes of permitting individual borrowers to
repay according to any of the alternative repayment plans.122 If a borrower is permitted to repay

119 In establishing the REPAYE repayment plan, ED stated that in the absence of a process that allows for borrowers to
consent to multi-year access to information on their income, the REPAYE Alternative Repayment pla n provides an
incentive for borrowers to comply with the requirement to certify their income information in a timely manner and also
provides a disincentive for borrowers to fail to provide updated information if their income increases substantially.
Department of Education, “ Student Assistance General Provisions, Federal Family Education Loan,” 80 Federal
Register 39620, July 9, 2015.
120 In the Public Service Loan Forgiveness (PSLF) program, after 10 years of qualifying payments made while
employed full-time in qualifying public service, a borrower’s remaining loan balance may be forgiven. Amounts
forgiven under the PSLF program are exempt from taxation under the Internal Revenue Code. For additional
information on PSLF, see CRS Report R43571, Federal Student Loan Forgiveness and Loan Repaym ent Program s.
121 34 C.F.R. §685.208(l).
122 U.S. Department of Education, Office of Federal Student Aid, Loan Servicing and Collection —Frequently Asked
Questions, “ ARP-Q1: Are there any standard criteria for alternative repayment plans?”,
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according to an alternative repayment plan, he or she is notified in writing of the terms of the plan
and may either accept those terms or select one of the other available repayment plans discussed
above.123 Four variations of alternative repayment plans are available:124
 Alternative Fixed Payment Repayment,
 Alternative Fixed Term Repayment,
 Alternative Graduated Payment Repayment, and
 Alternative Negative Amortization Repayment.
The alternative repayment plans are established in accordance with general guidelines specified in
regulations. Details on specific provisions of these plans are communicated to eligible borrowers
by loan servicers. A borrower may be provided up to a maximum of 30 years to repay according
to an alternative repayment plan, not including periods of deferment and forbearance. There is a
minimum monthly payment amount of $5 and payments cannot vary by more than three times the
amount of the smal est payment.125 Under the Alternative Negative Amortization Repayment
plan, a borrower may be permitted for one year to make monthly payments of less than the
amount of the interest that accrues on the loan.126 In such a case, any unpaid interest wil be
capitalized; however, capitalization of unpaid interest may not result in the loan balance
exceeding 110% of the original principal amount. If this occurs, any additional interest that
accrues must be paid by the borrower. Payments made according to an alternative repayment plan
do not count toward the periods of repayment that may qualify a borrower for loan forgiveness
under the IDR plans or the PSLF program.
Prepayment
The portion of any payment that is in excess of the amount due is considered a prepayment.
Borrowers of loans made through the Direct Loan program may prepay al or any part of their
loans at any time without penalty. Borrowers may obtain information from their Direct Loan
servicer on how to provide prepayment, with instructions regarding the application of
overpayments. The procedures for applying prepayments to borrowers’ accounts are specified in
regulations issued by ED.127
The procedures that apply for crediting a prepayment to a borrower’s loan balance depend on the
size of the prepayment amount relative to the borrower’s scheduled monthly payment. A borrower
with more than one loan who wants a prepayment to be applied to a certain loan or loans (e.g., the
loan with the highest interest rate) must specify such when making the prepayment; otherwise,
the prepayment wil be applied in accordance with HEA regulations and guidelines, which,

https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-asked-questions, accessed
May 21, 2021.
123 34 C.F.R. §685.208(l)((3).
124 T hese alternative repayment plans are distinct from the REPAYE Alternative Repayment plan.
125 U.S. Department of Education, Office of Federal Student Aid, Loan Repayment Plans, “ Alternative Repayment
Plans,” p. 9, https://fsapartners.ed.gov/sites/default/files/attachments/presentations/41LoanRepaymentPlansV1.pdf .
126 Email communication with staff of U.S. Department of Education, Office of Legislation and Congression al Affairs,
July 9, 2019.
127 34 C.F.R. §685.211(a).
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among other provisions, general y require al of a borrower’s loans to be repaid together and
under the same repayment plan.128
In general, if the amount of a prepayment is less than the next scheduled monthly payment
amount according to the borrower’s repayment plan, the prepayment is applied in the following
order: (1) to charges and collection costs,129 (2) to accrued interest, and then (3) to outstanding
principal. However, if the amount of the prepayment is less than the next scheduled monthly
payment amount and the borrower is repaying according to the IBR, PAYE, or REPAYE
repayment plans and has a scheduled monthly payment of $0.00, the prepayment is applied in the
following order: (1) to accrued interest, (2) to collection costs, (3) to late charges, and then (4) to
outstanding principal. For example, consider a borrower whose next scheduled monthly payment
was $200 in January and who was current on making payments. If at the time of making the
January payment the borrower made a payment of $300, this would result in a prepayment of
$100. The $100 prepayment would be applied toward reducing the outstanding principal balance
on the borrower’s loans, because he or she did not have any outstanding charges or accrued
interest. The borrower’s next scheduled monthly payment of $200 would remain due in February.
If the amount of the prepayment is equal to or greater than the next scheduled monthly payment
amount under the borrower’s repayment plan, the prepayment is applied in the same order as
described above, and, unless the borrower requests otherwise, the due date of the borrower’s next
payment is advanced and he or she is notified of the due date for the next payment. For example,
consider again a borrower whose next monthly payment was $200 in January and who was
current on making payments. If at the time of making the January payment the borrower made a
payment of $600, this would result in a prepayment of $400. Because this borrower did not have
any outstanding charges or accrued interest, the $400 prepayment would be applied toward the
next two payments due (i.e., the February and March payments) and the due date of the
borrower’s next payment would be advanced to April. If the borrower instead wanted the $400
prepayment to be applied toward reducing the outstanding principal balance and the next
scheduled payment to remain due in February, he or she would need to request this at the time of
making the prepayment.130
Application of Payments on Delinquent Loans
The loans of borrowers who fal behind on making payments are considered to be delinquent.131
In general, a federal student loan is considered delinquent when the full payment amount is not
satisfied by the payment due date. A borrower may restore a delinquent loan to current status by

128 U.S. Department of Education, Office of Federal Student Aid, Master Promissory Note (MPN) for Direct
Subsidized/ Unsubsidized Loans William D. Ford Federal Direct Loan Program, OMN No. 1845 -007; and 34 C.F.R.
§685.208(a)(4).
129 While the regulations permit the charging of late fees and fees for dishonored checks, in practice Direct Loan
servicing has never assessed such fees or charges. U.S. Department of Education, Office of Legislation and
Congressional Affairs (OLCA), email communication with the author, August 3, 2016.
130 T he Department of Education’s loan servicers provide additional information to borrowers on the treatment of
prepayments and on how to submit special payment instructions. For example, see MOHELA, Paym ent Inform ation:
How Paym ents Are Applied, https://www.mohela.com/DL/resourceCenter/PayingAhead.aspx , accessed May 21, 2021.
131 In general, a borrower who is 270 days or more delinquent on a loan is considered to be in default. Once in default,
the entire remaining balance of the loan becomes due immediately, and ED, via its contracted loan servicers, private
collections agencies, or other authorized means (e.g., the T reasury Offset Program) may attempt to recoup the entire
outstanding balance of the loan.
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making payments that are applied to past due amounts. When borrowers make payments on
delinquent loans, their payments are general y credited first to the oldest past due amounts owed.
An example of how a delinquent loan may be restored to current status is provided by ED in its
contracts for its loan servicers.132 The example considers a borrower whose scheduled monthly
payment amount of $225 is due on the 14th of the month. If as of January 14th, the borrower had
paid only $200 for the January payment, the loan would become delinquent, as $25 would remain
unpaid. However, if on February 14th, the borrower paid $250, $25 would be applied to the past
due amount for January and $225 would be applied to the amount due for February. This would
restore the borrower’s loan to current status.
Deferment and Forbearance
Periods of deferment and forbearance provide borrowers with temporary relief from the
obligation to make monthly payments that would otherwise be due on their loans. In certain
instances, interest subsidies may be provided during periods of deferment; however, with limited
exceptions, interest subsidies are not available during periods of forbearance. In general, periods
during which borrowers are in a deferment or forbearance are excluded from the repayment
period. However, for borrowers who are repaying according to any of the IDR plans, periods of
up to three years while in receipt of an economic hardship deferment are included as part of the
repayment period. The various forms of deferment and forbearance that are available to
borrowers of loans made through the Direct Loan program are described below.
Deferments
A deferment is a temporary period during which a borrower’s obligation to make regular monthly
payments of principal and interest is suspended, and during which an interest subsidy may be
provided. Deferments are available during periods while a student is pursuing postsecondary
education, participating in a graduate fel owship program or a training program, unemployed or
experiencing an economic hardship, performing or has recently completed military service, or
receiving treatment for cancer. Deferments are not available to borrowers whose loans are in
default status.
In most instances, a borrower must proactively apply for and request a deferment. To qualify for
it, the borrower (or, in certain instances, the individual on whose behalf the loan was made for
parent borrowers of Direct PLUS Loans) must satisfy certain eligibility criteria. Several
deferment types have no maximum period of eligibility, while other types are initial y granted for
a limited period of time and may be subsequently renewed up to a maximum period of eligibility
for the deferment type. Periods of eligibility for deferments are specific to the borrower, as
opposed to the borrower’s loans. Thus, for those deferment types that have a maximum period of
eligibility, if a borrower exhausts his or her eligibility with one set of loans no eligibility would
remain to qualify for the same type of deferment on any other loans for which he or she had not
received the deferment.
Unless an interest subsidy applies to a borrower’s loans, interest wil continue to accrue during a
period of deferment. While in receipt of a deferment, borrowers have the option either to pay the
interest as it accrues or pay it at a later time. In most instances, if the interest that accrues during a
period of deferment is not paid as it accrues it wil be capitalized at the end of the deferment

132 See, for example, U.S. Department of Education, Office of Federal Student Aid, Loan Servicing Contracts, T itle IV
Additional Servicing (T IVAS) Contracts (2014): Pennsylvania Higher Education Assistance Agency , p. 14,
https://studentaid.gov/sites/default/files/ED-FSA-09-D-0014_MOD_0072_PHEAA.pdf#page=14.
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period. However, if a borrower’s deferment coincides with the individual having a partial
financial hardship while repaying according to either of the IBR plans or the PAYE repayment
plan, any interest that has accrued during the deferment wil not be capitalized so long as the
borrower continues to have a partial financial hardship.
The following types of deferments are available to borrowers of loans made through the Direct
Loan program.133
In-School Deferment
A borrower is eligible to receive an in-school deferment134 for any period during which he or she
is enrolled at an eligible institution on at least a half-time basis, as determined by the institution
attended. Graduate student borrowers of Direct PLUS Loans first disbursed on or after July 1,
2008, (which enter repayment upon being fully dispersed) are also eligible to receive an in-school
deferment while they are enrolled in school and during the six-month period after ceasing to be
enrolled on at least a half-time basis.135
During an in-school deferment, an interest subsidy is provided on Direct Subsidized Loans and on
the subsidized component of Direct Consolidation Loans. There is no maximum period of
eligibility for an in-school deferment.
Eligible borrowers are typical y placed in an in-school deferment automatical y on the basis of
being enrolled in an eligible institution on at least a half-time basis. However, eligible borrowers
may also proactively request an in-school deferment.136 Borrowers who have been automatical y
placed in an in-school deferment have the option to cancel it. If these borrowers wish to do so,
they have the option to pay any principal and interest that had already been deferred or they may
let the interest that had accrued on the deferred payments be capitalized upon cancel ation of the
deferment.
In-School Deferment for Parent Borrowers of Direct PLUS Loans
Parent borrowers of Direct PLUS Loans for which the first disbursement was made on or after
July 1, 2008, are eligible for a deferment for any period during which the student on whose behalf
the loan was made would qualify for an in-school deferment.137 This deferment is also available
during the six-month grace period after the student on whose behalf the loan was made first
ceases to be enrolled on at least a half-time basis.

133 A borrower who had an outstanding balance on one or more loans that were made through the FFEL program prior
to July 1, 1993, when the borrower first obtained a loan through the Direct Loan program may also be able to qualify
for additional types of deferments. T hese additional deferments are specified at 34 C.F.R. §682.210(b).
134 34 C.F.R. §685.204(b).
135 As a grace period is not offered on Direct PLUS Loans, the six-month period corresponds to the grace period
available on Direct Subsidized Loans and Direct Unsubsidized Loans.
136 U.S. Department of Education, Office of Federal Student Aid, “ In-School Deferment Request ,” OMB No. 1845-
0011,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=inschool&localeCode=
en-us&_ga=2.124675085.684834368.1556119313-753213604.1539381477.
137 34 C.F.R. §685.204(c); U.S. Department of Education, Office of Federal Student Aid, “ Parent PLUS Borrower
Deferment Request ,” OMB No. 1845-0011,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=parentplus&localeCod
e=en-us&_ga=2.56140076.684834368.1556119313 -753213604.1539381477.
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Graduate Fellowship Deferment
A borrower may receive a deferment while pursuing a course of study in a graduate fel owship
program.138 Eligibility requirements include that the borrower has earned a bachelor’s degree, and
that the program operates on a full-time basis, provides financial support for at least six months,
and requires the applicant to submit a written statement of objectives and periodic progress
reports. There is no maximum period of eligibility for this deferment. It is not available to
borrowers who are serving in medical residency or internship programs, except for residency
programs in dentistry.
During a graduate fel owship deferment, an interest subsidy is provided on Direct Subsidized
Loans and on the subsidized component of Direct Consolidation Loans.
Rehabilitation Training Program Deferment
A borrower may receive a deferment while pursuing a course of study in a rehabilitation training
program for individuals with disabilities.139 For a borrower to be eligible, the rehabilitation
training program must be licensed, approved, certified, or recognized by a state agency or the
U.S. Department of Veterans Affairs. It also must provide services according to a written,
individualized plan that specifies an expected completion date and must require a substantial
commitment by the borrower toward rehabilitation to the extent that it would normal y prevent an
individual from being employed full-time (i.e., 30 or more hours per week) for at least three
months. There is no maximum period of eligibility for this deferment.
During a rehabilitation training program deferment, an interest subsidy is provided on Direct
Subsidized Loans and on the subsidized component of Direct Consolidation Loans.
Unemployment Deferment
A borrower who is seeking to obtain full-time employment and is either not employed or is
employed less than full-time may be granted an unemployment deferment.140 To be eligible, a
borrower must be either receiving unemployment benefits or must document that he or she has
registered with a public or private employment agency (if one is available within 50 miles) and is
diligently seeking to obtain full-time employment. A borrower may receive the deferment for a
maximum cumulative period of three years, which may include one or more episodes of
unemployment. He or she is not required to have been employed previously to qualify for it.
A borrower may request that an unemployment deferment begin the date that he or she became
unemployed or began working less than full-time, but that date may be no earlier than six months

138 34 C.F.R. §685.204(d); U.S. Department of Education, Office of Federal Student Aid, “ Graduate Fellowship
Deferment Request ,” OMB No. 1845-0011,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=gradflship&localeCod
e=en-us&_ga=2.219521438.684834368.1556119313 -753213604.1539381477.
139 34 C.F.R. §685.204(e); U.S. Department of Education, Office of Federal Student Aid, “ Rehabilitation T raining
Deferment Request ,” OMB No. 1845-0011,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=rehabtrn&localeCode=
en-us&_ga=2.119580047.684834368.1556119313-753213604.1539381477.
140 34 C.F.R. §685.204(f); U.S. Department of Education, Office of Federal Student Aid, “ Unemployment Deferment
Request,” OMB No. 1845-0011,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=unemploy&localeCod
e=en-us&_ga=2.212772371.684834368.1556119313 -753213604.1539381477.
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prior to requesting the deferment. The deferment may be granted for an initial period of six
months and may be extended in six-month increments.
During an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans
and on the subsidized component of Direct Consolidation Loans.
Economic Hardship Deferment
A borrower may qualify for a deferment during periods while he or she is experiencing an
economic hardship or is serving as a volunteer in the Peace Corps.141 To qualify for this deferment
on a loan made through the Direct Loan program, a borrower must satisfy at least one of the
following criteria:
 the borrower has been granted an economic hardship deferment under the FFEL
program or the Perkins Loan program for the same period of time for which the
borrower requests an economic hardship deferment;
 the borrower is receiving payments under a federal or state public assistance
program (e.g., Temporary Assistance for Needy Families [TANF], Supplemental
Security Income [SSI], Supplemental Nutrition Assistance Program [SNAP],
state general public assistance, other means-tested benefits);
 the borrower is working full-time and has a monthly income that does not exceed
an amount equal to 150% of the poverty line applicable to the borrower’s family
size, (see Table 7) as calculated on a monthly basis; or
 the borrower is serving as a volunteer in the Peace Corps.
The deferment may be granted for periods of up to one year at a time, and may be extended up to
a cumulative maximum of three years.142 Periods of up to three years while a borrower qualifies
for an economic hardship deferment may be counted as part of the repayment period for each of
the IDR plans. During an economic hardship deferment, an interest subsidy is provided on Direct
Subsidized Loans and on the subsidized component of Direct Consolidation Loans.
Military Service Deferment
A borrower may qualify for a military service deferment on the basis of serving on active duty or
performing qualifying National Guard duty during a war or other military operation or national
emergency.143 The deferment is provided for the entire period of qualifying military service, and

141 34 C.F.R. §685.204(g); U.S. Department of Education, Office of Federal Student Aid, “Economic Hardship
Deferment Request ,” OMB No. 1845-0011,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=ecohardshp&localeCo
de=en-us&_ga=2.9995570.684834368.1556119313 -753213604.1539381477.
142 If a borrower qualifies for this deferment based on service in the Peace Corps, it may be granted for the lesser of the
duration of his or her Peace Corps service, or the remainder of his or her period of eligibility without the borrower
being required to request an extension.
143 Qualifying National Guard duty is that which is full-time, performed for more than 30 consecutive days, and a call
to active duty authorized by the President or the Secretary of Defense. It does not include National Guard active duty
activated by the governor of a state. 34 C.F.R. §685.204(h); U.S. Department of Education, Office of Federal Student
Aid, “Military Service and Post -Active Duty Student Deferment Request,” OMB No. 1845-0080,
https://st udentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=milstdnt&localeCode=
en-us&_ga=2.220161438.684834368.1556119313-753213604.1539381477.
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for an additional 180 days following the completion of military service for borrowers whose
period of qualifying service includes or began after October 1, 2007.
During a military service deferment, an interest subsidy is provided on Direct Subsidized Loans
and on the subsidized component of Direct Consolidation Loans.144
Post-Active Duty Student Deferment
A borrower may qualify for a post-active duty student deferment if he or she is a member of the
National Guard145 or other reserve component of the Armed Forces (or is a member in retired
status) and is cal ed or ordered to active duty while he or she is enrolled on at least a half-time
basis at an eligible institution, or within six months of being enrolled.146 To qualify, the borrower
must have been required to perform at least 30 consecutive days of active duty service on or after
October 1, 2007. The deferment is available for a period of up to the lesser of 13 months
following the completion of active duty service or until the borrower re-enrolls in an eligible
institution on at least a half-time basis. If a borrower qualifies for both the military service
deferment and the post-active duty student deferment, the 180-day post-demobilization period
and the 13-month post-active duty service period apply concurrently.
During a post-active duty student deferment, an interest subsidy is provided on Direct Subsidized
Loans and on the subsidized component of Direct Consolidation Loans.
Cancer Treatment Deferment
A borrower may receive a cancer treatment deferment on eligible loans during periods while he or
she is receiving treatment for cancer and for the six months thereafter.147 To qualify for the
deferment, the borrower must submit an application on which a physician who is a Doctor of
Medicine (M.D.) or a Doctor of Osteopathy (D.O.) certifies that the borrower is receiving
treatment for cancer under the physician’s care.148
During periods while a borrower receives a cancer treatment deferment, no interest accrues on the
qualifying loans. Qualifying loans include Direct Subsidized Loans, Direct Unsubsidized Loans,
Direct PLUS Loans, and Direct Consolidation Loans that were either made on or after September
28, 2018, or had entered repayment status on or before September 28, 2018.149 Loans made prior

144 In addition, for all types of loans made through the Direct Loan program that were first disbursed on or after
October 1, 2008, no interest accrues during a period of up to 60 months while the borrower is serving on active duty or
is performing qualifying National Guard duty in an area of hostilities during a war or national emergency .
145 Unlike military service deferment, Post -Active Duty Student Deferment qualifying service includes National Guard
active duty activated by the governor of a state, as well as active duty authorized by the President or the Secretary of
Defense.
146 34 C.F.R. §685.204(i); U.S. Department of Education, Office of Federal Student Aid, “Military Service and Post -
Active Duty Student Deferment Request ,” OMB No. 1845-0080,
https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=milstdnt&localeCode=
en-us&_ga=2.220161438.684834368.1556119313-753213604.1539381477.
147 T he cancer treatment deferment is available for periods of cancer treatment occurring on or after September 28,
2018.
148 U.S. Department of Education, Office of Federal Student Aid, “ Deferment for Cancer T reatment for Direct Loan,
FFEL, and Perkins Loan Program Borrowers,” August 22, 2019, https://fsapartners.ed.gov/knowledge-
center/library/electronic-announcements/2019-08-22/deferment-cancer-treatment-direct -loan-ffel-and-perkins-loan-
program-borrowers; and U.S. Department of Education, Office of Federal Student Aid, “ Cancer T reatment Deferment
Request,” OMB No. 1845-0154, https://studentaid.gov/sites/default/files/CancerT reatmentDeferment.pdf.
149 T he cancer treatment deferment does not appear to be available for loans that were made prior to September 28,
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to September 28, 2018, but had not yet entered repayment as of that date due to the borrower
being enrolled in school on at least a half-time basis or being in the grace period, are not eligible
for this deferment. However, as Direct Consolidation Loans made on or after September 28,
2018, are eligible for the deferment, borrowers of ineligible loans may consider including them in
a Direct Consolidation Loan for purposes of qualifying for the deferment.
Forbearance
Forbearance constitutes permission for a borrower to temporarily cease making monthly student
loan payments, to make payments in reduced amounts, or to make payments over an extended
period of time. With limited exceptions, during periods of forbearance, no interest subsidies are
provided and borrowers ultimately remain responsible for paying al of the interest that accrues
on their loans. Borrowers have the option of either paying the interest as it accrues during
forbearance or letting it be capitalized into the principal balance at the end of the forbearance
period.150 In most instances, borrowers must apply for forbearance; and for certain types of it,
borrowers must provide supporting documentation to their loan servicer. Forbearance may be
granted for an initial period of up to 12 months, and may be renewed upon the borrower’s
request. Certain types of forbearance are limited to a maximum of 36 months.
Forbearance may be granted for a number of reasons. General or discretionary forbearance, may
be granted at the discretion of the loan servicer to borrowers who are temporarily unable to make
scheduled loan payments. Administrative forbearance is granted by the Secretary to borrowers
during periods necessary to determine a borrower’s eligibility for a number of borrower benefits
and for certain other reasons. Certain types of forbearance, referred to as mandatory forbearance,
are required to be granted to borrowers who satisfy applicable eligibility criteria.
General (Discretionary) Forbearance
A borrower may request a general forbearance on the basis of experiencing a temporary hardship
due to financial difficulties, a change in employment, medical expenses, or other reasons.151 A
general forbearance may be granted at the discretion of a borrower’s loan servicer for an initial
period of up to 12 months and may be extended in increments of 12 months. A borrower’s loan
servicer may limit the maximum duration of forbearance; however, there is no statutory or
regulatory limit.152
Administrative Forbearance
Administrative forbearance may be granted during periods necessary to process requests by a
borrower for certain benefits or to determine his or her eligibility.153 It may be granted for up to
60 days for the processing of requests for deferment, forbearance, change of repayment plan, and
loan consolidation. (Interest that accrues during administrative forbearance for these purposes is
not capitalized.) Administrative forbearance is also granted during periods necessary to determine

2019, but had not yet entered repayment prior to that date.
150 In some limited circumstances, as described below, interest is not capitalized at the end of forbearance.
151 34 C.F.R. §685.205(a)(1); U.S. Department of Education, “ General Forbearance Request ,” OMB No. 1845-0031,
https://studentaid.gov/sites/default/files/GeneralForbearance.pdf; U.S. Department of Education, “ Federal Employees:
How to manage your student loans during the government shutdown ,” January 11, 2019,
https://blog.ed.gov/2019/01/federal-employees-manage-student -loans-government -shutdown/.
152 See, U.S. Department of Education, “General Forbearance Request,” OMB No. 1845 -0031,
https://studentaid.gov/sites/default/files/GeneralForbearance.pdf.
153 34 C.F.R. §685.205(b).
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a borrower’s eligibility for a student loan discharge (e.g., death or total and permanent disability,
closed school, false certification, unauthorized payment, unpaid refund, bankruptcy, borrower
defense to repayment) or for loan forgiveness through the Teacher Loan Forgiveness program.
Administrative forbearance is provided to a borrower for up to three years if changes to variable
interest rates preclude the borrower’s ability to repay his or her loans in 10 years under the
standard or graduated repayment plans. It may also be granted for short periods, such as when
payments are overdue at the beginning of an authorized period of deferment or forbearance.
The Secretary may also authorize administrative forbearance in response to a national military
mobilization or a local or national emergency.
COVID-19 Loan Payment Suspension
In response to the COVID-19 pandemic, for March 13, 2020, through at least September 30,
2021, ED wil suspend monthly payments on al types of Direct Loan program loans. (In practice,
ED is placing al loans in administrative forbearance.)154 During this time, borrowers wil not be
required to make payments due on their loans. Borrowers who are eligible for this benefit need
not apply for it; ED wil automatical y suspend payments.
Whereas interest typical y accrues on loans during periods of forbearance, the COVID-19 interest
suspension (see section on “No Accrual of Interest During COVID-19”) ensures that interest does
not accrue on loans during the COVID-19 payment suspension period. In addition, suspended
payments wil count toward the 20- and 25-year repayment periods under the IDR plans, loan
rehabilitation for defaulted loans (see section on “Loan Rehabilitation”), and the 120 required
monthly payments under the Public Service Loan Forgiveness program (see section on “Public
Service Loan Forgiveness (PSLF) program”).155
Medical or Dental Internship or Residency Forbearance
A borrower who is a medical or dental intern or resident and does not or no longer qualifies for a
deferment may receive mandatory forbearance. To qualify, the borrower must have been accepted
into a medical or dental internship or residency program that either leads to a degree or certificate
that is awarded by an IHE, a hospital, or a health care facility that offers postgraduate training, or
that must be completed before the borrower may begin professional practice or service.156 This
type of forbearance may be granted for an initial period of up to 12 months and may be extended
in increments of up to 12 months for the duration of the borrower’s internship or residency.

154 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students,
Borrowers, and Parents,” https://studentaid.gov/announcements-events/coronavirus#forbearance-questions, accessed
May 21, 2021.
155 For additional information, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19.
156 34 C.F.R. §685.205(a)(3); U.S. Department of Education, Mandatory Forbearance Request, “ Medical or Dental
Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance
William D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program ,” OMB
No. 1845-0018,
https://studentaid.gov/sites/default/files/MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepa
yment.pdf.
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AmeriCorps National Service Forbearance
A borrower who is serving in a national service position for which he or she receives a Segal
AmeriCorps Education Award may receive mandatory forbearance.157 It may be granted for an
initial period of up to 12 months and may be extended in increments of up to 12 months for the
duration of the borrower’s national service.
Whereas borrowers are normal y responsible for paying the interest that accrues during
forbearance, the National Service Trust wil pay al or a portion of the interest that accrues during
forbearance for a borrower who has earned a Segal AmeriCorps Education Award.158
Teacher Loan Forgiveness Program Forbearance
A borrower who is serving in a position that would qualify him or her for loan forgiveness under
the Teacher Loan Forgiveness Program (described below) may receive mandatory forbearance. To
be eligible, the borrower must be serving as a full-time teacher at an elementary school,
secondary school, or educational service agency that serves low-income families. The borrower’s
outstanding loan balance is also considered in determining eligibility. This forbearance may be
granted “only if the Secretary believes, at the time of the borrower’s annual request, that the
expected forgiveness amount [i.e., up to $5,000 or up to $17,500, as applicable] wil satisfy the
anticipated remaining outstanding balance on the borrower’s loan at the time of the expected
forgiveness.”159 It may be granted for an initial period of up to 12 months and may be extended in
increments of up to 12 months for the duration of the five consecutive years of teaching service
required to qualify for loan forgiveness.
Student Loan Debt Burden Forbearance
A borrower may receive mandatory forbearance on the basis of having a federal student loan debt
burden that equals or exceeds 20% of his or her monthly total income.160 To qualify, a borrower
must demonstrate that his or her required monthly payments on federal student loans made under
Title IV of the HEA (e.g., loans made under the Direct Loan program, the FFEL program, or the
Perkins Loan program) equal or exceed 20% of his or her total monthly taxable income.161 This
type of forbearance may be granted for an initial period of 12 months and may be extended in
increments of 12 months for a maximum duration of 36 months.

157 34 C.F.R. §685.205(4). For additional information on AmeriCorps, see CRS Report RL33931, The Corporation for
National and Com m unity Service: Overview of Program s and Funding .
158 Corporation for National and Community Service, AmeriCorps, “Members & Volunteers: Your benefits,”
https://americorps.gov/members-volunteers/your-benefits, accessed May 21, 2021. . T his benefit should not be
confused with subsidized interest. During periods while a borrower receives an AmeriCorps National Service
Forbearance, he or she continues to be charged interest. T he interest may be paid on the borrower’s behalf by the
National Service T rust.
159 34 C.F.R. §685.205(a)(5); U.S. Department of Education, “Teacher Loan Forgiveness Forbearance Request ,” OMB
No. 1845-0059, https://studentaid.gov/sites/default/files/T eacherForbearance.pdf. T his type of forbearance is offered to
allow a borrower with a low loan balance the opportunity to avoid losing the oppor tunity to receive the maximum loan
forgiveness benefit available to the borrower due to paying down the borrower’s loan balance prior to satisfying the
program eligibility criteria.
160 34 C.F.R. §685.205(a)(6).
161 U.S. Department of Education, Mandatory Forbearance Request, “ Student Loan Debt Burden,” OMB No. 1845-
0018, https://studentaid.gov/sites/default/files/StudentLoanDebtBurdenForbearance.pdf .
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National Guard Duty Forbearance
Mandatory forbearance is available to a borrower who is a member of the National Guard and
qualifies for a Post-Active Duty Student Deferment but does not qualify for a Military Service
Deferment or other deferment, and is engaged in active state duty service for 30 or more
consecutive days.162 This type of forbearance may be granted for an initial period of up to 12
months and may be extended in increments of up to 12 months for the duration of the borrower’s
qualifying National Guard service.
Department of Defense Student Loan Repayment Program Forbearance
Mandatory forbearance is available during periods while a borrower is performing service that
qualifies him or her for partial repayment under a U.S. Department of Defense student loan
repayment program.163 Interest that accrues during this forbearance is not capitalized at the end of
the forbearance period. It may be granted for an initial period of up to 12 months and may be
extended in increments of up to 12 months for the duration of the borrower’s qualifying service.
Loan Discharge and Loan Forgiveness
An important benefit to borrowers of federal student loans made through the Direct Loan program
is that their obligation to repay these loans may be discharged or forgiven in a variety of
circumstances. Several types of loan discharge and loan forgiveness benefits are available. These
may be grouped into three broad categories: loan discharge for borrower hardship, loan
forgiveness following IDR plan repayment, and loan forgiveness for public service.
Loan Discharge for Borrower Hardship
A borrower who experiences certain types of hardship may have his or her loan discharged. Types
of hardship discharges available to borrowers of loans made through the Direct Loan program are
described below. Administrative forbearance (see above) is granted during the period necessary to
determine a borrower’s eligibility for these types of discharge.

162 34 C.F.R. §685.205(a)(7); U.S. Department of Education, Mandatory Forbearance Request, “ Medical or Dental
Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance
William D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program ,” OMB
No. 1845-0018,
https://studentaid.gov/sites/default/files/MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepa
yment.pdf.
163 34 C.F.R. §685.205(a)(9); U.S. Department of Education, Mandatory Forbearance Request, “ Medical or Dental
Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance
William D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program ,” OMB
No. 1845-0018,
https://studentaid.gov/sites/default/files/MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepa
yment.pdf. P.L. 116-159 amended this provision to make active duty members of the National Oceanic and
Atmospheric Administration’s Commissioned Officer Corps eligible for forbearance.
For additional information on U.S. Department of Defense student loan repayment programs, see CRS Report R43571,
Federal Student Loan Forgiveness and Loan Repaym ent Program s.
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Discharge Due to Death
A borrower’s obligation to repay a loan is discharged if he or she dies; and in the case of a Direct
PLUS Loan made to a parent borrower, the obligation to repay is discharged if the student on
whose behalf the loan was made dies.164 In the case of a Direct Consolidation Loan that repaid
either a Direct PLUS Loan or a FFEL PLUS Loan that was borrowed by a parent on behalf of a
student, if the student dies a proportionate share of the Direct Consolidation Loan attributable to
the applicable Direct PLUS Loan or FFEL PLUS Loan is discharged.165 In the case of a Joint
Direct Consolidation Loan borrowed by two married individuals, upon the death of one spouse a
proportionate share of the loan attributable to the individual who died is discharged.166
Total and Permanent Disability Discharge
A borrower’s liability to repay a loan is discharged upon the individual being determined to have
a total and permanent disability (TPD).167 A borrower may be determined to be have a total and
permanent disability based on any of the following three criteria:168
1. Physician’s Certification. Certification by a physician (M.D. or D.O.) licensed
to practice in the United States that the borrower is unable to engage in any
substantial gainful activity due to a physical or mental impairment that can be
expected to result in death, has lasted continuously for at least 60 months, or can
be expected to last continuously for at least 60 months.
2. SSA Disability Determination. Documentation from the Social Security
Administration (SSA) that the borrower is receiving Social Security Disability
Insurance (SSDI) or Supplemental Security Income (SSI) benefits and that his or
her next scheduled disability review wil be within five to seven years from the
date of the individual’s most recent SSA disability determination.169
3. VA Service Connected Disability or Unemployability. Documentation from the
Department of Veterans Affairs (VA) that the borrower has a service connected
disability (or disabilities) that is 100% disabling or that he or she is total y
disabled based on an individual unemployability rating.

164 HEA, §§437 and 455(a)(1). In addition, in the case of a borrower who is the spouse of an individual who was an
eligible public servant (i.e., a police officer, firefight er, other safety or rescue personnel, or a member of the Armed
Forces) at the time of the September 11, 2001, terrorist attacks and remained so until the eligible public servant’s death
due to injuries suffered in the attacks, the borrower’s obligation to repay a loan made through the Direct Loan program
is discharged upon the death of the borrower’s spouse. 34 C.F.R. §685.218.
165 34 C.F.R. §685.212(a).
166 34 C.F.R. §685.220(l).
167 HEA, §§437 and 455(a)(1). In addition, in the case of a borrower who is the spouse of an individual (or with respect
to a Direct PLUS Loan borrowed on behalf of student, in the case of a borrower who is the parent of such an
individual) who was an eligible public servant (i.e., a police officer, firefighter, other safety or rescue personnel, or a
member of the Armed Forces) at the time of the September 11, 2001, terrorist attacks who became permanently and
totally disabled due to injuries suffered in such attacks, and who was treated within 72 hours of such attacks, the
borrower’s obligation to repay a loan made through the Direct Loan program is discharged. 34 C.F.R. §685.218.
168 34 C.F.R. §§685.102(b), 685.213, and 685.218; U.S. Department of Education, Office of Federal Student Aid, T otal
and Permanent Disability (T PD) Discharge, “ T PD 101,” https://disabilitydischarge.com/tpd-101, accessed May 21,
2021.
169 T his occurs when SSA assigns an individual a Medical Improvement Not Expected (MINE) continuing disability
review diary. For additional information, see Appendix B in CRS Report R44948, Social Security Disability Insurance
(SSDI) and Supplem ental Security Incom e (SSI): Eligibility, Benefits, and Financing .
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On a periodic basis, ED obtains information from SSA and VA on borrowers who might qualify
for a TPD discharge on the basis of the second and third criteria, respectively, and contacts them
to inform them of their potential eligibility.170 A borrower, or his or her authorized representative,
may apply for a TPD discharge by submitting an application along with any required
documentation of the borrower’s disability.171 A borrower who has been identified as a veteran
with a VA service-connected disability or unemployability determination wil be granted a TPD
discharge without needing to submit an application unless he or she decides to opt out of the
process within 60 days of being notified by ED.172
If a borrower’s TPD discharge application is approved, he or she wil be considered total y and
permanently disabled as of the date of the physician’s certification, the date that ED received an
SSA notice of award for SSDI or SSI benefits or Benefits Planning Query (BPQY), or the
effective date of a VA service-connected disability or unemployability determination, as
applicable.173 Upon the determination of a borrower being total y and permanently disabled, his
or her obligation to make any further payments on the loans wil be discharged and any loan
payments that were made after the aforementioned dates wil be returned.
A TPD discharge approved on the basis of a physician’s certification or an SSA disability
determination is granted on a conditional basis for a three-year period that begins on the date of
discharge. During the three-year period, a borrower who has been granted a TPD discharge
according to either of these two criteria is subject to having his or her loans reinstated if the
borrower (1) has annual earnings from employment in excess of 100% of the federal poverty
guideline for a family of two (see Table 7), (2) obtains a new Direct Loan program loan or a
TEACH Grant, (3) fails to return any Direct Loan or TEACH Grant disbursements made between
the TPD discharge application date and the discharge date, or (4) receives a notice from SSA that
he or she is no longer disabled or that his or her next scheduled disability review wil be sooner
than five to seven years from the date of the borrower’s most recent SSA disability
determination.174 To show compliance with the annual earnings requirement, borrowers must

170 U.S. Department of Education, Office of Management, Privacy Safeguards Division, “ Computer Matching
Agreement Between the Social Security Administration (SSA) and the U.S. Department of Education (ED) Federal
Student Aid (FSA),” https://www2.ed.gov/about/offices/list/om/docs/pirms/ssa-mine-cma.pdf; and “ Computer
Matching Agreement Between U.S. Department of Veterans Affairs (VA) and the U.S. Department of Education (ED)
Federal Student Aid (FSA),” https://www2.ed.gov/about/offices/list/om/docs/pirms/computer-matching-agreement -
btwn-ed-and-va.pdf.
171 U.S. Department of Education, Office of Federal Student Aid, T otal and Permanent Disability (T PD) Discharge,
“Forms,” https://disabilitydischarge.com/Forms, accessed May 21, 2021.
172 Presidential Memorandum of August 21, 2019, “Discharging th e Federal Student Loan Debt of T otally and
Permanently Disabled Veterans,” 84 Federal Register 44677-44678, August 26, 2019; and U.S. Department of
Education, “ T rump Administration to Automatically Forgive Federal Student Loan Debt for T otally and Permanen tly
Disabled Veterans,” August 21, 2019. A borrower might consider opting out of a T PD discharge if the borrower is
concerned about the potential for the discharged indebtedness to be included as part of the borrower’s taxable income
under state tax law or if the borrower intends to subsequently obtain an additional loan through the Direct Loan
program. (For such a borrower to subsequently obtain another loan, the borrower must (1) obtain certification from a
physician that the borrower is able to engage in substantial gainful activity, and (2) sign a statement acknowledging that
the new loan may not be discharged on the basis of any impairment present at the time it is made, unless the
impairment becomes substantially worse. 34 C.F.R. §685.200.)
173 U.S. Department of Education, Office of Federal Student Aid, “ T otal and Permanent Disability Discharge: What
happens if my T PD discharge request is approved?”, https://studentaid.gov/manage-loans/forgiveness-
cancellation/disability-discharge#how-do-i-show-that -i-qualify-for-a-tpd-discharge.
174 If a borrower’s loan is reinstated, the borrower is not responsible for paying any interest that would have accrued on
the loan during the three-year monitoring period. T his may be considered as another of the various forms of subsidized
interest available on loans made through the Direct Loan program.
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annual y submit to ED documentation175 of their annual earnings from employment;176 failure to
submit this documentation results in the reinstatement of a borrower’s loan.177 After the three-
year period, the TPD discharge becomes permanent. A TPD discharge granted on the basis of a
VA service connected disability or unemployability is permanent upon being granted and is not
subject to a post-discharge monitoring period.
Closed School Discharge
A borrower’s liability to repay a loan is discharged if the borrower (or the student on whose
behalf a Direct PLUS Loan is made to a parent borrower) does not complete the program of study
for which the loan was made because the school he or she attended has closed.178 In the case of a
Direct Consolidation Loan, the portion of the loan attributable to loans borrowed to finance the
program of study at the closed school is discharged.
For loans made before July 1, 2020, to qualify for a closed school discharge, a borrower general y
must submit an application and certify that the school attended closed either while the student
was enrolled or within 120 days of the student withdrawing, and the student must not have
completed the program of study for which the loan was obtained through a teach-out
agreement179 at another school or by transferring credits earned at the closed school to another
school to enroll in a comparable program.180 However, if based on information available to the
Secretary, a borrower qualifies for a closed school discharge with respect to a school that closed
on or after November 1, 2013, and before July 1, 2020, and the borrower did not subsequently re-
enroll in any Title IV-eligible IHE within three years of the school having closed, the Secretary is
to discharge the borrower’s loan without the borrower needing to submit an application for a
discharge.

175 U.S. Department of Education, Office of Federal Student Aid, “T otal and Permanent Disability Discharge: What
requirements do I have to meet during the three-year postdischarge monitoring period?”,
https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge#what -requirements-do-i-have-to-
meet -during-the-three-year-postdischarge-monitoring-period, accessed May 21, 2021.
176 T he FUT URE Act (P.L. 116-91), among other provisions, authorizes the Internal Revenue Service (with borrower
approval) to disclose relevant tax return information to ED for the purpose of monitoring a borrower’s earnings and, if
necessary, reinstating their loans that were discharged based on T PD. Authorized disclosures include (1) taxpayer
identity information, (2) filing status, (3) the fact that no return was filed (if applicable), and (4) the amount of net
earnings from self-employment, wages, and taxable income from a farming business. As of the publication date of this
report, it appears these procedures have not yet been operationalized.
177 On March 29, 2021, in response to the COVID-19 pandemic, ED suspended the annual earnings certification
requirement through at least September 30, 2021. Borrowers whose loans were reinstated on or after March 13, 2 020,
due to not meeting the annual earnings certification requirement will have their loans automatically returned to
discharge status. U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for
Students, Borrowers, and Parents: T otal and Permanent Disability Discharge,” https://studentaid.gov/announcements-
events/coronavirus#total-and-permanent-disability, accessed May 21, 2021.
178 HEA, §437(c); 34 C.F.R. §§685.212 and 685.214.
179 A teach-out agreement is “a written agreement between institutions that provides for the equitable treatment of
students and a reasonable opportunity for students to complete their program of study if an institution, or an
institutional location that provides one hundred percent of at least one program offered, ceases to operate before all
enrolled students have completed their program of study .” 34 C.F.R. §602.3.
180 For additional information on comparable programs, see U.S. Department of Education, Office of Federal Student
Aid, “Has Your School Closed? Here’s What to Do: How does ED define a “comparable program of study” when
considering eligibility for a closed school loan discharge? ,” studentaid.gov/announcements-events/closed-school,
accessed May 21, 2021.
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For loans made on or after July 1, 2020, to qualify for a closed school discharge, a borrower must
submit an application and must certify that the school attended closed either while the student
was enrolled or within 180 days of the student withdrawing, that he or she has not completed the
program of study for which the loan was obtained through a teach-out agreement at another
school or by transferring credits earned at the closed school to another school, and that he or she
has not accepted the opportunity to complete the program of study or a comparable program at
another school through either a teach-out plan performed by the closing school or a teach-out
agreement at another school.181
In either case, upon being granted a closed school discharge, a borrower is reimbursed for any
amounts he or she had already repaid on the loan. If the borrower had previously defaulted on the
loan, upon being granted a closed school discharge his or her eligibility to receive additional Title
IV federal student aid wil be restored and consumer reporting agencies wil be instructed to
delete any adverse credit history related to the loan. Any discharged loans do not count against
the borrower’s annual and aggregate loan limits, nor against his or her Subsidized Usage Period
applicable under the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time
Borrowers.
False Certification and Unauthorized Payment Discharges
A borrower’s liability to repay a loan is discharged if the eligibility of the borrower (or of the
student in the case of a Direct PLUS Loan made to a parent borrower) to receive the proceeds of
the loan was falsely certified by the IHE attended, or if the loan proceeds were disbursed without
his or her authorization (e.g., unauthorized signature, identity theft).182 In the case of a Direct
Consolidation Loan, a borrower’s liability to repay the portion of the loan that is attributable to
loans that were falsely certified by the IHE attended, or that were disbursed without his or her
authorization, is discharged. Upon being granted a false certification or unauthorized payment
discharge, the borrower is reimbursed for any amounts he or she had already repaid on the loan. If
the borrower had previously defaulted on the loan, upon being granted a false certification or
unauthorized payment discharge his or her eligibility to receive additional Title IV federal student
aid wil be restored and consumer reporting agencies wil be instructed to delete any adverse
credit history related to the loan.
Unpaid Refund Discharge
If a borrower is owed a refund by an IHE that has not been paid, his or her liability to repay an
amount equal to the unpaid refund and any associated accrued interest and other charges is
discharged.183 An unpaid refund discharge is only available in instances where a borrower is owed
a refund by a school that has closed, or by an open IHE that the borrower (or the student on
whose behalf a Direct PLUS Loan is made to a parent borrower) is no longer attending.

181 HEA, §437(c); 34 C.F.R. §§685.212 and 685.214(c)(2). The 180 -day window may be extended in exceptional
circumstances. A teach-out plan is “ a written plan developed by an inst itution that provides for the equitable treatment
of students if an institution, or an institutional location that provides one hundred percent of at least one program,
ceases to operate before all students have completed their program of study, and may in clude, if required by the
institution's accrediting agency, a teach-out agreement between institutions.” 34 C.F.R. §602.3.
182 HEA, §437(c); 34 C.F.R. §§685.212 and 685.215.
183 HEA, §437(c); 34 C.F.R. §§685.212, 685.216, and Appendix A to Subpart B of Part 68 5—Examples of Borrower
Relief.
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Borrower Defense to Repayment Discharge
A borrower’s liability to repay a loan is discharged in whole or in part, and previous loan
payments are refunded, if the borrower (or the student on whose behalf a Direct PLUS Loan was
made to a parent borrower) successfully asserts a defense to repayment of the loan. A borrower
may assert certain acts or omissions by the IHE for which the loan was borrowed that relates to
the making of the loan as a defense to repayment.184
A borrower may assert a defense to repayment according to procedures specified in regulations
that are specific to the period during which his or her loans were made. There are three distinct
periods applicable to borrower defense claims. In the case of a Direct Consolidation Loan, the
procedures to be used for adjudicating a defense to repayment claim depend on the types of loans
that were repaid by it (e.g., loans made through the Direct Loan program, other types of eligible
loans) and when it was made.
For loans disbursed prior to July 1, 2017, a borrower defense to repayment “refers to any act or
omission of the school attended ... that would give rise to a cause of action against the school
under applicable State law.”185 For loans disbursed on or after July 1, 2017, and before July 1,
2020, a borrower defense to repayment refers to a nondefault, contested judgment against the
school; a breach of contract by the school; or a substantial misrepresentation by the school to the
borrower that the borrower had relied on to his or her detriment when he or she decided to attend
or continue attending the school, or decided to borrow a loan.186
For loans disbursed on or after July 1, 2020, a borrower defense to repayment refers to a
misrepresentation of material fact made by the borrower’s school about enrollment or the
provision of educational services that the borrower relied upon in deciding to borrow a loan and
from which he or she suffered financial harm.187 For loans disbursed on or after July 1, 2020, a
borrower must assert a defense to repayment within three years of ceasing to be enrolled at the
IHE.
In the instance that a borrower had previously defaulted on a loan, upon being granted a defense
to repayment discharge the borrower’s eligibility to receive additional Title IV federal student aid
wil be restored and consumer reporting agencies wil be instructed to delete any adverse credit
history related to the loan.

184 HEA, §437(c); 34 C.F.R. §§685.206(c), 685.206(e), 685.212(k), and 685.222. Refunds are limited to the amount of
payments made by the borrower “that exceed the amount owed on that portion of the loan not discharged.” For
additional information, see CRS Report R44737, The Closure of Institutions of Higher Education: Student Options,
Borrower Relief, and Other Im plications.
185 34 C.F.R. §685.206(c).
186 34 C.F.R. §685.222 and Part 668, Subpart F. A misrepresentation means “Any false, erroneous or misleading
statement an eligible institution, one of its representatives, or any ineligible institution, organization, or person with
whom the eligible institut ion has an agreement to provide educational programs, or to provide marketing, advertising,
recruiting or admissions services makes directly or indirectly to a student, prospective student or any member of the
public, or to an accrediting agency, to a Stat e agency, or to the Secretary.” 34 C.F.R. §668.71(c).
187 34 C.F.R. §685.206(e). A misrepresentation means “a statement, act, or omission by an eligible school to a
borrower that is false, misleading, or deceptive; that was made with knowledge of its false, misleading, or deceptive
nature or with a reckless disregard for the truth; and that directly and clearly relates to (1) enrollment or continuing
enrollment at the institution, or (2) the provision of educational services for which the loan was made. ” Financial harm
means “the amount of monetary loss that a borrower incurs as a consequence of a misrepresentation” and excludes
nonmonetary losses.
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Bankruptcy Discharge
Section 523(a)(8) of the Bankruptcy Code provides that student loans (e.g., loans made through
the Direct Loan program) are presumed to be not dischargeable in bankruptcy proceedings, unless
the debtor is able to demonstrate to the court that “excepting such debt from discharge .. would
impose an undue hardship on the debtor and the debtor’s dependents.”188 In general, to discharge
student loan debt in bankruptcy, the debtor must file a separate lawsuit against the holder of the
debt and must prove by a preponderance of the evidence that repayment of the debt would impose
an undue hardship.189 If a borrower’s liability to repay a loan made through the Direct Loan
program is discharged in bankruptcy, the Secretary wil cease to require the borrower to make
payments on the loan.190
Loan Forgiveness Following IDR Plan Repayment
A borrower who has repaid a loan made through the Direct Loan program according to one or
more of the Income-Driven Repayment (IDR) plans for the duration of the applicable maximum
repayment period (including periods of repayment according to certain other eligible plans,
periods while in receipt of an economic hardship deferment, and periods while payments are
suspended due to COVID-19) is relieved of the obligation to repay any balance of principal and
interest that remains outstanding. The applicable maximum repayment period varies by IDR
repayment plan as follows:
 Income-Contingent Repayment Plan: 25 years;
 Original IBR Plan: 25 years;
 IBR Plan for Post-July 1, 2014, New Borrowers: 20 years;
 PAYE Repayment Plan: 20 years;
 REPAYE Repayment Plan for borrowers with debt only for undergraduate
education: 20 years; and
 REPAYE Repayment Plan for borrowers with any debt for graduate education: 25
years.
For detailed information on the requirements for a borrower to qualify for loan forgiveness
following IDR plan repayment, see the descriptions of the maximum repayment period and loan
forgiveness in the prior sections on each of the various IDR plans.
Loan Forgiveness for Public Service
The Direct Loan program makes loan forgiveness benefits available to borrowers who have
engaged in certain types of public service for a specified period of time and meet program-
specific requirements, as described below.191

188 11 U.S.C. §§523(a)(8) and 1328.
189 See CRS Report R45113, Bankruptcy and Student Loans.
190 34 C.F.R. §685.212(c).
191 Borrowers of loans made through the Direct Loan program may also be able to qualify to receive loan repayment
benefits through a number of federal programs. For information on such programs, see CRS Report R43571, Federal
Student Loan Forgiveness and Loan Repaym ent Program s.
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Teacher Loan Forgiveness Program
A borrower who has completed five consecutive complete academic years of teaching service in a
low-income school or educational service agency (ESA) may be relieved of the obligation to
repay up to $5,000 for service as a highly qualified teacher, or up to $17,500 for service as a
highly qualified special education teacher or secondary school teacher of mathematics or
science.192 Teacher Loan Forgiveness benefits are only available to borrowers who had no
outstanding balance on any federal student loan made through the Direct Loan program (or the
FFEL program) as of the date the borrower first obtained such a loan after October 1, 1998.
Student loan debt attributable to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct
Consolidation Loans (to the extent that the Direct Consolidation Loan repaid a Direct Subsidized
Loan, a Direct Unsubsidized Loan, a FFEL Subsidized Stafford Loan, or a FFEL Unsubsidized
Stafford Loan) may be forgiven. Loans must have been obtained prior to the end of a borrower’s
fifth year of qualifying service and may not be in default, unless satisfactory repayment
arrangements have been made. A borrower may receive Teacher Loan Forgiveness Program
Forbearance during the five years of teaching service required to qualify for benefits.
A borrower becomes eligible for loan forgiveness benefits upon completion of the fifth year of
qualifying service. If a borrower’s student loan debt exceeds the amount to be forgiven, unless
otherwise requested by the borrower, loan forgiveness benefits are applied first to Direct
Unsubsidized Loans, then to Direct Subsidized Loans, then to the unsubsidized component of
Direct Consolidation Loans, and final y to the subsidized component of Direct Consolidation
Loans. Loan forgiveness benefits may not be provided for the same service used to qualify for
benefits under the Public Service Loan Forgiveness (PSLF) program, the Loan Forgiveness for
Service in Areas of National Need Program, or a Segal AmeriCorps Education Award.193
Public Service Loan Forgiveness (PSLF) Program
A borrower may be relieved of the obligation to repay the balance of principal and interest that
remains outstanding on eligible loans upon having made 120 qualifying monthly payments on or
after October 1, 2007, concurrent with the borrower being employed full-time by one or more
public service organizations or serving full-time in an AmeriCorps or Peace Corps position.194 To
qualify, a borrower must make 120 separate, full, on-time scheduled monthly payments on loans
that are not in default. In general, qualifying payments are those made within 15 days of the due
date according to certain repayment plans. Borrowers may make lump sum payments for up to the

192 HEA, §460; 34 C.F.R. §§685.212(h) and 685.217. Breaks in service are authorized for borrowers who return to
school on at least a half-time basis to pursue additional postsecondary education related to the qualifying teaching
service, who have a condition covered under the Family and Medical Leave Act of 1993 (FMLA), or who are called or
ordered to active duty for more than 30 days in a reserve component of the Armed Forces. An eligible school or ESA is
an entity (1) that qualifies for funds under T itle I of the Elementary and Secondary Education Act of 1965 (ESEA), (2)
at which more than 30% of students qualify for T itle I services, and (3) that is listed in the Annual Directory of
Designated Low-Incom e Schools for Teacher Cancellation Benefits (Teacher Cancellation Low-Incom e (TCLI)
Directory), https://studentloans.gov/myDirectLoan/tcli.action?_ga=2.177690848.49 3686772.1564697813-
1244777594.1562359674. Bureau of Indian Education (BIE) schools are considered eligible schools. Qualifying
service may be completed at one or more eligible schools or ESAs.
193 A parallel T eacher Loan Forgiveness program is available for borrowers of FFEL program loans. If a borrower also
has eligible loans made through the FFEL program, combined T eacher Loan Forgiveness program benefits received
through the Direct Loan program and the FFEL program may not exceed $5,000 or $17,500, as appl icable.
194 HEA, §455(m); 34 C.F.R. §§685.212(i) and 685.219. For a detailed description of the PSLF program, see CRS
Report R45389, The Public Service Loan Forgiveness Program : Selected Issues.
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lesser of 12 months or when their next IDR annual certification is due.195 Regulations also specify
that borrowers using Segal AmeriCorps Education Award benefits, Peace Corps transition
payments, or certain Department of Defense student loan repayment benefits may make lump
sum payments.196 Qualifying payments include those made according to one or more of the
following repayment plans:
 Income-Contingent Repayment (ICR) plan;
 Income-Based Repayment (IBR) plans;
 Pay As You Earn (PAYE) repayment plan;
 Revised Pay As You Earn (REPAYE) repayment plan;
 Standard Repayment Plan with a Maximum 10-Year Term; and
 any other of the loan repayment plans (except for the alternative repayment plans
[discussed above]) if the monthly payment amount is not less than what would be
paid under the Standard Repayment Plan with a Maximum 10-Year Term.
In addition, monthly payments suspended under the COVID-19 payment suspension count toward
the 120 qualifying monthly payments.
A borrower must be employed by or serving full time with a public service organization at the
time he or she makes each of the required 120 payments, applies for loan forgiveness benefits,
and has forgiveness granted.197 Public service organizations are federal, state, local, or tribal
government agencies, organizations, or entities; tribal colleges and universities; public child or
family service agencies; nonprofit entities organized under Section 501(c)(3) of the Internal
Revenue Code (IRC) that are tax-exempt under IRS Section 501(a); and certain other private
nonprofit entities that are providers of public services. Public service organizations exclude labor
unions and partisan political organizations. Currently, religious organizations are also excluded
from the definition of public service organization, except to the extent that activities do not relate
to religious instruction, worship services, or proselytizing. Effective July 1, 2021, religious
organizations are to qualify as public service organizations, regardless of whether activities relate
to religious instruction, worship services, or proselytizing.198 Eligible private nonprofit entities
include providers of any of the following public services: emergency management, military
service, public safety, law enforcement, public interest law services, early childhood education,
public service for individuals with disabilities and the elderly, public health, public education,
public library services, and school library or other school-based services. Loan forgiveness
benefits may not be provided for the same service used to qualify for benefits under the Teacher

195 U.S. Department of Education, Office of Federal Student Aid, Electronic Announcement, “Changes to the Public
Service Loan Forgiveness (PSLF) Program and New, Single PSLF Form, October 28, 2020,
https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2020-10-28/changes-public-service-
loan-forgiveness-pslf-program-and-new-single-pslf-form.
196 34 C.F.R.§685.219(c)(2).
197 Full-time employment means the greater of an average of 30 hours per week or the number of hours the employer
considers full time. Employer-provided leave or vacation and FMLA leave are not considered when determining the
average number of hours worked. Lump sum payments may be applied to the lesser of either the number that results
from dividing the amount of the lump sum payment by the borrower’s monthly payment amount as calculated
according to one of the authorized repayment plans, or 12 months. 34 C.F.R. §685.219.
198 Department of Education, "Federal Perkins Loan Program, Federal Work -Study Programs, Federal Supplemental
Educational Opportunity Grant, Federal Family Education Loan Program, William D. Ford Federal Direct Loan
Program, National Direct Student Loan Program, T eacher Education Assistance for College and Higher Education
Grant Program, Federal Pell Grant Program, Leveraging Educational Assistance Partnership Program, and Gaining
Early Awareness and Readiness for Undergraduate Programs," 85 Federal Register 49805-07, 49821, August 14, 2020.
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Loan Forgiveness Program, the Civil Legal Assistance Attorney Loan Repayment Program, or the
Loan Forgiveness for Service in Areas of National Need Program.199
Temporary Expanded Public Service Loan Forgiveness (TEPSLF) Program
The TEPSLF program was established in response to concerns that some borrowers were
experiencing difficulty in deciphering and complying with the requirements for establishing
eligibility for loan forgiveness through the PSLF program.200 A borrower who would qualify for
loan forgiveness under the PSLF program except for the fact that, under certain circumstances,
some or al of the required 120 monthly payments were nonqualifying may be relieved of the
obligation to repay the balance of principal and interest that remains outstanding upon the
borrower otherwise satisfying the requirements of the PSLF program as wel as the following
criteria:
 Al of the borrower’s nonqualifying monthly payments must have been made
according to any of the Extended Repayment Plans or the Graduated Repayment
Plans, but in an amount that was less than what would have been paid under the
Standard Repayment Plan with a Maximum 10-Year Term.
 The amount of both the borrower’s most recent monthly payment and the
monthly payment made 12 months prior to application for relief through the
TEPLSF program must equal or exceed the monthly payment amount that would
have been calculated under one of the IDR plans for which the borrower would
have otherwise qualified. (An exception to this criterion is provided to a
borrower who would otherwise qualify for TEPSLF benefits but over the past
five years demonstrates an “unusual fluctuation of income.”201)
Benefits are available on a first-come, first-served basis and are subject to the availability of
funds.202
Tax Treatment of Discharged and Forgiven Debt
The IRC provides that, in general, student loan debt (as wel as other types of debt) that is
discharged, forgiven, or repaid on a borrower’s behalf is included as part of the individual’s gross
income for the purposes of federal income taxation.203 In certain instances, however, discharged
or forgiven student loan debt may be excluded from an individual’s gross income and, therefore,
exempted from consideration in determining federal income tax liability. If loan discharge or loan
forgiveness benefits are not specifical y excluded from an individual’s gross income, he or she
may be responsible for paying any income tax liability associated with the benefits received. In

199 For additional information on the latter two programs, see CRS Report R43571, Federal Student Loan Forgiveness
and Loan Repaym ent Program s.
200 For background, see U.S. Government Accountability Office, Public Service Loan Forgiveness: Education Needs to
Provide Better Inform ation for the Loan Servicer and Borrowers, GAO-18-547, 2918,
https://www.gao.gov/assets/700/694304.pdf.
201 P.L. 115-141.
202 Up to $500 million in loan forgiveness benefits was made available by P.L. 115-141, an additional $500 million was
made available by P.L. 115-245, an additional $75 million was made available by P.L. 116 -94, and an additional $75
million was made available by P.L. 116-260.
203 IRC §61(a)(12).
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the circumstances described below, discharged or forgiven student loan debt may be excluded
from an individual’s gross income:
 Loan Discharge in General. Student loan debt that is discharged for almost any
reason, if the discharge occurs after December 31, 2020, and before January 1,
2026. This could include, discharge due to death of the borrower (or due to the
death of the student on whose behalf a Direct PLUS Loan was made to a parent
borrower) and discharge due to the total and permanent disability of the
borrower.204
 Closed School Discharge. Student loan debt that is discharged on the basis of
the school attended having closed while the student was enrolled or within 120
days (for loans made prior to July 1, 2020) or 180 days (for loans made on or
after July 1, 2020) of the student withdrawing and the student also having not
completed the program of study for which the loan was obtained.205
 False Certification and Unauthorized Payment Discharges. Student loan debt
that is discharged on the basis of the proceeds of the loan having been falsely
certified by the IHE the borrower attended or having been disbursed without his
or her authorization.206
 Unpaid Refund Discharge. Student loan debt that is discharged on the basis of a
school that has closed or that a borrower no longer attends having not refunded
amounts owed to the borrower.207
 Bankruptcy Discharge. Student loan debt that is discharged in bankruptcy
proceedings.208
 Insolvency. Student loan debt that is discharged while an individual is
insolvent.209 Depending on an individual’s unique circumstances, it may be
possible for a borrower who receives Loan Forgiveness Following IDR Plan
Repayment to be considered insolvent at the time of discharge.
 Loan Forgiveness for Public Service. Discharged or forgiven student loan debt
may be excluded if a loan was made by certain types of lenders (e.g., the federal
government), was borrowed to assist an individual in attending a qualified
educational institution, and contains terms providing that some or al of the
balance wil be cancel ed for work for a specified amount of time in certain
professions or occupations and for any of a broad class of employers (e.g., public
service organizations).210 Student loan debt that is discharged through the Teacher

204 P.L. 117-7.
205 HEA §§437(c) and 465(a)(5).
206 HEA §§437(c) and 465(a)(5).
207 HEA §§437(c) and 465(a)(5).
208 IRC §108(a)(1)(A).
209 IRC §108(a)(1)(B). “For purposes of [IRC §108], the term ‘insolvent’ means the excess of liabilities over the fair
market value of assets. With respect to any discharge, whether or not the taxpayer is insolvent, and the amount by
which the taxpayer is insolvent, shall be determined on the basis of the taxpayer’s assets and liabilities immediately
before the discharge.” IRC §108(d)(3).
210 IRC §108(f). For additional information on this provision, see “Exclusion of Income Attributable to the Discharge
of Certain Student Loan Debt and NHSC and Certain State Educational Loan Repayments,” in CRS Committee Print
CP10004, Tax Expenditures: Com pendium of Background Material on Individual Provisions — A Com m ittee Print
Prepared for the Senate Com m ittee on the Budget, 2020 , by Jane G. Gravelle et al.
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Loan Forgiveness program, the PSLF program, and the TEPSLF program may be
excluded.
Loan Default, Its Consequences, and Resolution
A loan made through the Direct Loan program is considered to be in default once the borrower
has failed to make payments when due or has otherwise not adhered to the terms of the
promissory note for 270 days.211 Defaulting on a federal student loan can result in a number of
adverse consequences for the borrower. Upon default, the borrower’s obligation to repay the loan
is accelerated (i.e., the entire unpaid balance of principal and accrued interest becomes due in
full).212 In addition, upon defaulting a borrower loses eligibility for certain borrower benefits
(e.g., deferment, forbearance, loan forgiveness), as wel as eligibility to receive additional Title IV
federal student aid.
Defaulting may also result in other adverse effects for the borrower and may present a major
obstacle to the borrower’s future economic wel -being. The Secretary will report defaulted loans
to consumer reporting agencies and wil take action to collect on them through one or more
means. The borrower of a defaulted loan may be assessed a variety of charges for the costs of
collecting on it.
Several options are available to borrowers to bring defaulted loans back into good standing. A
borrower may remove a loan from default status by rehabilitating the loan, consolidating the loan
into a new Direct Consolidation Loan, or paying off the defaulted loan balance.
Consequences of Default for Borrowers
A borrower who defaults on a loan made through the Direct Loan program becomes subject to
many consequences, which are briefly described below:
 Ineligibility for Federal Student Aid. The borrower becomes ineligible to
receive federal student aid made under Title IV of the HEA.213 A defaulted
borrower may regain eligibility by voluntarily making six consecutive, on-time,
full monthly payments. A borrower may restore eligibility for Title IV aid though
this method only once.
 Capitalization of Interest. Any unpaid interest that has accrued (e.g., during
periods of negative amortization, during delinquency) may be capitalized into the
principal balance of the loan.
 Acceleration. The entire unpaid balance owed on the borrower’s loan becomes
due in full.
 Transfer to Private Collection Agencies. Upon default, student loan accounts
are initial y transferred from the borrower’s student loan servicer to the Office of
Federal Student Aid’s Default Management and Collection System (DMCS),
which may then transfer defaulted loans to private collection agencies (PCAs)
that are under contract with FSA for collections. A PCA wil first contact the
borrower before pursuing efforts to collect on the debt. The PCA may offer the

211 34 C.F.R. §685.102.
212 34 C.F.R. §685.211(d).
213 Ineligibility for T itle IV aid also results from defaulting on a FFEL program loan or a Perkins Loan.
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borrower the opportunity to rehabilitate the loan or to enter into a voluntary
repayment agreement.214 If the borrower accepts neither offer, or does not honor a
voluntary repayment agreement, the PCA may seek to collect on the defaulted
loans by means of administrative wage garnishment (AWG). The PCA may also
refer defaulted loans to the Treasury Offset Program (TOP) for col ection, or may
recommend litigation.
 Assessment of Collection Charges. The borrower may be charged for the costs
of collecting on the loan, including loan collection fees, TOP processing fees,
court costs, and attorney’s fees.215
 Administrative Wage Garnishment (AWG). Up to 15% of the borrower’s
disposable pay may be garnished to repay the defaulted student loan.216
Disposable pay is defined as that part of a borrower’s compensation that remains
after deducting amounts required by law to be withheld. Defaulters must be given
written notice of the intent to garnish wages; and they have rights to examine the
debt record, have a hearing concerning the existence and amount of the debt or
repayment terms, and establish a repayment schedule before garnishment begins.
 Federal Salary Offset. Similar to AWG, up to 15% of the disposable pay
(including retirement pay) of a borrower who is a current or former federal
employee may be offset to repay a defaulted student loan.217
 Treasury Offset Program. Defaulters become subject to having their federal
income tax returns, Social Security benefits, and certain other federal benefits
offset through the Treasury Offset Program (TOP)218 as payment on their student
loans. Up to 100% of federal tax refunds may be offset. Social Security benefits
may be offset in an amount up to the lesser of 15% of the borrower’s monthly
benefit amount, or the amount that his or her monthly benefit exceeds $750.219
Special rules apply with regard to the offset of Social Security Disability
Insurance (SSDI) benefits. If a recipient has a disability rating of medical
improvement not expected (MINE), the offset of SSDI benefits wil be
suspended. However, if a recipient’s disability benefits are converted to
retirement benefits, the offset of Social Security benefits may resume.220
 Civil Lawsuit. Litigation is employed as a last resort to collect on a defaulted
loan. If this option is pursued, the U.S. Department of Justice may sue the
defaulter, on behalf of the Office of Federal Student Aid, to compel repayment.
 Reporting to Consumer Reporting Agencies. Information on student loans,
including amounts borrowed, amounts owed, and repayment status, is regularly

214 For additional information on PCAs, see CRS Report R44845, Administration of the William D. Ford Federal
Direct Loan Program .
215 34 C.F.R. §§30.60, 685.202(e), and 685.211(d).
216 HEA, §488A; 34 C.F.R. Part 30.
217 30 C.F.R. Part 31 and Part 32.
218 U.S. Department of the T reasury, Bureau of the Fiscal Service, “ T reasury Offset Program: What is the T reasury
Offset Program?”, https://fiscal.treasury.gov/top/how-top-works.html, accessed May 24, 2021.
219 31 U.S.C. §3716(c)(3)(A); 31 C.F.R. §285.4(e).
220 U.S. Department of Education, Office of Federal Student Aid, “Understanding Delinquency and Default:
Collections: Withholding Money From Your T ax Refund or Other Federal Payments (T reasury Offset) ,”
https://studentaid.ed.gov/sa/repay-loans/default/collections#treasury-offset, accessed May 24. 2021.
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exchanged with consumer reporting agencies. Upon default, information about it
wil also be shared. Consumer reporting agencies may report information on the
status of a borrower’s defaulted student loan for seven years from the date of the
default.221
COVID-19 Collection Suspension
In response to the COVID-19 pandemic, for March 13, 2020, through at least September 30,
2021, ED has halted involuntary collection practices, which include AWG; offset of federal
income tax returns, Social Security benefits, and certain other federal benefits; and civil litigation.
In addition, ED has directed PCAs not to engage in proactive collection activities (e.g., they may
not make collection cal s or send letters or bil ing statements to defaulted borrowers. However,
borrowers may contact PCAs to begin or continue default resolution arrangements (described
below).222
Resolution of Default
A number of options are available to borrowers to get out of default. As noted above, a borrower
may rehabilitate the defaulted loan, obtain a Direct Consolidation Loan and use the proceeds to
pay off the defaulted loan, pay the amount owed on the defaulted loan in full, or, in limited
circumstances, enter into a compromise agreement.
Repaying a defaulted loan in full may be beyond the means of many borrowers. However, options
to do so may include obtaining financing from outside the Direct Loan program to pay off the
defaulted debt. A compromise agreement or debt settlement may permit a borrower to satisfy the
debt by making a lump sum payment in an amount that is less than the full balance due.223
Compromise agreements and settlements are offered only after other repayment options have
been exhausted.224
Loan rehabilitation and loan consolidation are more widely available to and used by borrowers.
Each is described below.
Loan Rehabilitation
Loan rehabilitation offers borrowers who have defaulted on a student loan an opportunity to have
their loan(s) reinstated as active and to have their borrower benefits and privileges restored. A
defaulter must work with the PCA to whom the debt has been transferred to enter into a written
loan rehabilitation agreement.225 If during a period of 10 consecutive months a borrower

221 HEA, §430A. If the borrower reenters repayment after having defaulted and then subsequently defaults, information
may be reported for seven years from the date of the subsequent default .
222 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students,
Borrowers, and Parents” Loans in Default, https://studentaid.gov/announcements-events/coronavirus#defaulted-loan-
questions, accessed May 24, 2021. For additional information on the cessation of debt collection activities due to
COVID-19, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19.
223 34 C.F.R. §30.70.
224 U.S. Department of Education, Office of Federal Student Aid, “Loan Servicing and Collection Frequently Ask
Questions,” SET C-Q1, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-
asked-questions, accessed May 24, 2021.
225 34 C.F.R. §685.211(f)(1)(iv).
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voluntarily makes nine reasonable and affordable monthly payments on a defaulted loan within
20 days of the due date, the defaulted loan is rehabilitated.226
One of two methods may be used to determine what constitutes a reasonable and affordable
payment amount for purposes of rehabilitating a defaulted loan. It is initial y determined as being
an amount equal to the greater of either one-twelfth of 15% of any portion of the borrower’s AGI
that is in excess of 150% of the poverty line applicable to the borrower’s family size (see Table
7), or $5. However, a borrower is permitted to object to the initial determination and may instead
elect to have the amount calculated according to an alternative formula that is based on an
itemized accounting of his or her monthly income and expenses.227 In either case, the borrower is
required to provide documentation of income and, as applicable, expenses for purposes of
determining a reasonable and affordable payment amount.
Only payments that are voluntarily made by a borrower may be counted as among the nine
reasonable and affordable payments required for loan rehabilitation. Involuntary payments may
continue to be collected (e.g., through administrative wage garnishment or the TOP) while a
borrower pursues loan rehabilitation.228 Monthly payments suspended under the COVID-19
payment suspension count toward the nine monthly payments required for loan rehabilitation, but
only to the extent that such suspended payments occurred while a loan rehabilitation agreement
was in place.229
Upon a loan being rehabilitated, the borrower again becomes eligible for full borrower privileges,
such as deferments and loan forgiveness, and other means of collecting on the loan while it was in
default wil cease. The borrower’s loan wil then be transferred by DMCS to a nondefault loan
servicer and he or she wil be placed in one of the alternative repayment plans (discussed above)
for a period of 90 days. The borrower may then apply for another repayment plan for which he or
she is eligible; if the borrower does not apply for a repayment plan, he or she wil be placed in a
standard repayment plan.230 Consumer reporting agencies wil also be instructed to remove any
record of the default from the borrower’s credit history; however, records of late or missed
payments that led to the loan defaulting wil not be removed.231
A defaulted loan may be rehabilitated only once. Defaulted loans upon which a court judgement
has been obtained through a civil lawsuit are not eligible to be rehabilitated.

226 34 C.F.R. §685.211(f); U.S. Department of Education, Federal Student Aid, “ Getting Out of Default: Loan
Rehabilitation,” https://studentaid.ed.gov/sa/repay-loans/default/get -out#loan-rehab, accessed May 24, 2021.
227 34 C.F.R. §685.211(f); U.S. Department of Education, “ Loan Rehabilitation: Income and Expense Information,”
OMB No. 1845-0120,https://fsapartners.ed.gov/sites/default/files/attachments/2020 -
07/LoanRehabIncomeExpenseInfoFormOMB1845-0120.pdf.
228 Upon a borrower making five voluntary payments on a defaulted loan coincidental with collections through
administrative wage garnishment, the Secretary may suspend AWG. 34 C.F.R. §685.211(f)(11).
229 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info For Students,
Borrowers, and Parents,” Loans in Default: If I’m trying to rehabilitate my defaulted student loan, will my suspended
payments county toward my rehabilitation?, https://studentaid.gov/announcements-events/coronavirus#defaulted-loan-
questions, accessed May 24, 2021.
230 U.S. Department of Education, Office of Federal Student Aid, “Loan Servicing and Collection Frequently Ask
Questions” LRQ-12, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-asked-
questions, accessed May 24, 2021.
231 Late payments remain in a borrower’s credit report for seven years.
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Loan Consolidation
A borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more
defaulted loans. To become eligible to do so, a borrower must make what are considered
satisfactory repayment arrangements.232
One approach is for the borrower, prior to consolidation, to make three voluntary, consecutive,
on-time, full monthly payments that are considered reasonable and affordable, based on the
borrower’s total financial circumstances. These payments must be made within 20 days of the due
date and may not be involuntary payments (e.g., payments collected through administrative wage
garnishment or the TOP). A borrower who chooses this approach may repay the new Direct
Consolidation Loan according to any available repayment plan.
Another approach is for the borrower to agree to repay the new Direct Consolidation Loan
according to one of the IDR plans for which the borrower is eligible.233 If the borrower obtains a
Direct Consolidation Loan for purposes of repaying a Direct PLUS Loan or a FFEL PLUS Loan
made to a parent borrower, he or she must repay the new loan according to the Income-
Contingent Repayment plan, which is the only IDR plan available to borrowers of parent loans.
Several restrictions limit the availability of loan consolidation as an option for borrowers to bring
defaulted loans into good standing. If the borrower’s loan was subject to AWG, this must first be
lifted for the loan to be eligible for consolidation. A loan on which a court judgment has been
secured through litigation is not eligible for loan consolidation.234 If the borrower’s defaulted loan
is a Direct Consolidation Loan, the borrower must include at least one other eligible loan in the
new Direct Consolidation Loan. If the borrower’s defaulted loan is a FFEL Consolidation Loan,
the borrower may include the loan in a new Direct Consolidation Loan without including any
other loans; however, the borrower must repay according to one of the IDR plans.
If a borrower consolidates a loan out of default, collection fees wil be assessed on the
outstanding principal and interest of the defaulted loan, and these fees wil be included as part of
the original principal balance of the new Direct Consolidation Loan. Upon a defaulted loan being
repaid by a Direct Consolidation Loan, the borrower regains eligibility for full borrower
privileges, such as deferments and loan forgiveness, as wel as eligibility for additional federal
student aid. However, in contrast to loan rehabilitation, repaying a defaulted loan with a Direct
Consolidation Loan wil not remove the record of default from the borrower’s credit history.235
Loan Counseling and Disclosures
This report seeks to provide a comprehensive overview of the terms and conditions of federal
student loans made through the Direct Loan program. These loan terms and conditions are
voluminous and complex. For many individuals, the process of borrowing a federal student loan
may be among their first experiences with making a major financial transaction; thus, it is

232 34 C.F.R. §685.102(b).
233 34 C.F.R. §685.220(d)(3).
234 If the judgment is vacated, a defaulted loan may be consolidated; however, the federal government generally does
not vacate judgments on defaulted loans. U.S. Department of Education, Office of Federal Student Aid, “ Loan
Servicing and Collection: Frequently Asked Questions, JPJ-Q2, https://fsapartners.ed.gov/knowledge-center/faqs/loan-
servicing-and-collection-frequently-asked-questions, accessed May 24, 2021.
235 U.S. Department of Education, Federal Student Aid, “ Getting Out of Default: Loan Consolidation,”
https://studentaid.ed.gov/sa/repay-loans/default/get -out#loan-consolidation, accessed May 24, 2021.
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imperative for borrowers to understand the terms and conditions of the loans they obtain and their
associated rights and responsibilities as borrowers.
As part of the process of obtaining a federal student loan, borrowers are required to undergo
financial counseling that provides them with information about their loans and the obligations
they assume as borrowers. First-time borrowers must be provided with entrance counseling,
which provides them with comprehensive information on the loans they are about to obtain.
Borrowers who have received an adverse credit determination but have been able to establish
eligibility to borrow Direct PLUS Loans must receive PLUS Loan credit counseling. At the time
of obtaining a loan, borrowers are required to sign a promissory note, which is a contract that
establishes the borrower’s legal obligation to repay. The promissory note is accompanied by a
rights and responsibilities statement that uses plain language to disclose the terms and conditions
of the loan. Prior to a borrower ceasing to be enrolled on at least a half-time basis, he or she must
be provided with exit counseling.
Entrance Counseling
The institution attended by a first-time borrower of a Direct Subsidized Loan or a Direct
Unsubsidized Loan,236 or by a first-time graduate or professional student borrower of a Direct
PLUS Loan237 is required to ensure that he or she receives entrance counseling prior to the first
instal ment of the loan being disbursed. Entrance counseling may be provided through an in-
person counseling session, a written document provided to the borrower, or an online interactive
medium.238 Irrespective of the means through which entrance counseling is provided, the
institution must ensure that an individual who has expertise in federal student aid is available
shortly after the session to respond to any questions a borrower might have.
Entrance counseling is designed to provide a borrower with comprehensive information on both
the terms and conditions of the loan and the borrower’s rights and responsibilities with regard to
the loan.239 Entrance counseling must satisfy the following requirements:240
 explain the master promissory note;
 emphasize to the borrower the seriousness and importance of the obligation to
repay the loan;
 describe the likely consequences of default, which include adverse credit reports,
the collection of delinquent debt, and litigation;
 emphasize that the borrower is required to repay the loan in full, irrespective of
whether he or she completes the program of study on time or at all, is unable to
obtain employment, or is dissatisfied with the program;

236 A first-time borrower is an individual who has not previously borrowed a Direct Subsidized Loan, Direct
Unsubsidized Loan, FFEL program Subsidized or Unsubsidized Loan, of a Federal SLS Loan. 34 C.F.R.
§685.304(a)(1).
237 A first-time graduate or professional student borrower is an individual who has not previously borrowed a Direct
PLUS Loan of FFEL PLUS Loan for graduate or professional education. 34 C.F.R. §685.304(a)(2).
238 For example, see U.S. Department of Education, Office of Federal Student Aid, “Complete Your Student Loan
Entrance Counseling Requirement,”
https://studentloans.gov/myDirectLoan/demoEntranceCounseling.act ion#!/ecDemo/1, accessed May 25, 2021.
239 For detailed information on entrance counseling, see U.S. Department of Education, Office of Federal Student Aid,
“Direct Loan Entrance Counseling Guide,” 2018, https://studentaid.ed.gov/sa/sites/default/files/loan-entrance-
counseling-color.pdf.
240 HEA §485(l); 34 C.F.R. §685.304(a).
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 provide the borrower with sample monthly payment amounts based on either a
range of amounts that might be borrowed or the average cumulative amount
borrowed by other students in the same program at the same school;
 explain potential implications that accepting the loan might have on the
borrower’s eligibility to receive other forms of student aid;
 provide information on interest accrual and capitalization;
 inform the borrower of the option to pay the interest that accrues on Direct
Unsubsidized Loans and Direct PLUS Loans while he or she is enrolled in
school;
 explain the meaning of half-time enrollment and the consequences of not
maintaining half-time enrollment;
 explain the importance of informing the school if the borrower chooses to
withdraw so that exit counseling can be provided;
 provide information about, and how the borrower can access, the National
Student Loan Data System (NSLDS);
 provide the name of and contact information for an individual the borrower may
contact if the borrower has any questions about the terms and conditions of the
loan and the borrower’s rights and responsibilities with regard to the loan;
 for loans first disbursed on or after July 1, 2020, and if the school requires as a
condition of enrollment that the borrower enter into a pre-dispute arbitration
agreement, a written description of the school’s dispute resolution process that
the borrower has agreed to pursue, how and when the agreement applies, how the
borrower enters into the arbitration process, and who to contact if the borrower
has any questions;
 explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan
Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct
Subsidized Loans and its implications;241 and
 explain to first-time graduate student borrowers of a Direct PLUS Loan who have
previously borrowed a Direct Subsidized Loan or a Direct Unsubsidized Loan the
differences between these loan types with regard to interest rates, the accrual of
interest, and the start of the repayment period.
PLUS Loan Credit Counseling For Borrowers with Adverse Credit
Any parent borrower or graduate or professional student borrower with an adverse credit
determination who becomes eligible to borrow a Direct PLUS Loan, either by obtaining an
endorser or by providing documentation of extenuating circumstances, must receive special
PLUS Loan credit counseling.242 The counseling is also available on a voluntary basis to Direct

241 Effective August 13, 2021, this will not be a required element of entrance counseling, as the Direct Subsidized Loan
Limitations for Post -July 1, 2013, First -Time Borrowers are repealed as of that date. U.S. Department of Education,
"Repeal of the William D. Ford Federal Direct Loan Progr am Subsidized Usage Limit Restriction," 86 Federal
Register 31432-31438, June 14, 2021.
242 34 C.F.R. §685.200(b)(5) and (c)(2). See, for example, U.S. Department of Education, Office of Federal Student
Aid, “PLUS Credit Counseling Demo,” https://studentaid.gov/app/demoPlusCounseling.action, accessed May 25, 2021.
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PLUS Loan borrowers who have not received an adverse credit determination.243 This counseling
includes information similar to what is currently provided in PLUS Loan entrance counseling.244
Master Promissory Note and Plain Language Disclosure
The terms and conditions of federal student loans made through the Direct Loan program are
specified in a promissory note, which is a contract that establishes the borrower’s obligation to
repay the loan. A master promissory note (MPN) is a type of promissory note under which loans
may be made to a borrower for a single academic year or for multiple academic years. One type
of MPN is used for making Direct Subsidized Loans and Direct Unsubsidized Loans245 and
another type of MPN is used for making Direct PLUS Loans.246 A different type of promissory
note is used for making Direct Consolidation Loans.247
The MPN must be read and signed by a student or parent borrower before loan funds may be
disbursed. The IHE a student attends may choose to use a MPN with either a single-year or a
multiyear feature. IHEs that use a single-year MPN may only make loans under the MPN for one
academic year. IHEs that use the multiyear feature may make one or more loans under the same
MPN for up to 10 academic years.
IHEs that use a multiyear MPN must confirm a borrower’s acceptance of a new loan for each
subsequent year by either obtaining a borrower’s written confirmation of acceptance (affirmative
confirmation) or by not receiving a borrower’s notification that he or she is specifical y declining
the loan in whole or in part (passive confirmation).248 Under current regulations, IHEs are
encouraged, but not required, to obtain affirmative confirmation from the student that he or she
accepts the loan before disbursing loan funds.249
Attached to the MPN is a Plain Language Disclosure (PLD) form that explains loan terms and
conditions and the borrower’s rights and responsibilities in simplified terms. The PLD is provided
to borrowers prior to each disbursement of a loan made through the Direct Loan program,
regardless of whether an IHE uses a single-year or multiyear MPN.250

243 U.S. Department of Education, Office of Postsecondary Education, “ William D. Ford Federal Direct Loan Program:
Final Regulations,” 79 Federal Register 63322, October 23, 2014.
244 OMB No. 1845-0129, “ PLUS Credit Counseling for Graduate/Professional Students & PLUS Credit Counseling for
Parents,” https://www.reginfo.gov/public/do/DownloadDocument?objectID=74709801 .
245 U.S. Department of Education, Office of Federal Student Aid, “ Master Promissory Note: Direct Subsidized Loans
and Direct Unsubsidized Loans, William D. Ford Federal Direct Loan Program ,” OMB No. 1845-0007,
https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/SubUnsubMPN.pdf.
246 U.S. Department of Education, Office of Federal Student Aid, “ Master Promissory Note: Direct PLUS Loans,
William D. Ford Federal Direct Loan Program,” OMB No. 1845-0007,
https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/PLUSMPN.pdf.
247 U.S. Department of Education, Office of Federal Student Aid, “ Direct Consolidation Loan Application and
Promissory Note, William D. Ford Federal Direct Loan Program,” OMB No. 1845-0053, https://studentaid.gov/app-
static/images/ApplicationAndPromissoryNote.pdf..
248 34 C.F.R. §668.165(a).
249 34 C.F.R. §668.165(a)(2).
250 See, for example, U.S. Department of Education, Office of Federal Student Aid, “Plain Language Disclosure for
Direct Subsidized Loans and Direct Unsubsidized Loans William D. Ford Federal Direct Loan Program (Direct Loan
Program),” https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/SubUnsubPLD.pdf.
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Exit Counseling
Prior to a student borrower ceasing to be enrolled on at least a half-time basis, the institution a
borrower attends must provide him or her with exit counseling.251 It may be provided through an
in-person counseling session, an audiovisual presentation, or an online interactive medium.252
Irrespective of the means through which exit counseling is provided, the institution must ensure
that an individual who has expertise in federal student aid is available shortly after the session to
respond to any questions a borrower might have.
Exit counseling is designed to provide the borrower with comprehensive information on both the
terms and conditions of the loan and the borrower’s rights and responsibilities with regard to the
obligation to repay the loan.253 Exit counseling must satisfy the following requirements:254
 inform the borrower of the average anticipated monthly payment amount based
on either the individual’s actual student loan debt or the average cumulative
amount borrowed by other students at the same school or in the same program of
study at the same school;
 provide a review of the repayment plan options available to the borrower, along
with a description of the various features of each plan and sample information
showing average anticipated monthly payment amounts and differences in
interest and total payments under each plan;
 explain options to prepay a loan, to repay according to a shorter schedule, and to
change repayment plans;
 provide information on loan consolidation and how it affects the length of
repayment and total interest paid; how it affects borrower benefits, such as grace
periods, loan forgiveness, loan cancel ation, and deferment; and options to prepay
a loan or change repayment plans;
 include debt-management strategies designed to facilitate repayment;
 explain how to contact the borrower’s loan servicer;
 explain the master promissory note;
 emphasize to the borrower the seriousness and importance of the obligation to
repay the loan;
 emphasize that the borrower is required to repay the loan in full, irrespective of
whether he or she completes the program of study on time or at al , is unable to
obtain employment, or is dissatisfied with the program;
 describe the likely consequences of default, which include adverse credit reports,
the collection of delinquent debt, and litigation;

251 34 C.F.R. §685.304(b). If a borrower withdraws without notifying the school or fails to complete exit counseling,
the school must provide exit counseling to him or her either through electronic means or by sending exit counseling
materials via mail to the last known address or by email to an address not associated with the school.
252 U.S. Department of Education, Office of Federal Student Aid, “ Exit Counseling (Demonstration Module),”
https://studentloans.gov/myDirectLoan/demoDlExit.action#!/dlExitDemo/1 .
253 For detailed information on entrance counseling, see U.S. Department of Education, Office of Federal Student Aid,
“Direct Loan Exit Counseling Guide,” 2018, https://studentaid.ed.gov/sa/sites/default/files/loan-exit-counseling-
color.pdf.
254 HEA §485(b); 34 C.F.R. §685.304(b).
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 provide a general description of the terms and conditions under which a borrower
may receive full or partial discharge or forgiveness of principal and interest, may
defer repayment of principal or interest, or may be granted forbearance; and
descriptions of federal student assistance programs and other information and ED
publications as required by HEA Section 485(d);
 review information on the availability of the FSA Ombudsman Group;
 provide information about, and how the borrower can access, the NSLDS;
 explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan
Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct
Subsidized Loans and its implications;255
 provide a general description of tax benefits that may be available to borrowers;
 require the borrower to provide current and expected future contact information,
next of kin, and (if known) expected employer; and
 explain that the borrower may be contacted by third-party student loan debt relief
companies, that the borrower should use caution when interacting with such
companies, and that the services offered by such companies are offered to
borrowers free of charge through ED or the borrower’s loan servicer.
Additional Information on Loan Terms and Conditions
The loan counseling and disclosures described above are designed to ensure that borrowers are
provided with information about the terms and conditions of their loans, as required by law.
Appendix A presents a list of additional resources that may be accessed by policymakers and
others who may be interested in obtaining more detailed information about borrowers’ rights,
responsibilities, and obligations with regard to Direct Loan program loans.

255 Effective August 13, 2021, this will not be a required element of exit counseling, as the Direct Subsidized Loan
Limitations for Post -July 1, 2013, First -Time Borrowers are repealed as of that date. U.S. Department of Education,
"Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage Limit Restriction," 86 Federal
Register 31432-31438, June 14, 2021.
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Appendix A. Directory of Resources
Directory of Resources
Higher Education Act of 1965 (P.L. 89-329, as amended), Title IV, Part D—Wil iam D. Ford Federal Direct
Program (https://www.govinfo.gov/content/pkg/COMPS-765/pdf/COMPS-765.pdf)
Title 20 U.S.C. Chapter 28, Subchapter IV, Part D—Wil iam D. Ford Federal Direct Loan Program
(https://uscode.house.gov/browse/prelim@title20/chapter28/subchapter4/partD&edition=prelim)
Title 34 C.F.R. Part 685—Wil iam D. Ford Federal Direct Loan Program (https://www.ecfr.gov/cgi-bin/text-
idx?SID=e878c5d6ea6116593e8394e25ec1f3c9&mc=true&node=pt34.4.685&rgn=div5 )
U.S. Department of Education, Office of Federal Student Aid, FSA Partners, Loan Servicing and Col ection
(https://fsapartners.ed.gov/knowledge-center/library/functional-area/Loan%20Servicing%20and%20Col ection)
U.S. Department of Education, Office of Federal Student Aid, 2020-2021 Federal Student Aid Handbook
(https://fsapartners.ed.gov/knowledge-center/fsa-handbook/pdf/2020-2021)
U.S. Department of Education, Office of Federal Student Aid, “Manage Loans” (https://studentaid.gov/h/manage-
loans)
National Student Loan Data System (NSLDS) Student Access (https://nsldsfap.ed.gov/nslds_SA/)
U.S. Department of Education, FSA Ombudsman Group, P.O. Box 1843, Monticel o, KY 42633, 1-877-577-2575
(https://studentaid.gov/feedback-ombudsman/disputes/prepare)
CRS Report R44845, Administration of the Wil iam D. Ford Federal Direct Loan Program.
CRS Report R45389, The Public Service Loan Forgiveness Program: Selected Issues
CRS Report R43571, Federal Student Loan Forgiveness and Loan Repayment Programs
CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19

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Appendix B. Glossary of Terms

Acceleration
Demand for immediate repayment of the entire outstanding balance of a loan.
Bond equivalent rate
Also cal ed the bond equivalent yield, coupon equivalent yield, or the investment
yield; a Treasury bill’s yield based on the purchase price, discount, and a 365- or
366-day year. It can be used to compare the yield on a discount bil to the yield on
a nominal coupon bond that pays semiannual interest. Bond equivalent yield means
the annualized yield computed by doubling the semiannual yield. U.S. Department
of the Treasury, “Resource Center: Daily Treasury Bil Rates Data”
(https://www.treasury.gov/resource-center/data-chart-center/interest-
rates/Pages/TextView.aspx?data=bil rates).
Capitalized interest
Unpaid interest that has been added to the principal balance of a loan.
(Capitalization)
Cost of Attendance (COA)
The cost in dol ars of a period of enrol ment (such as an academic year). The COA
for a student is an estimate of his or her educational expenses for the period of
enrol ment.
Default
Failure to repay a loan according to the terms agreed to in the promissory note.
Default occurs on a loan made through the Direct Loan program after 270 days of
nonpayment.
Deferment
A period during which a borrower is entitled to have payments of principal and
interest on federal education loans postponed if the borrower meets applicable
eligibility criteria
Direct Loan program loan
A loan made under the Wil iam D. Ford Federal Direct Loan Program.
Disbursement
Payment of federal student aid funds to the student by the school. Students
general y receive their federal student aid in two or more disbursements.
Discharge
Cancel ation of the balance due on a loan. (See also loan forgiveness.)
Discretionary income
The difference between a borrower’s annual income and a specified percentage of
the federal poverty guideline for the borrower’s family size and state of residence.
Disposable pay
The amount that remains from an employee's pay after deductions. 34 C.F.R.
§31.2.
Economic hardship
A period of up to three years during which a borrower is receiving payments
(deferment)
under a federal or state public assistance program, is working ful -time and has a
monthly income that does not exceed 150% of the poverty line, or is serving as a
volunteer in the Peace Corps. 34 C.F.R. §685.204(g)(2).
Endorser
An individual who agrees to repay a Direct PLUS Loan if the borrower does not
repay it.
First-time borrower
For purposes of limitations on eligibility for Direct Subsidized Loans and borrower
responsibility for accruing interest, an individual who has no outstanding balance of
principal or interest on a Direct Loan program or FFEL program loan on July 1,
2013, or on the date the borrower obtains a Direct Loan program loan after July
1, 2013. 34 C.F.R. §685.200(f)(1)(i).
Forbearance
A period during which a borrower may temporarily stop making loan payments,
temporarily make smal er payments, or extend the time for making payments.
Full-time student
An enrol ed student carrying a ful -time academic workload, as determined by the
(enrollment)
institution, under a standard applicable to al students enrol ed in a particular
educational program.
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Grace period
A period of six months after a borrower of a Direct Subsidized Loan or a Direct
Unsubsidized Loan graduates, leaves school, or drops below half-time enrol ment,
during which the borrower is not required to make payments.
Half-time student
An enrol ed student who is carrying a half-time academic workload, as determined
(enrollment)
by the institution, that amounts to at least half of the workload of the applicable
minimum requirement outlined in the definition of a ful -time student, except that
a student enrol ed solely in a program of study by correspondence must be
carrying a workload of at least 12 hours of work per week, or be earning at least
six credit hours per semester, trimester, or quarter. Note that regardless of the
amount of work, no student enrol ed solely in correspondence study is considered
more than a half-time student.
In school
The period during which borrowers are enrol ed in a postsecondary educational
program. For purposes of eligibility for loan deferments, a student must be
enrol ed at least half-time as an eligible student to be considered “in-school.”
Interest
The cost of borrowing money. Interest is an expense calculated as a percentage of
the outstanding (unpaid) principal balance.
Interest accrual
The process through which interest accumulates over time.
Interest rate
The price charged per unit of money borrowed per year, or other unit of time,
usual y expressed as a percentage.
Loan forgiveness
Cancel ation or reduction of the balance due on a loan.
Loan origination fee
The amount a borrower is required to pay the Department of Education to help
defray the costs of subsidizing a Direct Loan.
Loan principal
Initial y, the amount borrowed plus any fees charged by the lender. Later, it
includes capitalized interest, charges and fees al owed by regulation, less any
amount paid and credited to principal, and any amount cancel ed, forgiven, or
discharged.
Loan servicer
An entity that col ects payments on loans, responds to customer service inquiries,
and performs other administrative tasks associated with maintaining a loan (e.g.,
processing requests for a change in repayment plans). A federal loan servicer is a
loan servicer for the U.S. Department of Education.
Master promissory note
A promissory note under which the borrower may receive loans for a single
(MPN)
academic year or multiple academic years. 34 C.F.R. §685.102(b).
Maximum eligibility period
A period of time, measured in academic years, equal to 150% of the length of the
educational program, as published by the institution, in which the borrower is
currently enrol ed.
Negative amortization
A period of time during which a borrower’s monthly payment amount may
sometimes be less than the amount of interest that accrues on the borrower’s
loans. U.S. Department of Education, Office of Federal Student Aid, “Income-
Driven Plans Questions and Answers” (https://studentaid.ed.gov/sa/repay-
loans/understand/plans/income-driven/questions#miscel aneous).
New borrower
An individual who has no outstanding balance on a loan made through either the
Direct Loan program or the FFEL program at the time the borrower receives a
loan through the Direct Loan program on or after a specific date.
Partial financial hardship
A period during which the total annual payments for al of a borrower’s eligible
(in IBR plans and PAYE
loans, as calculated according to a standard 10-year repayment period, are greater
repayment plan)
than an applicable percentage (e.g., 15% or 10%) of the borrower’s discretionary
income. For a married borrower, the eligible loans and discretionary income of the
borrower’s spouse may also be included in the calculation. 34 C.F.R. §§685.209(a)
and 685.221.
Prepayment
A loan payment made before it is due under the terms of the applicable
promissory note.
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Principal balance
The amount of principal that remains unpaid on a loan.
Promissory note
A legal y binding contract between a lender and a borrower that contains the
terms and conditions of the loan, including how the loan is to be repaid. It
becomes legal y binding when signed (executed) by the borrower. Most federal
education loans are made under a Master Promissory Note (MPN).
Rehabilitation
Process by which a borrower may bring a loan out of default by adhering to
(of a defaulted loan)
specified repayment requirements.
Remaining accrued
A portion of accrued interest that the Secretary of Education does not charge a
interest (IBR, PAYE, and
borrower if the borrower's monthly payment amount is not sufficient to pay the
REPAYE repayment plans)
accrued interest on his or her loans due to the loans being negatively amortized.
34 C.F.R. §§685.209(a) and (c) and 685.221.
Repayment period
The time during which a borrower is obligated to make payments on a loan
according to the terms and conditions of the loan’s promissory note and the
repayment plan the borrower chooses. For Direct Subsidized Loans and Direct
Unsubsidized Loans, repayment begins the day after the grace period ends. For
Direct PLUS Loans, repayment begins the day after the loan is ful y disbursed.
Satisfactory repayment
For the purpose of regaining eligibility for federal student aid funds, the agreement
arrangement
of a borrower to make a predetermined number of on-time, voluntary monthly
payments on a defaulted loan, or an overpayment of federal student aid. For the
purpose of consolidating a defaulted loan, the making of three consecutive,
voluntary, on-time, ful monthly payments on a defaulted loan. The required
monthly payment amount may not be more than is reasonable and affordable
based on the borrower’s total financial circumstances.
Subsidized component of a The portion of a Direct Consolidation Loan attributable to certain subsidized Title
Direct Consolidation Loan
IV education loans that were repaid by the consolidation loan. Interest is not
(Direct Subsidized
charged to the borrower during deferment periods, or, for a borrower whose
Consolidation Loan)
consolidation application was received before July 1, 2006, during in-school and
grace periods. 34 C.F.R. §685.102(b).
Subsidized interest
Interest that is not charged, or is only partial y charged, which would otherwise
(interest subsidy)
accrue on a loan during a specified period of time. 34 C.F.R. §§685.102(b),
685.209(a) and (c) and 685.221.
Subsidized usage period
A period of time measured in academic years and rounded down to the nearest
tenth of a year, calculated as number of days in the borrower’s loan period for a
Direct Subsidized Loan, divided by number of days in the academic year for which
the borrower receives the Direct Subsidized Loan.
Teach-out plan
A written plan developed by an institution that provides for the equitable
treatment of students if an institution, or an institutional location that provides
100% of at least one program, ceases to operate before al students have
completed their program of study, and may include, if required by the institution’s
accrediting agency, a teach-out agreement between institutions.
Unsubsidized component
The portion of a Direct Consolidation Loan attributable to unsubsidized Title IV
of a Direct Consolidation
education loans, certain subsidized Title IV education loans, and certain other
Loan (Direct Unsubsidized
federal education loans that were repaid by the consolidation loan. The borrower
Consolidation Loan)
is responsible for the interest that accrues during any period. 34 C.F.R.
§685.102(b).
Variable interest rate
An interest rate on a loan that fluctuates over the term of a loan on the basis of
changes in an index that reflects changes in market rates.
Voluntary payments
Payments made directly by a borrower who owes a federal student aid debt and
that do not include payments obtained by federal offset, garnishment, or income or
asset execution.
Source: U.S. Department of Education, Office of Federal Student Aid, 2020-2021 Federal Student Aid Handbook,
Appendix A: Federal Student Aid Glossary and Acronyms; 34 C.F.R. Part 685; U.S. Department of Education, Office
of Federal Student Aid; U.S. Department of the Treasury.
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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Notes: Definitions of terms general y are from the Federal Student Aid Handbook and federal regulations. General y, in
instances where the definitions are from sources other than the Federal Student Aid Handbook, citations are noted at
the end of the definitions.
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Appendix C. Historical Tables on Selected Loan
Terms and Conditions
Table C-1. History of Annual and Aggregate Loan Limits for
Direct Loan program loans, by Borrower Type and Academic Level
Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
July 1, 1994, to September 30, 1998
Undergraduate students
Annual loan limits

1st year
2,625
2,625
6,625a
n.a.
2nd year
3,500
3,500
7,500a
n.a.
3rd year and above
5,500
5,500
10,500a
n.a.
Aggregate loan limitsb,c,d

Al
23,000
23,000
46,000a
n.a.
Graduate and professional students
Annual loan limits

In general
8,500
n.a.
18,500
n.a.
Health professions
8,500
n.a.
38,500
n.a.
programsef
to 45,167
Health professions
8,500
n.a.
31,000
n.a.
programseg
to 35,167
Aggregate loan limitsb,c,d

In general
65,500
n.a.
138,500
n.a.
Health professions
65,500
n.a.
189,125
n.a.
programsh
Parents of dependent undergraduate students
Annual loan limits

In general
n.a.
n.a.
n.a.
Up to COA-
EFAi
Aggregate loan limitsb,c

In general
n.a.
n.a.
n.a.
Not limited
October 1, 1998, to June 30, 2007
Undergraduate students
Annual loan limits

Preparatory coursework for
2,625
2,625
6,625
n.a.
undergraduate program
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Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
1st year
2,625
2,625
6,625
n.a.
2nd year
3,500
3,500
7,500
n.a.
3rd year and above
5,500
5,500
10,500
n.a.
Preparatory coursework for
5,500
5,500
10,500
n.a.
graduate programj
Teacher certificationj
5,500
5,500
10,500
n.a.
Aggregate loan limitsb,c,d

In general
23,000
23,000
46,000
n.a.
Graduate and professional students
Annual loan limits

In general
8,500
n.a.
18,500
n.a.
Health professions
8,500
n.a.
38,500
n.a.
programse,f
to 45,167
Health professions
8,500
n.a.
31,000
n.a.
programse,g
to 35,167
Aggregate loan limitsb,c,d

In general
65,500
n.a.
138,500
n.a.
Health professions
65,500
n.a.
189,125
n.a.
programsh
Parents of dependent undergraduate students
Annual loan limits

In general
n.a.
n.a.
n.a.
Up to COA-
EFAi
Aggregate loan limitsb,c

In general
n.a.
n.a.
n.a.
Not limited
July 1, 2007, to June 30, 2008
Undergraduate students
Annual loan limits

Preparatory coursework for
2,625
2,625
6,625
n.a.
undergraduate program
1st year
3,500
3,500
7,500
n.a.
2nd year
4,500
4,500
8,500
n.a.
3rd year and above
5,500
5,500
10,500
n.a.
Preparatory coursework for
5,500
5,500
10,500
n.a.
graduate programj
Teacher certificationj
5,500
5,500
10,500
n.a.
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Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Aggregate loan limitsb,c,d

In general
23,000
23,000
46,000
n.a.
Graduate and professional students
Annual loan limits

In general
8,500
n.a.
20,500
Up to COA-
EFAi
Health professions
8,500
n.a.
40,500
Up to COA-
programse,f
to 47,167
EFAi
Health professions
8,500
n.a.
33,000
Up to COA-
programse,g
to 37,167
EFAi
Aggregate loan limitsb,c,d

n.a.

In general
65,500
n.a.
138,500
Not limited
Health professions
65,500
n.a.
189,125
Not limited
programsh,k
Parents of dependent undergraduate students
Annual loan limits

In general
n.a.
n.a.
n.a.
Up to COA-
EFAi
Aggregate loan limitsb,c

In general
n.a.
n.a.
n.a.
Not limited
July 1, 2008, to June 30, 2012
Undergraduate students
Annual loan limits

Preparatory coursework for
2,625
2,625
8,625
n.a.
undergraduate program
1st year
3,500
5,500
9,500
n.a.
2nd year
4,500
6,500
10,500
n.a.
3rd year and above
5,500
7,500
12,500
n.a.
Preparatory coursework for
5,500
5,500
12,500
n.a.
graduate programj
Teacher certificationj
5,500
5,500
12,500
n.a.
Aggregate loan limitsb,c,d

In general
23,000
31,000
57,500
n.a.
Graduate and professional students
Annual loan limits

In general
8,500
n.a.
20,500
Up to COA-
EFAi
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Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Health professions
8,500
n.a.
40,500
Up to COA-
programse,f
to 47,167
EFAi
Health professions
8,500
n.a.
33,000
Up to COA-
programse,g
to 37,167
EFAi
Aggregate loan limitsb,c,d

In general
65,500
n.a.
138,500
Not limited
Health professionsk
65,500
n.a.
224,000
Not limited
Parents of dependent undergraduate students
Annual loan limits

In general
n.a.
n.a.
n.a.
Up to COA-
EFAi
Aggregate loan limitsb,c

In general
n.a.
n.a.
n.a.
Not limited
On or after July 1, 2012
Undergraduate students
Annual loan limits

Preparatory coursework for
2,625
2,625
8,625
n.a.
undergraduate program
1st year
3,500
5,500
9,500
n.a.
2nd year
4,500
6,500
10,500
n.a.
3rd year and above
5,500
7,500
12,500
n.a.
Preparatory coursework for
5,500
5,500
12,500
n.a.
graduate programj
Teacher certificationj
5,500
5,500
12,500
n.a.
Aggregate loan limitsb,c,d

In general
23,000
31,000
57,500
n.a.
Graduate and professional students
Annual loan limits

In general
n.a.
n.a.
20,500
Up to COA-
EFAi
Health professions
n.a.
n.a.
40,500
Up to COA-
programse,f
to 47,167
EFAi
Health professions
n.a.
n.a.
33,000
Up to COA-
programse,g
to 37,167
EFAi
Aggregate loan limitsb,c,d,l

In general
65,500m
n.a.
138,500
Not limited
Health professionsk
65,500m
n.a.
224,000
Not limited
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Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Parents of dependent undergraduate students
Annual loan limits

In general
n.a.
n.a.
n.a.
Up to COA-
EFAi
Aggregate loan limitsb,c

In general
n.a.
n.a.
n.a.
Not limited
Source: HEA, §§428, 428A, 428B, and 428H; P.L. 89-329; P.L. 90-575; P.L. 92-318; P.L. 92-391; P.L. 94-482; P.L.
95-566; P.L. 96-374; P.L. 97-35; P.L. 99-498; P.L. 100-297; P.L. 102-325; P.L. 103-66; P.L. 103-208; P.L. 105-244;
P.L. 109-171; P.L. 110-227; P.L. 112-25; Department of Education, Office of Postsecondary Education, Dear
Col eague Letters GEN-96-14; GEN-97-14, GEN-05-09, GEN-08-04, and GEN-08-08; 45 C.F.R. §177.14(a)(3)
(1967 edition).
Notes: “n.a.” means not applicable
a. These loan limits also apply to dependent undergraduate students whose parents are unable to obtain
Direct PLUS Loans.
b. Includes Subsidized Stafford Loans and Unsubsidized Stafford Loans borrowed through the FFEL program.
c. Accrued interest and other charges that have not been capitalized do not count toward aggregate loan
limits.
d. Direct Subsidized Loans and Direct Unsubsidized Loans (and comparable loans made through the FFEL
program) that have been included in a Direct Consolidation Loan remain attributab le to the aggregate limits
for Direct Subsidized Loans and total Direct Subsidized Loans and Direct Unsubsidized Loans combined in
accordance with their proportionate share of the Direct Consolidation Loan.
e. In accordance with authority provided the Secretary under P.L. 104-134, effective July 1, 1996, increased
Direct Unsubsidized Loan borrowing limits were extended to students who became unable to borrow
under the Health Education Assistance Loan (HEAL) program.
f.
Students enrol ed in programs in the fol owing disciplines are eligible to annual y borrow an additional
$20,000 more than regular students in Direct Unsubsidized Loans for programs with nine-month academic
years, and an additional $26,667 for programs with 12-month academic years: Doctor of Al opathic
Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry, Doctor of Veterinary Medicine, Doctor of
Optometry, Doctor of Podiatric Medicine; and effective May 1, 2005, Doctor of Naturopathic Medicine, and
Doctor of Naturopathy. (Amounts are prorated for 10- and 11-month programs.)
g. Students enrol ed in programs in the fol owing disciplines are eligible to annual y borrow an additional
$12,500 more than regular students in Direct Unsubsidized Loans for programs with nine-month academic
years, and an additional $16,667 for programs with 12-month academic years: Doctor of Pharmacy,
Graduate in Public Health, Doctor of Chiropractic, Doctoral Degree in Clinical Psychology, Masters or
Doctoral Degree in Health Administration. (Amounts are prorated for 10- and 11-month programs.)
h. On December 1, 1997, aggregate loan limits of $189,500 were established for borrowers enrol ed in certain
health professions programs.
i.
There is no statutory borrowing limit for Direct PLUS Loans; however, borrowers must be credit-worthy
and al aid combined may not exceed COA.
j.
For individuals who have obtained a baccalaureate degree.
k. Effective April 14, 2008, aggregate loan limits of $224,000 were established for borrowers enrol ed in
certain health professions programs.
l.
Aggregate loan limits for graduate and professional students include amounts borrowed for undergraduate
study.
m. The aggregate loan limit for Direct Subsidized Loans to graduate and professional students applies to loans
borrowed for programs of instruction beginning before July 1, 2012.
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Table C-2. History of Interest Rate Formulas for Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans

Variable Interest Rate Formula or Fixed Interest Rate in Effecta
Disbursement Period,
Direct
Direct
Direct
Borrower Type, and
Subsidized
Unsubsidized
PLUS
Loan Period (if applicable)
Loans
Loans
Loans
July 1, 1994, to June 30, 1995
Undergraduate students
91-day T-bil + 3.1%
91-day T-bil + 3.1%
n.a.
(8.25% cap), variableb
(8.25% cap), variableb
Graduate and professional students
91-day T-bil + 3.1%
91-day T-bil + 3.1%
n.a.
(8.25% cap), variableb
(8.25% cap), variableb
Parent borrowers
n.a.
n.a.
52-week T-bil c + 3.1%
(9% cap), variableb
July 1, 1995, to June 30, 1998
Undergraduate students:
91-day T-bil + 2.5%
91-day T-bil + 2.5%
n.a.
In-school, grace, and deferment
(8.25% cap), variableb
(8.25% cap), variableb
Undergraduate students:
91-day T-bil + 3.1%
91-day T-bil + 3.1%
n.a.
Repayment periods
(8.25% cap), variableb
(8.25% cap), variableb
Graduate and professional students:
91-day T-bil + 2.5%
91-day T-bil + 2.5%
n.a.
In-school, grace, and deferment (8.25% cap), variableb
(8.25% cap), variableb
Graduate and professional students:
91-day T-bil + 3.1%
91-day T-bil + 3.1%
n.a.
Repayment periods
(8.25% cap), variableb
(8.25% cap), variableb
Parent borrowers
n.a.
n.a.
52-week T-bil c + 3.1%
(9% cap), variable
July 1, 1998, to June 30, 2006
Undergraduate students:
91-day T-bil + 1.7%
91-day T-bil + 1.7%
n.a.
In-school, grace, and deferment (8.25% cap), variableb
(8.25% cap), variableb
Undergraduate students:
91-day T-bil + 2.3%
91-day T-bil + 2.3%
n.a.
Repayment periods
(8.25% cap), variableb
(8.25% cap), variableb
Graduate and professional students:
91-day T-bil + 1.7%
91-day T-bil + 1.7%
n.a.
In-school, grace, and deferment (8.25% cap), variableb
(8.25% cap), variableb
Graduate and professional students:
91-day T-bil + 2.3%
91-day T-bil + 2.3%
n.a.
Repayment periods
(8.25% cap), variableb
(8.25% cap), variableb
Parent borrowers
n.a.
n.a.
91-day T-bil + 3.1%
(9% cap), variableb
July 1, 2006, to June 30, 2007
Undergraduate students
6.8%, fixed rate
6.8%, fixed rate
n.a.
Graduate and professional students
6.8%, fixed rate
6.8%, fixed rate
n.a.
Parent borrowers
n.a.
n.a.
7.9%, fixed rate
July 1, 2007, to June 30, 2009
Undergraduate students
6.0%, fixed rate
6.8%, fixed rate
n.a.
Graduate and professional students
6.8%, fixed rate
6.8%, fixed rate
7.9%, fixed rate
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Variable Interest Rate Formula or Fixed Interest Rate in Effecta
Disbursement Period,
Direct
Direct
Direct
Borrower Type, and
Subsidized
Unsubsidized
PLUS
Loan Period (if applicable)
Loans
Loans
Loans
Parent borrowers
n.a.
n.a.
7.9%, fixed rate
July 1, 2009, to June 30, 2010
Undergraduate students
5.6%, fixed rate
6.8%, fixed rate
n.a.
Graduate and professional students
6.8%, fixed rate
6.8%, fixed rate
7.9%, fixed rate
Parent borrowers
n.a.
n.a.
7.9%, fixed rate
July 1, 2010, to June 30, 2011
Undergraduate students
4.5%, fixed rate
6.8%, fixed rate
n.a.
Graduate and professional students
6.8%, fixed rate
6.8%, fixed rate
7.9%, fixed rate
Parent borrowers
n.a.
n.a.
7.9%, fixed rate
July 1, 2011, to June 30, 2012
Undergraduate students
3.4%, fixed rate
6.8%, fixed rate
n.a.
Graduate and professional students
6.8%, fixed rate
6.8%, fixed rate
7.9%, fixed rate
Parent borrowers
n.a.
n.a.
7.9%, fixed rate
July 1, 2012, to June 30, 2013
Undergraduate students
3.4%, fixed rate
6.8%, fixed rate
n.a.
Graduate and professional students
n.a.
6.8%, fixed rate
7.9%, fixed rate
Parent borrowers
n.a.
n.a.
7.9%, fixed rate
On or after July 1, 2013
Undergraduate students
10-yr T-note + 2.05%
10-yr T-note + 2.05%
n.a.
(8.25% cap), fixed rate
(8.25% cap), fixed rate
Graduate and professional students
n.a.
10-yr T-note + 3.6%
10-yr T-note + 4.6%
(9.5% cap), fixed rate
(10.5% cap), fixed rate
Parent borrowers
n.a.
n.a.
10-yr T-note + 4.6%
(10.5% cap), fixed rate
Source: HEA §§427A, 428, and 455(b); (20 U.S.C. §§1077a, 1078 and 1087e(b)).
Note: “n.a.” means not applicable.
a. Interest rates shown are rates for new borrowers with no outstanding loan balance on loans made prior to
July 1, 1994. Different interest rate procedures apply to borrowers with an outstanding balance on a loan
made under HEA, Title IV, Part B prior to July 1, 1994.
b. Rates adjust every July 1 based on last auction prior to June 1.
c. The Consolidated Appropriations Act, 2001 (P.L. 106-554) includes an amendment to the HEA that changed
the index used in the formulas that determine interest rates for PLUS Loans disbursed between July 1, 1987,
and June 30, 1998. The amendment substituted the one-year constant maturity Treasury yield for the 52-
week Treasury bil . This change, which affects interest rate adjustments made for any 12 -month period
beginning on or after July 1, 2001, became necessary because the Department of the Treasury stopped
issuing 52-week Treasury bil s.
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Table C-3. History of Interest Rate Formulas for Direct Consolidation Loans
Direct Consolidation Loan
Disbursement Period
Interest Rate Formula in Effect
July 1, 1994, to June 30, 1995
Direct Subsidized Consolidation Loansa and
91-day T-bil + 3.1% (8.25% cap), variable ratec
Direct Unsubsidized Consolidation Loansb
Direct PLUS Consolidation Loansd
52-week T-bil e + 3.1% (9% cap), variable ratec
July 1, 1995, to June 30, 1998
Direct Subsidized Consolidation Loansa and

Direct Unsubsidized Consolidation Loansb
In-school, grace, and deferment periods
91-day T-bil + 2.5% (8.25% cap), variable ratec
Repayment periods
91-day T-bil + 3.1% (8.25% cap), variable ratec
Direct PLUS Consolidation Loansd
52-week T-bil e + 3.1% (9% cap), variable ratec
July 1, 1998, to September 30, 1998
Direct Subsidized Consolidation Loansa and

Direct Unsubsidized Consolidation Loansb
In-school, grace, and deferment periods
91-day T-bil + 1.7% (8.25% cap), variable ratec
Repayment periods
91-day T-bil + 2.3% (8.25% cap), variable ratec
Direct PLUS Consolidation Loansd
52-week T-bil e + 3.1% (9% cap), variable ratec
October 1, 1998, to January 31, 1999
Direct Consolidation Loans
91-day T-bil + 2.3% (8.25% cap), variable ratec
February 1, 1999, to June 30, 2013
Direct Consolidation Loans
Weighted average of the interest rates on the loans
consolidated, rounded to the nearest higher one-
eighth of 1% (8.25% cap), fixed rate
On or after July 1, 2013
Direct Consolidation Loans
Weighted average of the interest rates on the loans
consolidated, rounded to the nearest higher one-
eighth of 1% (no cap), fixed rate
Source: HEA §§428C and 455(b); (20 U.S.C. §§1078-3 and 1087e(b)); and 34 C.F.R. §685.202(a)(3).
Notes: “n.a.” means not applicable.
a. This refers to the subsidized component of a Direct Consolidation Loan.
b. This refers to the unsubsidized component of a Direct Consolidation Loan, excluding the portion of a
Direct Consolidation Loan attributable to Direct PLUS Loans, Direct PLUS Consolidation Loans, and FFEL
PLUS Loans that were repaid by the Direct Consolidation Loan.
c. Rates adjust every July 1 based on last auction prior to June 1.
d. This refers to the unsubsidized component of a Direct Consolidation Loan attributable to Direct PLUS
Loans, Direct PLUS Consolidation Loans, and FFEL PLUS Loans that were repaid by the Direct
Consolidation Loan.
e. For outstanding Direct PLUS Consolidation Loans with rate setting formulas tied to the 52-week Treasury
bil , for periods beginning July 1, 2001, the average weekly one-year constant maturity Treasury yield was
substituted for the bond equivalent rate of 52-week Treasury bil s. This change became necessary because
the Department of Treasury decided to stop issuing 52-week Treasury bil s.

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Table C-4. History of Interest Rates in Effect for Direct Loan program loans
For the period of July 1 through June 30
Disbursement

Period,
Loan Type, and
-1995
-1996
-1997
-1998
-1999
-2000
-2001
-2002
-2003
-2004
-2005
-2006
-2007
-2008
-2009
-2010
-2011
-2012
-2013
-2014
-2015
-2016
-2017
-2018
-2019
-2020
-2021
-2022
Loan Period
(if applicable)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
July 1, 1994, to June 30, 1995
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans,a and Direct Unsubsidized Consolidation Loansb
91-day T-bil + 3.1% 7.43 8.25 8.25 8.25 8.25 7.72 8.25 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.46 3.23 3.12
(8.25% cap), variable
Direct PLUS Loans and Direct PLUS Consolidation Loansc
52-wk. T-bil + 3.1% 8.38 8.98 8.72 8.98 8.53 7.98 9.00 6.56 5.23 4.05 5.26 6.50 8.34 8.05 5.67 3.58 3.39 3.27 3.29 3.23 3.20 3.12 3.65 4.32 5.44 5.08 3.27 TBD
(9% cap), variabled
July 1, 1995, to June 30, 1998
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans,a and Direct Unsubsidized Consolidation Loansb
In-school, grace, and deferment periods
91-day T-bil + 2.5%
— 8.25 7.66 7.66 7.66 7.12 8.25 6.19 4.26 3.62 3.57 5.50 7.34 7.42 4.41 2.68 2.67 2.56 2.59 2.55 2.53 2.52 2.85 3.48 4.43 4.86 2.63 2.52
(8.25% cap), variable
Repayment periods
91-day T-bil + 3.1%
— 8.25 8.25 8.25 8.25 7.72 8.25 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.46 3.23 3.12
(8.25% cap), variable
Direct PLUS Loans and Direct PLUS Consolidation Loansc
52-wk. T-bil + 3.1%
— 8.98 8.72 8.98 8.53 7.98 9.00 6.56 5.23 4.05 5.26 6.50 8.34 8.05 5.67 3.58 3.39 3.27 3.29 3.23 3.20 3.12 3.65 4.32 5.44 5.08 3.27 TBD
(9% cap), variabled
July 1, 1998, to June 30, 2006
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans,a and Direct Unsubsidized Consolidation Loansb
In-school, grace, and deferment periods
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link to page 112
Disbursement

Period,
Loan Type, and
-1995
-1996
-1997
-1998
-1999
-2000
-2001
-2002
-2003
-2004
-2005
-2006
-2007
-2008
-2009
-2010
-2011
-2012
-2013
-2014
-2015
-2016
-2017
-2018
-2019
-2020
-2021
-2022
Loan Period
(if applicable)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
91-day T-bil + 1.7%
— — — — 6.86 6.32 7.59 5.39 3.46 2.82 2.77 4.70 6.54 6.62 3.61 1.88 1.87 1.76 1.79 1.75 1.73 1.72 2.05 2.68 3.63 4.06 1.83 1.72
(8.25% cap), variable
Repayment periods
91-day T-bil + 2.3%
— — — — 7.46 6.92 8.19 5.99 4.06 3.42 3.37 5.30 7.14 7.22 4.21 2.48 2.47 2.36 2.39 2.35 2.33 2.33 2.65 3.28 4.23 4.66 2.43 2.32
(8.25% cap), variable
Direct PLUS Loans and Direct PLUS Consolidation Loansc
91-day T-bil + 3.1%
— — — — 8.26 7.72 8.99 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.08 3.23 3.12
(9% cap), variable
July 1, 2006, to June 30, 2008
Direct Subsidized Loans and Direct Unsubsidized Loans
6.8% fixed rate
— — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80
Direct PLUS Loans
7.9% fixed rate
— — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90
July 1, 2008, to June 30, 2009
Direct Subsidized Loans to Undergraduate Students
6.0% fixed rate
— — — — — — — — — — — — — — 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
Direct Subsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students
6.8% fixed rate
— — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80
Direct PLUS Loans
7.9% fixed rate
— — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90
July 1, 2009, to June 30, 2010
Direct Subsidized Loans to Undergraduate Students
5.6% loans
— — — — — — — — — — — — — — — 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60
CRS-100

Disbursement

Period,
Loan Type, and
-1995
-1996
-1997
-1998
-1999
-2000
-2001
-2002
-2003
-2004
-2005
-2006
-2007
-2008
-2009
-2010
-2011
-2012
-2013
-2014
-2015
-2016
-2017
-2018
-2019
-2020
-2021
-2022
Loan Period
(if applicable)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Direct Subsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students
6.8% fixed rate
— — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80
Direct PLUS
7.9% fixed rate
— — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90
July 1, 2010, to June 30, 2011
Direct Subsidized Loans to Undergraduate Students
4.5% fixed rate
— — — — — — — — — — — — — — — — 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50
Direct Subsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students
6.8% fixed rate
— — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80
PLUS Loans
7.9% fixed rate
— — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90
July 1, 2011, to June 30, 2012
Direct Subsidized Loans to Undergraduate Students
3.4% fixed rate
— — — — — — — — — — — — — — — — — 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40
Direct Subsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students
6.8% fixed rate
— — — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80
PLUS Loans
7.9% fixed rate
— — — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90
July 1, 2012, to June 30, 2013
Direct Subsidized Loans to Undergraduate Students
3.4% fixed rate
— — — — — — — — — — — — — — — — — — 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40
CRS-101

Disbursement

Period,
Loan Type, and
-1995
-1996
-1997
-1998
-1999
-2000
-2001
-2002
-2003
-2004
-2005
-2006
-2007
-2008
-2009
-2010
-2011
-2012
-2013
-2014
-2015
-2016
-2017
-2018
-2019
-2020
-2021
-2022
Loan Period
(if applicable)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Direct PLUS Loans
10-yr T-note + 4.6%
— — — — — — — — — — — — — — — — — — — — — — — —
—
— 5.30 5.30
(10.5% cap), fixed
July 1, 2021, to June 30, 2022
Direct Subsidized Loans and Direct Unsubsidized Loans to Undergraduate Students
10-yr T-note +
— — — — — — — — — — — — — — — — — — — — — — — —
—
— — 3.73
2.05% (8.25% cap),
fixed
Direct Unsubsidized Loans to Graduate Students
10-yr T-note +
— — — — — — — — — — — — — — — — — — — — — — — —
—
— — 5.28
3.60%
(9.50% cap), fixed
Direct PLUS Loans
10-yr T-note + 4.6%
— — — — — — — — — — — — — — — — — — — — — — — —
—
— — 6.28
(10.5% cap), fixed
Sources: U.S. Department of Education, Office of Federal Student Aid, "Annual Notice of Interest Rates for Variable-Rate Federal Student Loans Made Under the
Wil iam D. Ford Federal Direct Loan Program," 83 Federal Register 53858-53860, October 25, 2018; Department of Education, Office of Federal Student Aid, "Annual
Notice of Interest Rates for Fixed-Rate Federal Student Loans Made Under the Wil iam D. Ford Federal Direct Loan Program," 83 Federal Register 53864-53866, October
25, 2018 and prior notices; U.S. Department of Education, Office of Federal Student Aid, LOANS-21-06 “Interest Rates for Direct Loans First Disbursed Between July 1,
2021 and June 30, 2022,” May 19, 2021; and U.S. Department of Education, Office of Federal Student Aid, “Federal Stafford, Federal PLUS, Federal SLS, and Federal
Consolidation Interest Rate Calculations for the Period July 1, 2021-June 30, 2022,” June 3, 2021.
a. This refers to the subsidized component of a Direct Consolidation Loan.
b. This refers to the unsubsidized component of a Direct Consolidation Loan, excluding the portion of a Direct Consolidation Loa n attributable to Direct PLUS Loans,
Direct PLUS Consolidation Loans, and FFEL PLUS Loans that were repaid by the Direct Consolidation Loan.
c. This refers to the unsubsidized component of a Direct Consolidation Loan attributable to Direct PLUS Loans, Direct PLUS Consolidation Loans, and FFEL PLUS
Loans that were repaid by the Direct Consolidation Loan.
d. The Consolidated Appropriations Act for FY2001 (P.L. 106-554) includes an amendment to the HEA that changed the index used in the formulas that determine
interest rates for PLUS Loans made under the FFEL and Direct Loan programs disbursed between July 1, 1987, and June 30, 1998. The amendment substitut ed the
CRS-106

one-year constant maturity Treasury yield for the 52-week Treasury bil . This change, which affects interest rate adjustments made for any 12-month period
beginning on or after July 1, 2001, became necessary because the Department of the Treasury stopped issuing 52 -week Treasury bil s.

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Table C-5. History of Direct Loan Origination Fees
Direct
Direct
Direct
Subsidized
Unsubsidized
PLUS
Loans
Loans
Loans
Disbursement Period
(%)
(%)
(%)
July 1, 1994, through August 14, 1999
4.000
4.000
4.000
August 15, 1999, through June 30, 2006
3.000a
3.000a
4.000
July 1, 2006, through June 30, 2007
3.000
3.000
4.000
July 1, 2007, through June 30, 2008
2.500
2.500
4.000
July 1, 2008, through June 30, 2009
2.000
2.000
4.000
July 1, 2009, through June 30, 2010
1.500
1.500
4.000
July 1, 2010, through June 30, 2013
1.000
1.000
4.000
July 1, 2013, through November 30, 2013b
1.051
1.051
4.204
December 1, 2013, through September 30, 2014b
1.072
1.072
4.288
October 1, 2014, through September 30, 2015b
1.073
1.073
4.292
October 1, 2015, through September 30, 2016b
1.068
1.068
4.272
October 1, 2016, through September 30, 2017b
1.069
1.069
4.276
October 1, 2017, through September 30, 2018b
1.066
1.066
4.264
October 1, 2018, through September 30, 2019b
1.062
1.062
4.248
October 1, 2019, through September 30, 2020b
1.059
1.059
4.236
October 1, 2020, through September 30, 2021b
1.057
1.057
4.228
October 1, 2021, through September 30, 2022b
1.057
1.057
4.228
Sources: HEA, §455(c); 20 U.S.C. §1087e(c); U.S. Department of Education, Direct Loan Task Force, Direct
Loan Bul etin, DLB 99-39, “Meeting Our Promise – Procedures on Processing the Reduced Loan Origination
Fee,” June 1, 1999, https://ifap.ed.gov/dlbul etins/doc0188_bodyoftext.htm; U.S. Department of Education,
“Wil iam D. Ford Federal Direct Loan Program: Final Regulations,” 64 Federal Register 46252-24255, August 24,
1999, https://www.govinfo.gov/content/pkg/FR-1999-08-24/pdf/99-21957.pdf; and BBEDCA, §256(b); FY22
Sequester-Required Changes to the Title IV Student Aid Programs,” May 17, 2021,
https://fsapartners.ed.gov/knowledge-center/library/elect ronic-announcements/2021-05-17/fy-22-sequester-
required-changes-title-iv-student-aid-programs-ea-id-general-21-31, and prior notices.
a. During the period from August 15, 1999 through June 30, 2006, the Department of Education charged a
reduced loan origination fee of 3.0% on Direct Subsidized Loans and Direct Unsubsidized Loans.
b. Origination fee increased due to a sequestration order being in effect.

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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Author Information

Alexandra Hegji

Analyst in Social Policy

Acknowledgments
This report was originally authored by David P. Smole, CRS Coordinator of Research Planning.

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