FAFSA gives you both grants and loans — you repay only the loans
Not all FAFSA money is a loan. The federal government sends two types of aid through your FAFSA results: grants (which you keep) and loans (which you repay). Grants are information programs based on financial need. Loans are borrowed money you begin repaying after you leave school or drop below half-time enrollment.
Your FAFSA form itself does not determine which type you receive — your school's financial aid office does that. They look at your FAFSA information, your school's cost, and what other aid you have, then they build a package that usually mixes both grants and loans. The school's award letter tells you exactly which dollars are grants and which are loans.
The most common grant for undergraduates is the Federal Pell Grant, which goes to students from lower-income families. Pell Grants do not require repayment under any circumstance. Federal loans — mainly the Stafford loan — do require repayment, usually beginning six months after you graduate or stop attending school full-time.
Key Takeaways
- Federal Pell Grants and other grants listed on your award letter are information programs you never repay.
- Federal Stafford loans and PLUS loans are borrowed money you must repay, starting after you leave school or enroll part-time.
- Your school's award letter separates grants from loans, so you can see exactly which aid requires repayment.
- Repayment plans vary — standard repayment takes 10 years, but income-driven plans can extend it to 20 or 25 years.
- Private loans from banks are separate from FAFSA and have their own repayment terms set by the lender.
How to tell grants from loans on your award letter
Your school mails or emails an award letter after you submit your FAFSA. This letter lists every dollar the school is offering you for that year. Look for two sections: one labeled "Grants and Scholarships" and another labeled "Loans."
Anything in the grants section — whether it says Pell Grant, state grant, institutional grant, or scholarship — is money you do not repay. Anything in the loans section, whether it says Stafford Loan, Unsubsidized Loan, or PLUS Loan, requires repayment. Some schools also list work-study in a separate section; that is a job on campus, not aid you repay.
If your award letter does not clearly separate these, call your school's financial aid office and ask them to explain which items require repayment. They can also tell you the interest rate on any loans and when repayment begins.
Federal loans you repay and when repayment starts
The most common federal loan is the Stafford Loan, which comes in two versions: subsidized and unsubsidized. With a subsidized Stafford, the government pays the interest while you are in school. With an unsubsidized Stafford, interest accrues (builds up) from the moment you borrow, even while you are still studying.
Repayment begins six months after you graduate, leave school, or enroll in fewer than six credits per term. This six-month period is called the grace period. During the grace period, you do not have to make payments, though interest continues to accrue on unsubsidized loans.
A Parent PLUS Loan is borrowed by your parent, not you, and your parent is responsible for repayment. Repayment can begin as soon as the loan is disbursed, though parents can request a deferment (delay) while the student is in school.
Repayment plans and how long you have to pay
Once your grace period ends, you choose a repayment plan. The Standard Repayment Plan requires fixed monthly payments over 10 years. This plan costs the least in total interest but has the highest monthly payment.
Income-Driven Repayment Plans base your monthly payment on what you earn. There are four versions: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR). Monthly payments can be as low as $0 if your income is very low, and the repayment period extends to 20 or 25 years depending on the plan. Any balance remaining after that period may be forgiven, though you may owe income tax on the forgiven amount.
You can change your repayment plan at any time by logging into your loan servicer's website or calling them. Your loan servicer is the company that collects your payments — it is listed on your loan documents and also on StudentLoans.gov.
Private loans and other borrowed money
Some students also borrow from banks or private lenders. These loans do not appear on your FAFSA and are not federal loans. Private loans have their own interest rates and repayment terms set by the lender. You must repay them, and the terms are usually less flexible than federal loans — for example, many private loans do not offer income-driven repayment or loan forgiveness.
Before borrowing from a private lender, exhaust your federal loan options. Federal loans have fixed interest rates set by Congress, income-driven repayment, and forgiveness programs. Private loans typically have higher rates and fewer protections.
What happens if you do not repay
If you do not make a payment within 90 days of the due date, your loan enters delinquency. After 270 days (about nine months), it enters default. Defaulted loans trigger serious consequences: the government can garnish your wages, intercept your tax refund, and damage your credit score. You may also lose future may be able to access for federal aid.
If you are struggling to pay, contact your loan servicer before you miss a payment. They can discuss income-driven plans, deferment, or forbearance (a temporary pause on payments). These options are free and can prevent default.
Frequently Asked Questions
Do I have to repay a Pell Grant if I drop out?
No. Pell Grants are never repaid, even if you leave school, change schools, or do not finish your degree. However, if you received a Pell Grant for a term and then withdraw from all classes during that term, the school may ask you to return a portion of it.
What if I cannot afford my monthly loan payment?
Contact your loan servicer when ready. You can switch to an income-driven repayment plan, which may lower your payment to $0 if your income is low enough. You can also request deferment or forbearance, which temporarily pauses payments. These options are free and do not require a special form.
Can my FAFSA loans be forgiven?
Federal loans may be forgiven after 20 or 25 years of payments under an income-driven plan, or through Public Service Loan Forgiveness if you work for a government agency or nonprofit for 10 years. Forgiven amounts may be taxable income. Private loans are not forgiven under any federal program.
Do I start repaying loans while I am still in school?
No. Repayment begins six months after you graduate or drop below half-time enrollment. However, interest on unsubsidized loans accrues during school, so the amount you owe grows even before you make your first payment.
What is the difference between deferment and forbearance?
Both pause your payments temporarily. With deferment, the government pays interest on subsidized loans, but interest accrues on unsubsidized loans. With forbearance, interest accrues on all loans. Forbearance is easier to obtain but costs more in the long run because more interest builds up.