FAFSA gives you both grants and loans — you repay only the loans
Not all FAFSA money is a loan. The federal government sends you two types of aid through FAFSA: grants (which you keep) and loans (which you repay). Grants are information programs based on your family's income and your school costs. Loans are borrowed money that you begin repaying after you leave school or drop below half-time enrollment.
The key difference: your school's financial aid office decides which type you receive based on your FAFSA results and your school's own aid budget. You do not choose between them — the school packages both into your aid offer. But you can refuse loans and accept only grants if your school offers both.
Most students who file FAFSA receive at least some grant money. Whether you owe anything back depends entirely on whether loans are included in your aid package and whether you accept them.
Key Takeaways
- Federal Pell Grants and other grant programs give you money you never repay, but only if your family income and school costs may have access to you.
- Federal student loans (Stafford loans, PLUS loans, and others) must be repaid with interest, starting after you graduate or leave school.
- Your school's financial aid office decides what combination of grants and loans to offer you based on your FAFSA information.
- You can refuse loans and accept only grants, but you cannot refuse grants and accept only loans.
- Loan repayment terms, interest rates, and forgiveness programs vary by loan type and change by year.
Federal grants you do not repay
The most common grant is the Federal Pell Grant, which goes to undergraduate students whose family income falls below a certain threshold. The maximum Pell Grant amount changes each year — your school's financial aid office will tell you the exact amount you received in your aid letter. Pell Grants are information programs; you never repay them.
Other federal grants include the Federal Supplemental Educational Opportunity Grant (FSEOG) and Teacher Education information for College and Higher Education (TEACH) Grant. FSEOG is also information programs. TEACH Grant requires you to work in a high-need school or subject area after graduation; if you do not meet that requirement, it converts to a loan you must repay.
Some states and individual schools also offer grants through FAFSA. Your aid letter will list every grant you received and whether it has any repayment requirement or condition attached.
Federal loans you must repay
Federal Stafford Loans are the most common student loans. They come in two types: subsidized (the government pays interest while you are in school) and unsubsidized (interest accrues from the day you borrow). Both require repayment after you graduate or leave school.
Federal PLUS Loans are borrowed by parents or graduate students and have higher interest rates than Stafford Loans. Federal Perkins Loans, which some schools still offer, are older loans with different terms. All of these are federal loans that you repay through the U.S. Department of Education.
Your aid letter will show the loan type, the amount, the interest rate, and when repayment begins. Interest rates on federal loans are set by Congress and change each year; your school cannot change them.
How to tell what you owe from your aid letter
Your school sends you a financial aid letter (sometimes called an aid package or award letter) after you submit FAFSA. This letter lists every dollar of aid you received, separated by type. Grants appear in one section; loans appear in another. The letter also shows the loan type, interest rate, and when you must start repaying.
If your aid letter shows only grants and no loans, you owe nothing back. If it shows loans, those are the amounts you will repay. Some students receive both — for example, a $6,000 Pell Grant and a $5,500 Stafford Loan in the same year.
Keep your aid letter. You will need it later to understand your repayment obligations and to track what you borrowed across all years of school.
Private loans are separate from FAFSA
FAFSA itself does not offer private loans. However, some students borrow private student loans from banks or other lenders in addition to federal aid. Private loans are not part of your FAFSA package — you explore for them separately, and they have different terms, interest rates, and repayment rules than federal loans.
Private loans typically have higher interest rates and fewer repayment options than federal loans. If you borrow private loans, you are responsible for understanding their terms before you sign. FAFSA does not manage or track private loans.
When federal loan repayment begins
Federal student loans enter a grace period after you graduate or drop below half-time enrollment. The grace period is usually six months, during which you do not have to make payments. After the grace period ends, you must begin repaying according to your loan's repayment plan.
You choose your repayment plan from several federal options: Standard Repayment (fixed payments over 10 years), Income-Driven Repayment (payments based on your income), Graduated Repayment (payments start low and increase), or others. Different plans result in different total amounts paid and different payoff timelines.
You manage federal loan repayment through the Federal Student Aid website (studentaid.gov) or by contacting your loan servicer. The servicer is the company that collects your payments; the Department of Education assigns you one when your loan enters repayment.
What happens if you do not repay federal loans
Federal student loans have serious consequences if you stop paying. Your loan enters default if you do not make a payment for 270 days (about nine months). Once in default, the entire remaining balance becomes due when ready, your credit score drops significantly, and the government can garnish your wages or tax refunds.
If you are struggling to pay, contact your loan servicer before you miss payments. Federal loans offer income-driven repayment plans that can lower your monthly payment to as little as $0 if your income is very low. You can also request a deferment or forbearance, which temporarily pauses payments while you face hardship.
Defaulted loans can be rehabilitated by making nine on-time payments within 10 months, which removes the default from your credit report. This is difficult but possible, and it stops wage garnishment.
Frequently Asked Questions
Do I have to accept the loans in my FAFSA aid package?
No. You can refuse loans and accept only grants. However, you cannot refuse grants and accept only loans. If your aid package includes both and you need more money than the grants provide, you can choose to accept some or all of the loans offered. Contact your school's financial aid office to decline loans.
What if I received a TEACH Grant and did not work in a may have access to school?
TEACH Grants convert to loans if you do not meet the service requirement. You will owe the full amount you received plus interest, and repayment begins six months after you leave school. Contact your loan servicer when ready to set up a repayment plan.
Can I pay back my federal student loans early without a penalty?
Yes. Federal student loans have no prepayment penalty. You can pay extra toward your balance at any time, and the extra money goes directly to reducing what you owe. Paying extra reduces the total interest you pay over the life of the loan.
What is the difference between subsidized and unsubsidized Stafford Loans?
With subsidized loans, the government pays the interest while you are in school and during your grace period. With unsubsidized loans, interest accrues (builds up) from the day you borrow, even while you are in school. Both require repayment after graduation, but unsubsidized loans cost more because interest has been accumulating longer.
If I did not receive any loans in my aid package, do I owe FAFSA anything?
No. If your aid package contains only grants, you owe nothing back to the federal government. Grants are information programs. However, if you borrowed private loans separately, you owe those to the private lender, not to FAFSA.