Student Aid Reference Desk

Direct Loans

The Direct Loan Program makes long-term loans available to students at all levels of study, and to parents on behalf of dependent students. The federal government subsidizes interest during defined periods for undergraduate students who show need under the federal need analysis methodology, but only for a limited amount of time based on the length of the student’s program. Various repayment plans are available, as well as deferments, cancellations, and discharges.

Related terms: Loan Counseling; Cohort Default Rate (CDR)

Statutory Authority

U.S. Code, Title 20—Education Chapter 28—Higher Education Resources and Student Assistance Subchapter IV—Student Assistance > Part D—William D. Ford Federal Direct Loan Program §§ 1087a – 1087j [HEA §§ 451 - 460]

Regulation

34 CFR Part 685

ED References

New! 2022-23 FSA Handbook, Vol. 4, May 2022

2021-22 FSA Handbook, Vol. 1, July 2021

2021-22 FSA Handbook, Vol. 2, November 2021

2021-22 FSA Handbook, Vol. 3, March 2022

2021-22 FSA Handbook, Vol. 4, August 2021

FSA Assessments, Direct Loans

Publications, Articles & Other Resources

A Case Study of Undergraduate Debt, Repayment Plans, and Postbaccalaureate Decision-Making Among Black Students at HBCUs

Source: Journal of Student Financial Aid

A Primer on Higher Education, Student Aid, and the Federal Budget Process

Source: Journal of Student Financial Aid

Another Lesson on Caution in IDR Analysis: Using the 2019 Survey of Consumer Finances to Examine Income-Driven Repayment and Financial Outcomes

Source: Journal of Student Financial Aid

Borrowers Discuss the Challenges of Student Loan Repayment

Source: The Pew Charitable Trusts

Changes in HBCU Financial Aid and Student Enrollment After the Tightening of PLUS Credit Standards

Source: Journal of Student Financial Aid

College Student Debt and Anticipated Repayment Difficulty

Source: Journal of Student Financial Aid

Comparison of Sub and Unsub for Undergrads, 2020-21

Source: National Association of Student Financial Aid Administrators

Debt Profiles of Model Students: The Projected Debt of Highly Productive Students and Its Economic Impact

Source: Journal of Student Financial Aid

Direct Loans AskRegs Knowledgebase Q&As

Source: National Association of Student Financial Aid Administrators

Direct Loans Self-Study Guide

Source: National Association of Student Financial Aid Administrators

Do Promise Programs Reduce Student Loans? Evidence from Tennessee Promise

Source: The Journal of Higher Education

Does the House Always Win? An Analysis of Barriers to Wealth Building and College Borrowing

Source: Journal of Student Financial Aid

Education Tax Credits: A Different Trajectory for Federal Funding of Higher Education and Remediation for Effectual Policymaking

Source: Journal of Student Financial Aid

Exploring IDR: A Comparison of Financial Situations and Behaviors Between Those in Traditional Student Loan Repayment and Those in Income-Driven Repayment

Source: Journal of Student Financial Aid

Getting it Right: Design Principles for Student Loan Servicing Reform

Source: Third Way

Graduate and Professional Reference Sheet, 2021-22

Source: National Association of Student Financial Aid Administrators

Higher Education: Can Debt Beat Savings?

Source: Journal of Student Financial Aid

National Student Aid Profile: Overview of 2021 Federal Programs

Source: National Association of Student Financial Aid Administrators

Parent Borrowing and College Completion

Source: Journal of Student Financial Aid

PLUS Borrowing in Texas: Repayment Expectations, Experience, and Hindsight by Minority-Serving Institution Status

Source: Trellis Company

Policymakers Should Consider Impact of Growing Student Loan Balances on Borrowers and Taxpayers

Source: The Pew Charitable Trusts

New! Protecting Borrowers & Advancing Equity: Systemic Solutions to Improve Federal Student Loan Servicing & Repayment

Source: National Association of Student Financial Aid Administrators

Social Dimensions of Student Debt: A Data Mining Analysis

Source: Journal of Student Financial Aid

Student Aid Reference Sheet - 2021-22

Source: National Association of Student Financial Aid Administrators

Student Loan System Presents Repayment Challenges

Source: The Pew Charitable Trusts

Student Loans and Health-related Financial Hardship

Source: Journal of Student Financial Aid

Student Loans, Financial Stress, and College Student Retention

Source: Journal of Student Financial Aid

The Influence of Stafford Loan Debt Load on Persistence Among Historically Underserved Populations at a Hispanic Serving Institution

Source: Journal of Student Financial Aid

The North Carolina Teaching Fellows Program: A Case Study of the Use of Forgivable Loans in Recruiting Future STEM Teachers

Source: Journal of Student Financial Aid

Understanding Loan Use and Debt Burden Among Low-income and Minority Students at a Large Urban Community College

Source: Journal of Student Financial Aid

Unforced Errors: How One Simple Fix Could Improve Student Loan Repayment

Source: Third Way

Who do College Students Turn to for Financial Aid and Student Loan Advice, and is it Advice Worth Following?

Source: Journal of Student Financial Aid

Subtopics

Acceleration

See De faulted loans

Adverse credit

See Borrower eligibility

Aggregate loan limits

Graduate/Professional

Direct Subsidized Loans

Limits

685.203(d)(2)

Loss of subsidized eligibility on/after 7/1/12

GEN-11-16

Prior to 7/1/12

685.203(a)(5)

Direct Unsubsidized Loans

685.203(e)(3)

PLUS

685.203(g)

NSLDS information

General

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Calculating unsubsidized aggregate loan amounts

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

PLUS

685.203(g)

Summary chart

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Student Aid Reference Sheet, 2021-22

Source: National Association of Student Financial Aid Administrators

Treatment of consolidation loans

685.203(i)

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Treatment of converted TEACH Grants

685.203(k)

Undergraduate

Direct Subsidized Loans

685.203(d)(1)

Direct Unsubsidized Loans

Dependent student whose parent cannot borrow PLUS

685.203(e)(2)

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Dependent undergraduate student

685.203(e)(1)

Independent undergraduate student

685.203(e)(2)

Annual loan limits

Grade level progression

General information

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Grade level changes during academic year

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

New annual amount for same grade level

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Remedial work

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Transfer student’s grade level classification

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Graduate/Professional students

Direct Subsidized Loans

Limits

685.203(d)(2)

Loss of subsidized eligibility on/after 7/1/12

GEN-11-16

Prior to 7/1/12

685.203(a)(5)

Direct Unsubsidized Loans

685.203(b)(2)(iii)

685.203(c)(1)(i)

685.203(c)(2)(v)

PLUS

685.203(f)

Health professions students

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Loan limit period (period to which loan limit applies)

685.203(h)

Loan limit progression [Scheduled Academic Year (SAY) and Borrower Based Academic Year (BBAY)]

685.303(e)

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Maximum loan amount (need limitation)

685.203(j)

PLUS

685.203(f)

Preparatory coursework

Direct Subsidized Loans

685.203(a)(6)

Direct Unsubsidized Loans

685.203(c)(2)(vi)

Students returning for same or lower credential

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Summary chart

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Student Aid Reference Sheet, 2021-22

Source: National Association of Student Financial Aid Administrators

Teacher certification (postbaccalaureate)

Direct Subsidized Loans

685.203(a)(7)

Direct Unsubsidized Loans

685.203(c)(2)(vii)

Transfer student

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Treatment of converted TEACH Grants

685.203(k)

Undergraduate students

First year

Direct Subsidized Loans

685.203(a)(1)

685.203(a)(8)

685.203(a)(9)(i)

Direct Unsubsidized Loans

Dependent student

685.203(b)(1)

Dependent student whose parent cannot borrow PLUS

685.203(c)(1)

685.203(c)(2)(i)

685.203(c)(2)(viii)

685.203(c)(2)(ix)(A)

685.203(c)(3)

Independent undergraduate student

685.203(b)(2)

685.203(c)(1)

685.203(c)(2)(i)

685.203(c)(2)(viii)

685.203(c)(2)(ix)(A)

Second year

Direct Subsidized Loans

685.203(a)(2)

685.203(a)(9)(ii)

Direct Unsubsidized Loans

Dependent student

685.203(b)(1)

Dependent student whose parent cannot borrow PLUS

685.203(b)(2)

685.203(c)(1)

685.203(c)(2)(ii)

685.203(c)(2)(ix)(B)

685.203(c)(3)

Independent undergraduate student

685.203(b)(2)

685.203(c)(1)(i)

685.203(c)(2)(ii)

685.203(c)(2)(ix)(B)

Third year through end of undergraduate program (including upper division programs, i.e., programs requiring an associate or baccalaureate for admission)

Direct Subsidized Loans

685.203(a)(3)

685.203(a)(4)

Direct Unsubsidized Loans

Dependent student

685.203(b)(1)

Dependent student whose parent cannot borrow PLUS

685.203(c)(1)

685.203(c)(2)(iii)

685.203(c)(2)(iv)

685.203(c)(3)

Independent undergraduate student

685.203(b)(2)

685.203(c)(1)(i)

685.203(c)(2)(iii)

685.203(c)(2)(iv)

Application of payments

Application of prepayments

685.211(a)(3)

Application of refunds and returns of Title IV funds from schools

685.211(c)

Order of application for scheduled payments

685.211(a)(1)

Order of application under income-based repayment

685.221(c)

Order of application under PAYE repayment

685.209(a)(3)

Order of application under REPAYE repayment

685.209(c)

Prepayment without penalty

685.211(a)(2)

Attendance at multiple schools during same period

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Authority to pay refund or return of funds to ED on behalf of borrower

685.306

Borrower defenses against collection of a loan and school liability

685.206(c)

685.222

Federal Register, 12/11/20, p. 79862

Electronic Announcement, 3/15/19

Borrower eligibility

Parent borrower of PLUS loans

Adverse credit history

General rules

685.200(c)(1)(vii)

Federal Register, 1/14/15, pp. 1848 to 1849

Federal Register, 10/23/14, pp. 63319 to 33321

Electronic Announcement, 1/27/15

2021-22 FSA Handbook, Vol. 1, Ch. 6, July 2021

Definition of endorser

685.102(b)

Borrowing on behalf of an eligible dependent undergraduate student

685.200(c)(2)

Citizenship/residency

668.33

685.200(c)(1)(iii)

Default on Title IV loans

Student Loan Default Has Serious Financial Consequences

Source: The Pew Charitable Trusts

General rules

668.32(g)(1)

685.200(c)(2)(iv)

685.200(d)

Definition of satisfactory repayment arrangement

685.102(b)

Disability cancellation of previous loan

685.200(a)(1)(iv)

685.200(c)(1)(vi)

Fraudulently obtained Title IV funds

685.200(c)(2)(vii)

Overpayment of Title IV funds

668.32(g)(4)

685.200(c)(2)(iv)

Parent (definition and qualification to borrow)

685.200(c)(2)

GEN-14-14

2021-22 FSA Handbook, Vol. 1, Ch. 6, July 2021

Social Security number

685.200(c)(2)(ii)

Statement of Educational Purpose

668.32(h)

685.200(c)(2)(v)

Student borrower

See top list entry for Student Eligibility

Code of conduct

668.14(b)(27)

2021-22 FSA Handbook, Vol. 2, Ch. 3, November 2021

Collection charges

685.202(e)

685.211(d)(2)

Consolidation

General rules

685.220

Interest rate

685.202(a)(10)

685.220(g)

Federal Register, 8/10/20, pp. 48229 to 48231

Loans eligible for consolidation

685.220(b)

Defaulted loans

Acceleration

685.211(d)(1)

Collection actions

685.211(d)(3)

Eligibility for deferment

685.204(a)(3)

Failure to repay in response to immediate demand letter

685.211(e)(3)

Satisfactory repayment arrangements

685.102(b)

Deferment

Additional deferments for borrowers with loans made prior to 7/1/93

682.210(b)

685.204(j)

Borrower’s responsibility to request and document deferment

685.204(a)(4)

Cancer Treatment

Electronic Announcement, 8/22/19

Economic hardship

685.204(g)

Graduate fellowship

General rules

685.204(d)

Medical internship or residency

685.204(d)(2)(i)(C)

In-school deferment

General rules

685.204(b)

Medical internship or residency

685.204(b)(1)(ii)

Methods for identifying or conveying deferment status

685.204(b)(2)

Military service

See also Repayment plans

Americans Support Federal Action To Make Student Loan Repayment Easier

Source: The Pew Charitable Trusts

Consolidation loan

685.207(e)

Exclusion of deferments and forbearances from repayment period

685.208(a)(5)

First payment due date

685.207(a)(3)

PLUS loan

685.207(d)

Subsidized loan

685.207(b)(4)

Unsubsidized loan

685.207(c)(4)

Repayment plans

Alternative repayment plan

685.208(l)

Applicability of selected plan to all Direct Loans of borrower

685.208(a)(4)

Changing repayment plans

685.210(b)

Choice of plan

685.210

Defaulted loans

685.211(d)(3)(ii)

Extended repayment plan

685.208(d)-(e)

685.208(i)

Graduated repayment plan

685.208(f)-(j)

Income-based repayment (IBR) plan

General rules

685.221

Eligibility documentation, verification, and notifications

685.221(e)

Federal Register, 12/11/20, pp. 79856 to 79863

Federal Register, 9/29/17, pp. 45465 to 45471

Interest forgiveness

685.221(b)(3)

Loan forgiveness after designated years of repayment

685.221(f)

Monthly payment limit

685.221(b)(1)

Partial financial hardship

685.221(a)(5)

Income-contingent repayment (ICR) plan

General rules

685.209(b)

Eligibility documentation

685.209(b)(3)(i)

685.209(b)(3)(vi)

Federal Register, 12/11/20, pp. 79856 to 79863

Federal Register, 9/29/17, pp. 45465 to 45471

Interest capitalization limitation

685.209(b)(3)(iv)

Federal Register, 12/11/20, pp. 79856 to 79863

Loan forgiveness after designated years of repayment

685.209(b)(3)(iii)(D)

Monthly repayment

685.208(k)

Repayment amount calculation

685.209(b)(1)

Repayment period

685.209(b)(3)(iii)

Income-driven repayment (IDR) plans

See Income-based repayment (IBR) plan, Income-contingent repayment (ICR) plan, Pay As You Earn (PAYE) repayment plan, and Revised Pay As You Earn (REPAYE) repayment plan

Minimum payment of accrued interest

685.208(a)(2)(v)

685.208(f)(3)

Pay as you earn (PAYE) repayment plan

General rules

685.209(a)

Eligibility documentation, verification, and notifications

685.209(a)(5)

Federal Register, 9/29/17, pp. 45465 to 45471

Interest forgiveness

685.209(a)(2)(iii)

Loan forgiveness after designated years of repayment

685.209(a)(6)

Monthly payment limit

685.209(a)(2)(i)

Partial financial hardship

685.209(a)(1)(v)

Repayment period

685.209(a)(2)(vi)

Plans available to Direct Subsidized or Unsubsidized Loan borrowers who enter repayment before 7/1/2006

685.208(a)(1)(i)

Plans available to Direct PLUS borrowers who enter repayment before 7/1/2006

685.208(a)(1)(ii)

Plans available to Direct Subsidized, Unsubsidized, or Grad PLUS borrowers who enter repayment on or after 7/1/2006

685.208(a)(2)(i)

Plans available to parent PLUS borrowers who enter repayment on or after 7/1/2006

685.208(a)(2)(ii)

Plans available to Direct Consolidation Loan borrowers who enter repayment on or after 7/1/2006

685.208(a)(2)(iii), (iv)

Revised Pay As You Earn (REPAYE) repayment plan

General rules

685.209(c)

Eligibility documentation, verification, and notifications

685.209(c)(4)

Federal Register, 9/29/17, pp. 45465 to 45471

Electronic Announcement, 12/17/15

Interest forgiveness

685.209(c)(2)(iii)

Loan forgiveness after designated years of repayment

685.209(c)(5)

Monthly payment limit

685.209(c)(2)

Repayment period

685.209(c)(2)(ii)

Spousal information for income-based, income-contingent, and pay as you earn plans

GEN-14-14

Standard repayment plan

685.208(b), (c)

685.208(j)

Replacement of EFC with loan proceeds

685.200(e)

Replacement of subsidized loan with unsubsidized loan

New! 2022-23 FSA Handbook, Vol. 4, Ch. 3, May 2022

2021-22 FSA Handbook, Vol. 4, Ch. 3, August 2021

Subsidy

Counseling information

685.304(a)(6)(xiii)(C)

685.304(b)(4)(xii)(C)(2)

Repeal of 150% SULA (R-) Frequently Asked Questions, R-SAG-Q3/R-SAG-A3; R-SAG-Q4/R-SAG-A4

Limitation on eligibility for subsidy (150% limit)

Loans disbursed after 7/1/21

150% Direct Subsidized Loan Limit: Electronic Announcement #25 – Guidance and Operational Information for the Repeal of 150% Subsidized Usage Limit (DL-21-04)

Repeal of 150% SULA (R-) Frequently Asked Questions, R-FTB-Q1/R-FTB-A1; R-FTB-Q2/R-FTB-A2; R-BL-Q2/R-BL-A2;R-BL-Q3/R-BL-A3; R-CON-Q1/R-CON-A1; R-CON-Q2/R-CON-A2; R-CON-Q3/R-CON-A3; R-LOS-Q1/R-LOS-A1; R-LOS-Q2/R-LOS-A2; R-LOS-Q4/R-LOS-A4; R-LOS-Q6/R-LOS-A6

Loans disbursed for 2013-14 award year and before 7/1/21

685.200(f)

Federal Register, 1/17/14, Preamble to the Final Rule

150% Direct Subsidized Loan Limit: Electronic Announcement #25 – Guidance and Operational Information for the Repeal of 150% Subsidized Usage Limit (DL-21-04)

150% Direct Subsidized Loan Limit: Electronic Announcement, #20

150% Direct Subsidized Loan Limit: Electronic Announcement #11

150% Direct Subsidized Loan Limit - Frequently Asked Questions

Repeal of 150% SULA (R-) Frequently Asked Questions, R-BL-Q1/R-BL-A1; R-BL-Q2/R-BL-A2; R-BL-Q3/R-BL-A3; R-CON-Q1/R-CON-A1; R-CON-Q2/R-CON-A2; R-CON-Q3/R-CON-A3; R-LOS-Q1/R-LOS-A1; R-LOS-Q2/R-LOS-A2; R-LOS-Q3/R-LOS-A3; R-LOS-Q6/R-LOS-A6

2021-22 FSA Handbook, Vol. 3, Ch. 5, March 2022

Periods subsidized

685.100(a)(1)

685.102(b), Federal Direct Consolidation Loan Program (2)

685.102(b), Federal Direct Stafford/Ford Loan Program

685.207(b)(3)

685.207(c)(3)

150% Direct Subsidized Loan Limit: Electronic Announcement #25 – Guidance and Operational Information for the Repeal of 150% Subsidized Usage Limit (DL-21-04)

Repeal of 150% SULA (R-) Frequently Asked Questions, R-BL-Q2/R-BL-A2; R-BL-Q3/R-BL-A3; R-CON-Q2/R-CON-A2; R-LOS-Q5/R-LOS-A5

Reporting

Electronic Announcement, 4/20/17

150% Direct Subsidized Loan Limit: Electronic Announcement #25 – Guidance and Operational Information for the Repeal of 150% Subsidized Usage Limit (DL-21-04)

150% Direct Subsidized Loan Limit: Electronic Announcement #22

150% Direct Subsidized Loan Limit: Electronic Announcement, #19

Repeal of 150% SULA (R-) Frequently Asked Questions, R-NSLDS-Q1/R-NSLDS-A1; R-NSLDS-Q2/R-NSLDS-A2; R-NSLDS-Q3/R-NSLDS-A3

Unenforceable loans due to school action

685.308

Withdrawal date

685.305

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