FAFSA gives you both grants and loans — you repay only the loans

When you receive FAFSA money, part of it comes as a grant (money you keep) and part as a loan (money you repay). The FAFSA process itself does not determine what you owe back. Instead, the school's financial aid office decides which programs to offer you based on your FAFSA results, and that mix determines what portion requires repayment.

Grants — including the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), and state grants — never require repayment. Loans — including Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans — do require repayment, usually beginning six months after you leave school or drop below half-time enrollment.

Your financial aid package will list each program separately, so you can see exactly which dollars are grants and which are loans before you accept them.

Key Takeaways

  • Federal Pell Grants and state grants that appear in your aid package never require repayment under any circumstance.
  • Direct Subsidized and Unsubsidized Loans must be repaid, and repayment typically starts six months after graduation or when you drop below half-time enrollment.
  • Your school's financial aid office decides which FAFSA-based programs to offer you; the FAFSA form itself does not determine what you owe.
  • You can refuse any loan offer in your aid package and accept only the grant portion if you choose.

How to tell grants from loans in your aid package

After you submit the FAFSA, your school sends you an award letter listing the financial aid you have been offered. This letter breaks down each program by name and amount. Programs labeled as grants, scholarships, or waivers do not require repayment. Programs labeled as loans do.

The most common grant is the Federal Pell Grant, which the federal government funds and which goes to undergraduate students with financial need. The amount varies by year and by your Expected Family Contribution (EFC), now called the Student Aid Index (SAI). Your school may also offer FSEOG, state grants, or institutional grants funded by the school itself — none of these require repayment.

Direct Subsidized Loans and Direct Unsubsidized Loans are the most common loan types in a FAFSA-based package. Both require repayment. The difference is that the federal government pays the interest on a Subsidized Loan while you are in school, whereas you owe interest on an Unsubsidized Loan from the moment it is disbursed.

When repayment begins for federal student loans

Repayment of Direct Loans does not start when ready after you receive the money. Instead, there is a grace period — a set amount of time after you leave school or drop below half-time enrollment during which you do not have to make payments.

For Direct Subsidized and Unsubsidized Loans, the grace period is six months. For Direct PLUS Loans (which parents take out), there is no grace period; repayment begins 60 days after the loan is fully disbursed. During the grace period for Subsidized Loans, the federal government continues to pay the interest. During the grace period for Unsubsidized Loans, interest accrues but you do not have to pay it yet — it will be added to your loan balance when repayment begins.

You will receive a notification from your loan servicer before repayment begins, telling you your monthly payment amount and your first due date. The servicer's contact information appears on your loan documents.

What happens if you do not repay a federal student loan

If you do not make a payment within 90 days of the due date, your loan enters delinquency. If you do not pay for 270 days (about nine months), the loan goes into default. Defaulting on a federal student loan has serious consequences: the entire remaining balance becomes due when ready, your wages can be garnished, your tax refunds can be seized, and your credit score will be damaged.

If you are struggling to pay, you have options before default occurs. You can request a deferment or forbearance, which temporarily pauses your payments. You can also change your repayment plan to a lower monthly amount. Contact your loan servicer as soon as you know you will have trouble making a payment — waiting until you are in default makes your options much more limited.

Repayment plans for federal student loans

The federal government offers several repayment plans, each with different monthly payment amounts and total repayment timelines. The Standard Repayment Plan sets a fixed payment amount over 10 years. Income-Driven Repayment Plans (PAYE, REPAYE, IBR, and ICR) set your monthly payment based on your current income and family size, which means your payment can be as low as $0 per month if your income is very low.

You choose your repayment plan when you enter repayment, and you can change plans later if your circumstances change. Income-driven plans typically result in a longer repayment timeline and more total interest paid, but they offer lower monthly payments and the possibility of loan forgiveness after 20 or 25 years of payments. The Standard plan results in less total interest but higher monthly payments.

You can view and manage your federal loans through the Federal Student Aid website at studentaid.gov. There you can see your loan balance, your servicer's contact information, and your repayment plan options.

Private student loans and repayment

If your school's financial aid package includes private student loans (not federal loans), those also require repayment. Private loans are made by banks, credit unions, or other private lenders, not by the federal government. They have different terms, interest rates, and repayment rules than federal loans, and they do not offer income-driven repayment plans or loan forgiveness programs.

Private loans typically require repayment to begin while you are still in school or shortly after graduation, depending on the lender's terms. Interest rates are usually higher than federal loan rates and may be fixed or variable. If you default on a private loan, the lender can sue you for the debt, and a judgment against you can result in wage garnishment.

Before accepting a private loan, compare its interest rate and terms to federal loan options. Federal loans almost always offer better terms and more protections.

Frequently Asked Questions

Do I have to accept the loans in my financial aid package?

No. You can accept only the grant portion of your aid package and decline any loans offered. Your school's financial aid office can show you how to do this. If you decline loans, you will need to find other ways to pay for school, such as working, using savings, or borrowing from family.

What if I received a grant but now I am not in school anymore — do I have to return it?

No. Grants are yours to keep regardless of whether you finish school, change schools, or leave before graduating. However, if you received a grant for a specific term and you withdraw from school partway through that term, your school may recalculate how much grant money you earned and ask you to return the unearned portion.

Can I get my federal student loans forgiven?

Federal loans can be forgiven under specific programs: Public Service Loan Forgiveness (PSLF) forgives remaining balances after 10 years of payments while working in public service; income-driven repayment plans forgive remaining balances after 20 or 25 years of payments; and Total and Permanent Disability discharge forgives loans if you become disabled. Forgiveness is not automatic — you must meet the program's requirements and submit the required paperwork.

What is the difference between deferment and forbearance?

Both temporarily pause your loan payments, but they work differently. During deferment, the federal government pays the interest on Subsidized Loans; during forbearance, interest accrues on all loans. Deferment is usually available only if you meet specific conditions (such as returning to school or experiencing economic hardship), while forbearance is more flexible but results in more interest owed.