How do federal student loans work?

Federal student loans are government-backed education loans with program-specific eligibility, borrowing limits, interest, and repayment rules. You apply through FAFSA, then complete the school’s loan acceptance requirements.

What to know before you act

First-time Direct Loan borrowers generally complete entrance counseling and a Master Promissory Note. Funds normally pass through the school, which applies eligible charges before releasing any remaining credit. You remain responsible for repayment under the loan terms.

Federal loan and repayment rules changed in 2026, and applicable options depend on factors including loan type and borrowing date. Review current terms with the school rather than relying on an older graduate-loan or repayment-plan description. Compare the long-term obligation with the education you expect to complete.

Your next steps

• Use grants and suitable scholarships before deciding what to borrow.
• Read the rate, fees, limits, and repayment terms.
• Keep loan records and identify your servicer after disbursement.

For the next step, use the compare financial aid offers. Use a worked example and worksheet to compare net price, loans, and renewal conditions.