Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program: Terms and Conditions for Borrowers

Changes from June 21, 2021 to June 26, 2023

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Federal Student Loans Made Through the
June June ~~21, 2021~~26, 2023
William D. Ford Federal Direct Loan Program:
Alexandra Hegji
Terms and Conditions for Borrowers
Analyst in Social Policy Analyst in Social Policy

The The ~~Wil iam~~ William D. Ford Federal Direct Loan (Direct Loan) program is the single largest D. Ford Federal Direct Loan (Direct Loan) program is the single largest
source of federal financial assistance to support students’ postsecondary educational source of federal financial assistance to support students’ postsecondary educational

pursuits. The U.S. pursuits. The U.S. Department of Education estimates that in Department of Education estimates that in ~~FY2022, $91.3 bil ion~~FY2024, $85.8 billion in in
new loans new loans ~~wil~~ will be made through the program. As of the end of the be made through the program. As of the end of the ~~fourth~~first quarter of quarter of ~~FY2020, $1.3 tril ion~~FY2023, $1.4 trillion in in
principal and interest on Direct Loan program loans, borrowed by or on behalf of principal and interest on Direct Loan program loans, borrowed by or on behalf of ~~35.9 mil ion~~38.3 million individuals, individuals,
remained outstanding.remained outstanding.
For many individuals, borrowing a federal student loan through the Direct Loan program may be among their first For many individuals, borrowing a federal student loan through the Direct Loan program may be among their first
experiences in incurring a major financialexperiences in incurring a major financial obligation. Upon obtaining a loan, a borrower assumes a contractual obligation. Upon obtaining a loan, a borrower assumes a contractual
obligation to repay the debt over a period that may span a decade or more. obligation to repay the debt over a period that may span a decade or more.
Loans were first made through the Direct Loan program in 1994. Since then, Congress has Loans were first made through the Direct Loan program in 1994. Since then, Congress has ~~periodical y~~periodically made made
changes to the program and the terms and conditions of loans. Changes have impacted program aspects such as changes to the program and the terms and conditions of loans. Changes have impacted program aspects such as
the availabilitythe availability of loan types, interest rates, loan repayment, loan discharge and forgiveness, and the consequences of loan types, interest rates, loan repayment, loan discharge and forgiveness, and the consequences
of default. Over time, the accumulation of changes—many of which are of default. Over time, the accumulation of changes—many of which are ~~differential y~~differentially applicable to borrowers or applicable to borrowers or
loan types—has resulted in a set of loan terms and conditions that are voluminous and complex. Congress may loan types—has resulted in a set of loan terms and conditions that are voluminous and complex. Congress may
contemplate making future changes to loan terms and conditions. contemplate making future changes to loan terms and conditions.
This report has been prepared to provide Congress with a comprehensive description of the terms and conditions This report has been prepared to provide Congress with a comprehensive description of the terms and conditions
and borrower benefits that are applicable to loans made through the Direct Loan program. Emphasis is placed on and borrower benefits that are applicable to loans made through the Direct Loan program. Emphasis is placed on
discussing loan types, provisions related to borrower eligibility,discussing loan types, provisions related to borrower eligibility, amounts that may be borrowed, interest and fees, amounts that may be borrowed, interest and fees,
loan repayment, repayment relief, loan forgiveness benefits, the consequences of default, and the methods used to loan repayment, repayment relief, loan forgiveness benefits, the consequences of default, and the methods used to
ensure borrowers are informed about the terms and conditions of their loans and their obligation to repay them. ensure borrowers are informed about the terms and conditions of their loans and their obligation to repay them.
Direct Loan Types
Four types of loans are availableFour types of loans are available through the Direct Loan program. through the Direct Loan program. Direct Subsidized Loans are available are available only to only to
undergraduate students with financial need. undergraduate students with financial need. Direct Unsubsidized Loans are available are available both to undergraduate both to undergraduate
students and graduate students. students and graduate students. Direct PLUS Loans may be borrowed by graduate students and by the parents of may be borrowed by graduate students and by the parents of
undergraduate students dependent upon them for financial support. undergraduate students dependent upon them for financial support. Direct Consolidation Loans ~~al ow~~allow borrowers borrowers
to combine debt from multiple existing federal student loans into a single new loan. to combine debt from multiple existing federal student loans into a single new loan.
Eligibility and Amounts That May Be Borrowed
Whether an individualWhether an individual may borrow a loanmay borrow a loan, and the amount and the amount ~~he or she~~they may borrow may borrow, are determined by the interaction are determined by the interaction
of many factors. Eligibility to borrow varies by loan type, borrower characteristics, program level, and class level. of many factors. Eligibility to borrow varies by loan type, borrower characteristics, program level, and class level.
The amount an The amount an ~~individual~~ individual may borrow is subject to annual and aggregate borrowing limits, and federal need may borrow is subject to annual and aggregate borrowing limits, and federal need
analysis and packaging procedures. Loans are made available in amounts constrained by program rules, but—with analysis and packaging procedures. Loans are made available in amounts constrained by program rules, but—with
the exception of Direct PLUS Loans—without consideration of a borrower’s ability to repay. Eligibilitythe exception of Direct PLUS Loans—without consideration of a borrower’s ability to repay. Eligibility to borrow to borrow
a Direct PLUS Loan depends on an individual’s creditworthiness. a Direct PLUS Loan depends on an individual’s creditworthiness.
Interest on Direct Loan Program Loans
Procedures for calculating interest vary by loan type, repayment status, and the period during which a loan was Procedures for calculating interest vary by loan type, repayment status, and the period during which a loan was
made. In limited circumstances, the federal government subsidizes, or does not charge, interest that would made. In limited circumstances, the federal government subsidizes, or does not charge, interest that would
otherwise accrue. Interest subsidies are mostly limited to Direct Subsidized Loans; however, certain interest otherwise accrue. Interest subsidies are mostly limited to Direct Subsidized Loans; however, certain interest
subsidies may be provided on subsidies may be provided on ~~al loan types.~~
~~Congressional Research Service~~

~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~
all loan types.
Loan Repayment Plans
Numerous repayment plans, each with different payment structures and maximum durations, are available. Numerous repayment plans, each with different payment structures and maximum durations, are available.
Among the various plans, income-driven repayment (IDR) plans cap monthly payments at a specific percentage Among the various plans, income-driven repayment (IDR) plans cap monthly payments at a specific percentage
~~of a borrower’s~~ of a borrower’s Congressional Research Service Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program discretionary income. For most repayment plans, monthly payments must cover the interest that discretionary income. For most repayment plans, monthly payments must cover the interest that
accrues; however, the IDR plans accrues; however, the IDR plans ~~al ow~~allow for negative amortization, in which case monthly payments may be for less for negative amortization, in which case monthly payments may be for less
than the interest that accrues. than the interest that accrues.
Deferment and Forbearance
Periods of deferment and forbearance offer a borrower temporary relief from the obligation to make monthly Periods of deferment and forbearance offer a borrower temporary relief from the obligation to make monthly
payments. In certain instances, interest subsidies may be provided during periods of deferment; however, with payments. In certain instances, interest subsidies may be provided during periods of deferment; however, with
limited exceptions, interest subsidies are not available during periods of forbearance. limited exceptions, interest subsidies are not available during periods of forbearance.
Loan Discharge and Loan Forgiveness
A borrower may be relieved of the obligation to repay A borrower may be relieved of the obligation to repay ~~his or her~~their loans in certain circumstances. Student loan debt loans in certain circumstances. Student loan debt
may be discharged on the basis of borrower hardship (e.g., death, total and permanent disability, school closure) may be discharged on the basis of borrower hardship (e.g., death, total and permanent disability, school closure)
or may be forgiven following an extended period of repayment according to an IDR plan or completion of a or may be forgiven following an extended period of repayment according to an IDR plan or completion of a
period of public service. period of public service.
Loan Default, Its Consequences, and Resolution
If a borrower defaults, the loan becomes due in full and the borrower loses eligibility for many benefits, as If a borrower defaults, the loan becomes due in full and the borrower loses eligibility for many benefits, as ~~wel~~ well as as
access to other forms of federal student aid. The government also uses numerous means to collect on defaulted access to other forms of federal student aid. The government also uses numerous means to collect on defaulted
student loan debt. A student loan debt. A ~~limited~~ limited set of options is availableset of options is available for a borrower to bring a defaulted loan back into good for a borrower to bring a defaulted loan back into good
standing. standing.
Loan Counseling and Disclosures
Student borrowers are required to undergo financial counseling, which is designed to provide them with Student borrowers are required to undergo financial counseling, which is designed to provide them with
comprehensive information on the terms and conditions of their loans as comprehensive information on the terms and conditions of their loans as ~~wel~~ well as their rights and the as their rights and the
responsibilities they assume as borrowers. Loan terms and conditions are specified in a promissory note, which is responsibilities they assume as borrowers. Loan terms and conditions are specified in a promissory note, which is
a contract that establishes the borrower’s obligation to repay the loan, and in a plain language disclosure a contract that establishes the borrower’s obligation to repay the loan, and in a plain language disclosure
document that uses simplified terms to explain a loan’s terms and conditions and the borrower’s rights and document that uses simplified terms to explain a loan’s terms and conditions and the borrower’s rights and
responsibilities. responsibilities.
Congressional Research Service Congressional Research Service

Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Introduction
The The ~~Wil iam~~ William D. Ford Federal Direct Loan (Direct Loan) program makes several types of federal D. Ford Federal Direct Loan (Direct Loan) program makes several types of federal
student loans availablestudent loans available to individuals to assist them with financing postsecondary education to individuals to assist them with financing postsecondary education
expenses. It represents the single largest source of federal financial assistance to support students’ expenses. It represents the single largest source of federal financial assistance to support students’
postsecondary educational pursuits. The U.S. Department of Education (ED) estimates that in postsecondary educational pursuits. The U.S. Department of Education (ED) estimates that in
~~FY2022, 13.8 mil ion~~ FY2024, 13.9 million new loans, averaging $6,new loans, averaging $6,~~632~~164 each and totaling $ each and totaling $~~91.3 bil ion, wil~~ 85.8 billion, will be made be made
through the Direct Loan program to undergraduate and graduate students, and to the parents of through the Direct Loan program to undergraduate and graduate students, and to the parents of
undergraduate students.1 In addition, ED estimates that undergraduate students.1 In addition, ED estimates that ~~636~~532,000 Direct Consolidation Loans,,000 Direct Consolidation Loans,2
averaging $averaging $~~62,063~~68,651 each and totaling $ each and totaling $~~39.5 bil ion, wil~~ 36.5 billion, will be made to existing borrowers of federal be made to existing borrowers of federal
student loans.student loans.23 As of the end of the As of the end of the ~~fourth~~first quarter of quarter of ~~FY2020, $1.3 tril ion~~FY2023, $1.4 trillion in principal and interest in principal and interest
on Direct Loan program loanson Direct Loan program loans (including Direct Consolidation Loans), borrowed by or on behalf , borrowed by or on behalf of 38.3 million individuals, remained outstanding.4 ~~of 35.9 mil ion individuals, remained~~
~~outstanding.3~~
This report presents a comprehensive overview of the terms and conditions that apply to federal This report presents a comprehensive overview of the terms and conditions that apply to federal
student loans made through the Direct Loan program.student loans made through the Direct Loan program.45 It begins by providing background It begins by providing background
information on the history of the Direct Loan program. This is followed by a brief description of information on the history of the Direct Loan program. This is followed by a brief description of
the various types of loans that are offered through the program. The report then presents a the various types of loans that are offered through the program. The report then presents a
thorough description of the terms and conditions for loans made through the Direct Loan thorough description of the terms and conditions for loans made through the Direct Loan
program. In identifying and describing loan terms and conditions, it focuses on provisions program. In identifying and describing loan terms and conditions, it focuses on provisions
that are generally applicable to loans regardless of special circumstances (e.g., not temporarily in place due to a national emergency) and applicable to loans that are currently being made or that have been made in recent years. applicable to loans that are currently being made or that have been made in recent years.
Emphasis is placed on discussing Direct Loan program provisions that Emphasis is placed on discussing Direct Loan program provisions that ~~are related~~relate to borrower to borrower
eligibility,eligibility, amounts that may be borrowed, interest rates and fees, procedures for loan repayment, amounts that may be borrowed, interest rates and fees, procedures for loan repayment,
repayment relief, the availabilityrepayment relief, the availability of loan discharge and loan forgiveness benefits, and the of loan discharge and loan forgiveness benefits, and the
consequences of defaulting. The final section of the report provides a summary of the methods consequences of defaulting. The final section of the report provides a summary of the methods
that are used to ensure that borrowers are informed about the terms and conditions of the loans that are used to ensure that borrowers are informed about the terms and conditions of the loans
they obtain and their obligation to repay them. they obtain and their obligation to repay them.
~~This report has been prepared as a resource for Members of~~ 1 U.S. Department of Education, FY2024 Justification of Appropriation Estimates to the Congress Congress, Volume II, “Student Loans Overview,” March 12, 2023, p. 25, https://www2.ed.gov/about/overview/budget/budget24/justifications/s-sloverview.pdf. In some instances, more than one loan will be borrowed by a student or on the student’s behalf. 2 Direct Consolidation Loans allow individuals who have at least one loan borrowed through either the Direct Loan program or the Federal Family Education Loan program to refinance their eligible federal student loan debt by borrowing a new loan and using the proceeds to pay off their existing federal student loan obligations. 3 U.S. Department of Education, FY2024~~, congressional committees,~~
~~and congressional staff to support them in their legislative, oversight, and representational roles~~
~~related to federal student loan policy. It is intended to provide a thorough, but nonexhaustive,~~
~~description of loan terms and conditions and borrower benefits. It is not intended to be relied~~

~~1 U.S. Department of Education,~~ ~~FY2022~~ Justification of Appropriation Estimates to the Congress, Volume, Volume II, “Student II, “Student
Loans Overview,” Loans Overview,” ~~May 26, 2020, p. R-26~~March 12, 2023, p. 25, https://www2.ed.gov/about/overview/budget/, https://www2.ed.gov/about/overview/budget/~~budget22~~budget24/justifications//justifications/r-
~~sloverview.pdf. In some instances, more than one loan will be borrowed by a student or on the student’s behalf.~~
~~2 Ibid.~~
~~3 U.S.~~ s-sloverview.pdf. 4 U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, Federal StudentFederal Student Aid Data Center, “Aid Data Center, “ Federal Student Aid Federal Student Aid
Portfolio Summary,” Portfolio Summary,” ~~FY2020 Q4,~~
FY2023 Q1, https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls. https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls.
~~4 T his~~ 5 This report focuses on describing report focuses on describing the terms and conditions of federal student loans made through the Direct Loan the terms and conditions of federal student loans made through the Direct Loan
program as specifiedprogram as specified by the Higher Education Act of 1965 (HEA) and other lawsby the Higher Education Act of 1965 (HEA) and other laws, and their implementing regulations. and their implementing regulations.
In addition to the generally applicable loan terms and conditions that are In addition to the generally applicable loan terms and conditions that are ~~summ arized~~summarized in this report, the Higher in this report, the Higher
Education ReliefEducation Relief Opportunities for Students (HEROES)Opportunities for Students (HEROES) Act authorizes a number of waiversAct authorizes a number of waivers and regulatory flexibilities and regulatory flexibilities
that may be usedthat may be used to extend benefits to certain classes of borrowers. to extend benefits to certain classes of borrowers. ~~T he~~The waivers and flexibilities made waivers and flexibilities made ~~a vailable~~ available by the by the
HEROESHEROES Act are beyond the scope of this report. For additional information, see CRSAct are beyond the scope of this report. For additional information, see CRS Report R42881, Report R42881, Education-
Related Regulatory Flexibilities, Waivers, and Federal Assistance in Response to ~~Disasters~~ Disasters and National ~~Em ergencies~~.
Emergencies, (archived, available to congressional clients upon request). Additionally, in response to the current COVID-19 pandemic, Congress andAdditionally, in response to the current COVID-19 pandemic, Congress and the Administration provided additional the Administration provided additional
student loan relief measuresstudent loan relief measures to Direct Loan program to Direct Loan program borrowers. These measures are briefly described in Appendix D. ~~borrowers.~~ For additional information, seeFor additional information, see ~~CRS~~ CRS Report R46314, Report R46314,
Federal Student Loan Debt Relief in the Context of COVID-19. .
Congressional Research Service Congressional Research Service

1 1

link to page link to page 9298 link to page link to page 9399 link to page link to page 97102 link to page link to page 9399 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program This report has been prepared as a resource for Members of Congress, congressional committees, and congressional staff to support them in their legislative, oversight, and representational roles related to federal student loan policy. It is intended to provide a thorough, but non-exhaustive, description of loan terms and conditions and borrower benefits. It is not intended to be relied ~~the William D. Ford Federal Direct Loan Program~~

upon by borrowers as a resource for validating individualupon by borrowers as a resource for validating individual ~~eligibility~~ eligibility for specific borrower for specific borrower
benefits. benefits.
Appendix A to this report contains a directory of resources to this report contains a directory of resources ~~from which additional information~~
~~may be obtained about~~on topics relating to loans made loans made ~~available~~ through the Direct Loan programthrough the Direct Loan program. Appendix B
consists of a glossary of terms.consists of a glossary of terms.65 Appendix C contains a set of tables that present historical contains a set of tables that present historical
information on borrowing limits, interest rates, and fees that have applied to loans made through information on borrowing limits, interest rates, and fees that have applied to loans made through
~~the Direct Loan program.~~
the Direct Loan program. Appendix D briefly describes temporary Direct Loan program flexibilities and debt relief that have been made available to borrowers in light of the COVID-19 pandemic. Background on the Direct Loan Program
The Direct Loan program is authorized under Title IV, Part D of the Higher Education Act of The Direct Loan program is authorized under Title IV, Part D of the Higher Education Act of
1965 (HEA; P.L. 89-329, as amended). It was established by the Student Loan Reform Act of 1965 (HEA; P.L. 89-329, as amended). It was established by the Student Loan Reform Act of
1993 (SLRA), Title IV of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).1993 (SLRA), Title IV of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).67 Federal Federal
student loans were first made through the Direct Loan program in 1994. student loans were first made through the Direct Loan program in 1994.
In the Direct Loan program, loans are made by the government using federal capital (i.e., funds In the Direct Loan program, loans are made by the government using federal capital (i.e., funds
from the U.S. Treasury), and once made, outstanding loans constitute an asset of the federal from the U.S. Treasury), and once made, outstanding loans constitute an asset of the federal
government. Some important characteristics of loans made through the Direct Loan program are government. Some important characteristics of loans made through the Direct Loan program are
that the federal government assumes the risk for losses that may occur as a result of borrower that the federal government assumes the risk for losses that may occur as a result of borrower
default, and that it pays for the discharge of loans in cases of borrower death, total and permanent default, and that it pays for the discharge of loans in cases of borrower death, total and permanent
disability, and other disability, and other ~~limited~~ instances. The federal government also assumes the cost of loans that instances. The federal government also assumes the cost of loans that
are not required to be paid in full due to borrowers satisfying criteria that make them eligibleare not required to be paid in full due to borrowers satisfying criteria that make them eligible to to
have a portion or have a portion or al all of the balance of their loans discharged under any of several loan forgiveness of the balance of their loans discharged under any of several loan forgiveness
programs. For federal budgeting purposes, the program is classified as a direct loan program, programs. For federal budgeting purposes, the program is classified as a direct loan program,
which is a type of federal credit program for which mandatory spending authority is provided.which is a type of federal credit program for which mandatory spending authority is provided.7
8 ED’s Office of Federal Student Aid (FSA) is the primary entity tasked with administering the ED’s Office of Federal Student Aid (FSA) is the primary entity tasked with administering the
Direct Loan program. The institutions of higher education (IHEs) that participate in the Direct Direct Loan program. The institutions of higher education (IHEs) that participate in the Direct
Loan program originate loans to borrowers through FSA’s Common Origination and Loan program originate loans to borrowers through FSA’s Common Origination and
Disbursement (COD) system. Contractors hired by ED service and collect on the program’s Disbursement (COD) system. Contractors hired by ED service and collect on the program’s
loans.loans.8
9 When the Direct Loan program was first established, it was intended to expand gradually and When the Direct Loan program was first established, it was intended to expand gradually and
then ultimatelythen ultimately ~~fully~~ fully replace the Federal Family Education Loan (FFEL) program, a guaranteed replace the Federal Family Education Loan (FFEL) program, a guaranteed
~~student loan program authorized under Title IV, Part B of the HEA, and through which most~~
~~federal student loans were being made.9 The FFEL program had descended from the Guaranteed~~

5 6 In the process of describing In the process of describing loans made through the Direct Loan program, numerous terms with precise meanings are loans made through the Direct Loan program, numerous terms with precise meanings are
used.used. When some of these terms are introduced, it is not always practical to fully describeWhen some of these terms are introduced, it is not always practical to fully describe or define the term, as a or define the term, as a
subsequentsubsequent section in the report may be better suited to providing a detailed description. Definitions for selected terms section in the report may be better suited to providing a detailed description. Definitions for selected terms
are presented in the Glossary are presented in the Glossary in ~~Appe ndix~~in Appendix B. .
67 A Federal Direct Loan Demonstration Program was enacted under the Education Amendments of 1992 ( A Federal Direct Loan Demonstration Program was enacted under the Education Amendments of 1992 ( P.L. 102-P.L. 102-
325); however, prior to being fully implemented, the demonstration program was succeeded325); however, prior to being fully implemented, the demonstration program was succeeded by the Direct Loan by the Direct Loan
program that was enacted underprogram that was enacted under P.L. 103-66. P.L. 103-66.
7 8 Federal credit may be extended in the form of a direct loan or a loan guarantee. For additional information, see CRS Federal credit may be extended in the form of a direct loan or a loan guarantee. For additional information, see CRS
Report R42632, Report R42632, Budgetary ~~Treatm ent~~Treatment of Federal Credit (Direct Loans and Loan Guarantees): Concepts, History, and
Issues for Congress, archived, archived (available to congressional clients upon request). 9.
8 For more detailed For more detailed information on the administration of the Direct Loan program, see CRSinformation on the administration of the Direct Loan program, see CRS Report R44845, Report R44845,
~~Adm inistration~~Administration of the William D. Ford Federal Direct Loan Program. Congressional Research Service 2 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program student loan program authorized under Title IV, Part B of the HEA, and through which most federal student loans were being made.10 The FFEL program had descended from the Guaranteed ~~D. Ford Federal Direct Loan Progra m~~ .
~~9 At the time the Direct Loan program was established, federal student loans were also being made through the Federal~~
~~Perkins Loan program, authorized by HEA, T itle IV, Part E, and through several smaller health education loan~~
~~Congressional Research Service~~

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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

Student Loan (GSL) program, which was enacted under Title IV of the HEAStudent Loan (GSL) program, which was enacted under Title IV of the HEA in 1965 to enhance in 1965 to enhance
access to postsecondary education for students from low- and middle-income families by access to postsecondary education for students from low- and middle-income families by
providing them access to low-interest federal student loans. In the FFEL program, loan capital providing them access to low-interest federal student loans. In the FFEL program, loan capital
was provided by private lenders who also originated and serviced loans. The federal government was provided by private lenders who also originated and serviced loans. The federal government
guaranteed lenders against loss due to factors such as borrower default, death, total and guaranteed lenders against loss due to factors such as borrower default, death, total and
permanent disability, and in limited instances, bankruptcy. State and nonprofit guaranty agencies permanent disability, and in limited instances, bankruptcy. State and nonprofit guaranty agencies
administered the federal guarantee. The federal government was also responsible for making administered the federal guarantee. The federal government was also responsible for making
several different types of payments to lenders and guaranty agencies to support the operation of several different types of payments to lenders and guaranty agencies to support the operation of
the program. The FFEL program was administratively complex and the Direct Loan program was the program. The FFEL program was administratively complex and the Direct Loan program was
established with the aims of streamlining the federal student loan delivery system and achieving established with the aims of streamlining the federal student loan delivery system and achieving
cost savings.cost savings.10
11 Several years into the implementation of the Direct Loan program, Several years into the implementation of the Direct Loan program, ~~statutory provisions specifying~~
~~that it ultimately succeed the FFEL program were repealed by~~ the Higher Education Amendments the Higher Education Amendments
of 1998 (P.L. 105-244)of 1998 (P.L. 105-244)~~.11~~ repealed statutory provisions specifying that it ultimately succeed the FFEL program.12 From 1994 to 2010, the Direct Loan program and the FFEL program From 1994 to 2010, the Direct Loan program and the FFEL program
operated side-by-side. During this period, IHEs could elect to participate in the program of their operated side-by-side. During this period, IHEs could elect to participate in the program of their
choice. As this decision was made at the institutional level, the program through which an choice. As this decision was made at the institutional level, the program through which an
individualindividual could borrow federal student loans was dependent upon the program participation could borrow federal student loans was dependent upon the program participation
decisions made by the institution a student attended.decisions made by the institution a student attended.
During the period while loans were being made through both the FFEL and Direct Loan During the period while loans were being made through both the FFEL and Direct Loan
programs, from the perspective of the borrower, the terms and conditions of loans offered through programs, from the perspective of the borrower, the terms and conditions of loans offered through
the programs were similar in most respects. However, the degree of similarity varied over time. the programs were similar in most respects. However, the degree of similarity varied over time.
Notable differences included certain characteristics of the repayment plans offered and, beginning Notable differences included certain characteristics of the repayment plans offered and, beginning
in 2008, the availabilityin 2008, the availability of the Public Service Loan Forgiveness (PSLF) program only to of the Public Service Loan Forgiveness (PSLF) program only to
borrowers of loans made through the Direct Loan program.borrowers of loans made through the Direct Loan program.12
~~The authority to make loans through the FFEL program was terminated, effective July 1, 2010, by~~
~~the~~ 13 The SAFRA Act, Title II of the Health Care and Education Reconciliation Act of 2010 (HCERA; SAFRA Act, Title II of the Health Care and Education Reconciliation Act of 2010 (HCERA;
P.L. 111-152)P.L. 111-152)~~.13 While loans are no longer being made through the FFEL program, as of the end~~

terminated the authority to make loans through the FFEL program, effective July 1, 10 At the time the Direct Loan program was established, federal student loans were also being made through the Federal Perkins Loan program, authorized by HEA, Title IV, Part E, and through several smaller health education loan programs authorized under the Public Health Servicesprograms authorized under the Public Health Services Act (PHSA). Act (PHSA). ~~T hese~~These other loan programs are beyond the scope of other loan programs are beyond the scope of
this report. For additional information on the loan programs authorized under the PHSA, seethis report. For additional information on the loan programs authorized under the PHSA, see ~~CRS~~ CRS Report R46720, Report R46720,
Student Loan ~~Program s~~Programs Authorized by the Public Health Service Act: An Overview. .
~~10 See CRS~~ 11 See CRS Report 95-110 EPW, Report 95-110 EPW, The Federal Direct Student Loan Program , October 16, 1996 (available to , October 16, 1996 (available to
congressional clients upon request). congressional clients upon request).
1112 During the early years of implementation of the Direct Loan program, concerns were raised During the early years of implementation of the Direct Loan program, concerns were raised about the about the ~~capacit y~~capacity of ED of ED
to transition from overseeing lending through the FFEL guaranteed loan program to lending completely through the to transition from overseeing lending through the FFEL guaranteed loan program to lending completely through the
Direct Loan program. For additional information, see U.S. Congress, Senate Committee on Labor and Human Direct Loan program. For additional information, see U.S. Congress, Senate Committee on Labor and Human
Resources,Resources, Subcommittee on Education, Arts and Humanities, Subcommittee on Education, Arts and Humanities, Oversight of the Direct Student Loan Program , 104th , 104th
Cong., 1st sess.,Cong., 1st sess., March 30, 1995, S.Hrg. 104-28 (Washington: GPO, 1995). March 30, 1995, S.Hrg. 104-28 (Washington: GPO, 1995).
1213 When the PSLF program was When the PSLF program was enacted, it wasenacted, it was made availablemade available only through the Direct Loan program, with the only through the Direct Loan program, with the
expectation that it would encourage increasedexpectation that it would encourage increased borrowing through the Direct Loan program at the expense of the FFEL borrowing through the Direct Loan program at the expense of the FFEL
program. program. ~~T he~~The legislative history of the College Cost Reduction and Access legislative history of the College Cost Reduction and Access Act of 2008 (CCRAA;Act of 2008 (CCRAA; P.L. 110-84) shows P.L. 110-84) shows
that when the establishment of a program of “loan forgiveness for certain public service jobs”that when the establishment of a program of “loan forgiveness for certain public service jobs” ~~was~~ was approved in the approved in the
House-passedHouse-passed version of H.R. 2669, it wasversion of H.R. 2669, it was estimated that the costs of establishing suchestimated that the costs of establishing such a program woulda program would be be offset with offset with
savingssavings that would result from borrowers switchingthat would result from borrowers switching from the FFEL program to the Direct Loan program for purposes of from the FFEL program to the Direct Loan program for purposes of
taking advantage of loan forgiveness benefits. U.S. Congress,taking advantage of loan forgiveness benefits. U.S. Congress, House Committee on Education and Labor, House Committee on Education and Labor, College Cost
Reduction Act of 2007, H.R. 2669, 110th Cong., 1st sess., June, H.R. 2669, 110th Cong., 1st sess., June 25, 2007, H.Rept. 110-210 (Washington: GPO, 2007), 25, 2007, H.Rept. 110-210 (Washington: GPO, 2007),
pp. 71-72pp. 71-72.
~~13 For additional information on changes made to the FFEL and Direct Loan programs by the SAFRA Act, see CRS~~
~~Report R41127, The SAFRA Act: Education Program s in the FY2010 Budget Reconciliation (available to congressional~~
~~clients upon request)~~. .
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~~of the fourth quarter of FY2020, $245.9 bil ion~~2010.14 While loans are no longer being made through the FFEL program, as of the end of the first quarter of FY2023, $198.6 billion in principal and interest in principal and interest on FFEL program loans, on FFEL program loans,
borrowed by or on behalf of borrowed by or on behalf of ~~11.0 mil ion~~8.8 million students, remained outstanding and due to be repaid students, remained outstanding and due to be repaid
over the coming years.over the coming years.14
15 Over the history of the Direct Loan program, Congress has Over the history of the Direct Loan program, Congress has ~~periodical y~~periodically made changes to loan made changes to loan
terms and conditions. Such changes have often been made as part of comprehensive amendments terms and conditions. Such changes have often been made as part of comprehensive amendments
to the HEA,to the HEA, which authorizes the Direct Loan program; as part of amendments contained in which authorizes the Direct Loan program; as part of amendments contained in
budget reconciliation measures; or as part of amendments included in annual appropriations budget reconciliation measures; or as part of amendments included in annual appropriations
measures. Congress may measures. Congress may ~~wel~~ contemplate making future changes to loan terms and conditions. contemplate making future changes to loan terms and conditions.
Direct Loan Types
~~The following types of loans are currently made available to borrowers~~Individuals currently may borrow the following types of loans through the Direct Loan through the Direct Loan
program:program:
 • Direct Subsidized Loans. These loans are available only to undergraduate These loans are available only to undergraduate
~~students15~~students16 who demonstrate financial need. Direct Subsidized Loans are who demonstrate financial need. Direct Subsidized Loans are
characterized by having an interest subsidy characterized by having an interest subsidy (i.e., interest that is not charged, or is only partially charged) that applies during an in-school that applies during an in-school
period when a borrower is enrolled in an eligibleperiod when a borrower is enrolled in an eligible program on at least a half-time program on at least a half-time
basis, during a six-month basis, during a six-month grace period that borrowers receive prior to entering repayment on their loans, ~~grace period,~~ during periods of authorized deferment, during periods of authorized deferment,
and during certain other periods. The Direct Subsidized Loans currently being and during certain other periods. The Direct Subsidized Loans currently being
made have a fixed interest rate that remains constant for the duration of the loan. made have a fixed interest rate that remains constant for the duration of the loan.
• Direct Unsubsidized Loans. These loans are available to undergraduate . These loans are available to undergraduate
students, graduate students, and professional students, without regard to the students, graduate students, and professional students, without regard to the
student’s financial need. Direct Unsubsidized Loans student’s financial need. Direct Unsubsidized Loans ~~general y~~generally do not have an do not have an
interest subsidy. The Direct Unsubsidized Loans currently being made have a interest subsidy. The Direct Unsubsidized Loans currently being made have a
fixed interest rate that remains constant for the duration of the loan. The interest fixed interest rate that remains constant for the duration of the loan. The interest
rate on loans made to graduate and professional students is higher than the rate rate on loans made to graduate and professional students is higher than the rate
on loans made to undergraduate students. on loans made to undergraduate students.
• Direct PLUS Loans. These loans are available to graduate and professional . These loans are available to graduate and professional
students, and to the parents of undergraduate students who are dependent upon students, and to the parents of undergraduate students who are dependent upon
them for financial support. They are them for financial support. They are ~~made~~available without regard to financial need without regard to financial need ~~and~~
~~general y~~and generally do not have an interest subsidy. The Direct PLUS Loans currently do not have an interest subsidy. The Direct PLUS Loans currently
being made have a fixed interest rate, which remains constant for the duration of being made have a fixed interest rate, which remains constant for the duration of
the loan; and the interest rate is higher than the rate on both Direct Subsidized the loan; and the interest rate is higher than the rate on both Direct Subsidized
Loans and Direct Unsubsidized Loans. Loans and Direct Unsubsidized Loans.
~~ Direct Consolidation Loans.16 These loans al ow individuals who have at least~~
~~one loan borrowed through either the Direct Loan program or the FFEL program~~

~~14 U.S. Department of Education, Office of Federal St udent Aid, Federal Student Aid Data Center, “~~ 14 For additional information on changes made to the FFEL and Direct Loan programs by the SAFRA Act, see CRS Report R41127, The SAFRA Act: Education Programs in the FY2010 Budget Reconciliation (archived, available to congressional clients upon request). 15 U.S. Department of Education, Office of Federal Student Aid, Federal Student Aid Data Center, “Location of Federal Location of Federal
Family Education Loan (FFEL) Program Loans,” Family Education Loan (FFEL) Program Loans,” ~~FY2020 Q4,~~
FY2023 Q1, https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/LocationofFFELPLoans.xls. Of this amount, https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/LocationofFFELPLoans.xls. Of this amount,
~~$159.8~~$121.6 billion in principal and interest on FFEL program loans is held by commercial lenders billion in principal and interest on FFEL program loans is held by commercial lenders and guaranty agencies, and guaranty agencies,
~~while~~ while the remaining $the remaining $~~86.1~~77.0 billion is held billion is held by ED. by ED.
1516 Direct Subsidized Direct Subsidized Loans wereLoans were once available to graduate andonce available to graduate and professional students for periods of instruction professional students for periods of instruction
beginningbeginning prior to July 1, 2012. prior to July 1, 2012. ~~T he~~The Budget Control Act of 2011 (BCA; P.L. 112-25) eliminated the availability of Budget Control Act of 2011 (BCA; P.L. 112-25) eliminated the availability of
Direct SubsidizedDirect Subsidized Loans to graduateLoans to graduate and professional students for periods of instruction beginning on or after July 1, and professional students for periods of instruction beginning on or after July 1,
2012. 2012.
~~16 A number of variations of Direct Consolidation Loans were once available. Married individuals who both had federal~~
~~student loans were once able to obtain Joint Direct Consolidation Loans for purposes of repaying their combined~~
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~~to refinance their eligible federal student loan debt by borrowing~~• Direct Consolidation Loans.17 These loans allow individuals who have at least one loan borrowed through either the Direct Loan program or the FFEL program to borrow a new loan and use ~~a new loan and~~
~~using~~ the proceeds to pay off their existing federal student loan obligations, the proceeds to pay off their existing federal student loan obligations,
including loans that are in default. including loans that are in default. ~~Direct Consolidation Loans may be obtained~~
This is essentially a form of debt refinancing. Direct Consolidation Loans are available without regard to financial need. The Direct Consolidation Loans currently being without regard to financial need. The Direct Consolidation Loans currently being
made have fixed interest ratesmade have fixed interest rates~~, which are~~. In general, the interest rate for a Direct Consolidation Loan is determined by calculating the weighted determined by calculating the weighted
average of the interest rates on the loans that are consolidated, average of the interest rates on the loans that are consolidated, ~~rounded up the~~
~~result~~and rounding the result up to the next higher one- to the next higher one-eighth of a percentage point. For a Direct Consolidation Loan that was the result of the separation of a Joint Consolidation Loan (JCL), the interest rate is equal to the interest rate on the JCL as of the date before the separation of the JCL.18 ~~eighth of a percentage point.~~ Upon an individual Upon an individual
obtaining a Direct Consolidation Loan, a new repayment period begins, which obtaining a Direct Consolidation Loan, a new repayment period begins, which
may be for a longer term than applied to the loans may be for a longer term than applied to the loans ~~original y~~ originally borrowed.borrowed.1719 A Direct A Direct
Consolidation Loan may have a Consolidation Loan may have a subsidized ~~component18~~component20 and an and an unsubsidized
~~component.19~~
~~Eligibility and Amounts That May Be Borrowed~~
~~Eligibility for an individual to borrow a loan through the Direct Loan program and the amount~~
~~that he or she may borrow are governed by provisions in the HEA and by policies and procedures~~

~~student loan debt. Borrowers of these loans became jointly and severally liable for the debt —even in the event of~~
~~divorce. T he~~component.21 17 A number of variations of Direct Consolidation Loans were once available. Married individuals who both had federal student loans were once able to obtain Joint Direct Consolidation Loans for purposes of repaying their combined student loan debt. Borrowers of these loans became jointly and severally liable for the debt—even in the event of divorce. The authority to make new Joint Direct Consolidation Loans was authority to make new Joint Direct Consolidation Loans was repealed effective July 1, 2006repealed effective July 1, 2006 , under the , under the
Higher Education Reconciliation Act of 2005 (HERA; P.L. 109-171). Also, Higher Education Reconciliation Act of 2005 (HERA; P.L. 109-171). Also, Special Direct Consolidation Loans were were
available duringavailable during a limited period from January 17, 2012, through June 30, 2012, to borrowers whoa limited period from January 17, 2012, through June 30, 2012, to borrowers who had both (1) one or had both (1) one or
more student loans made through the FFEL program and heldmore student loans made through the FFEL program and held by a commercial lender, and (2) one or more loans made by a commercial lender, and (2) one or more loans made
through either the Direct Loan program or made through the FFEL program and heldthrough either the Direct Loan program or made through the FFEL program and held by ED. Eligibleby ED. Eligible borrowers were borrowers were
afforded the opportunity to consolidate their commercially held FFEL program loans into a Specialafforded the opportunity to consolidate their commercially held FFEL program loans into a Special ~~Dir ect~~ Direct
Consolidation Loan, and in doingConsolidation Loan, and in doing so simplify the repayment of their loans by having them all serviced by a single so simplify the repayment of their loans by having them all serviced by a single
entity. A number of special repayment incentives were available to borrowers whoentity. A number of special repayment incentives were available to borrowers who consolidated their loans underconsolidated their loans under this this
program. U.S.program. U.S. Department of Education, Office of Postsecondary Education, “Department of Education, Office of Postsecondary Education, “ Special Direct Consolidation Loan Special Direct Consolidation Loan
Information - ShortInformation - Short -Term Consolidation Opportunity Offered from January - June 30, 2012,” October 26, 2011, -Term Consolidation Opportunity Offered from January - June 30, 2012,” October 26, 2011,
https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2011-10-26/loans-subject-special-direct-https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2011-10-26/loans-subject-special-direct-
consolidation-loan-information-short-term-consolidation-opportunity-offered-january-june-30-2012. consolidation-loan-information-short-term-consolidation-opportunity-offered-january-june-30-2012.
1718 HEA §455(g)(2)(B)(i)(II). Prior to October 11, 2022, a JCL could not be separated, even if the individuals who borrowed the loan were no longer married. The Joint Consolidation Loan Separation Act (P.L. 117-200) authorized borrowers of JCLs to separate those loans into two new Direct Consolidation Loans, one for each borrower of the JCL. As of June 14, 2023, ED has not yet implemented these statutory changes. 19 Loan consolidation is essentially a form of debt refinancing. Under current law, Loan consolidation is essentially a form of debt refinancing. Under current law, borrowers may useborrowers may use the proceeds of a the proceeds of a
Direct Consolidation Loan to pay off debt owedDirect Consolidation Loan to pay off debt owed on one or more previously borrowedon one or more previously borrowed federal student loans and to begin federal student loans and to begin
a new repayment term of up to 30 years. Doing so may allowa new repayment term of up to 30 years. Doing so may allow borrowers to lower their requiredborrowers to lower their required monthly payment monthly payment
amount. Borrowers may not, however, obtain a lower interest rate on their federal student loan debt as a result of loan amount. Borrowers may not, however, obtain a lower interest rate on their federal student loan debt as a result of loan
consolidation. consolidation.
~~18 T he~~20 The subsidized component of a Direct Consolidation Loan (also referred to as a of a Direct Consolidation Loan (also referred to as a Direct Subsidized Consolidation
Loan) is the portion of a Direct Consolidation Loan attributable to) is the portion of a Direct Consolidation Loan attributable to the following loan types (some of which may have the following loan types (some of which may have
been made through programs authorized under been made through programs authorized under ~~T itle~~Title IV, Part B of the HEA): (1) Subsidized IV, Part B of the HEA): (1) Subsidized Federal Stafford Loans, (2) Federal Stafford Loans, (2)
GuaranteedGuaranteed Student Loans, (3) Federal InsuredStudent Loans, (3) Federal Insured Student Loans, (4) Direct SubsidizedStudent Loans, (4) Direct Subsidized Loans, (5) Direct Subsidized Loans, (5) Direct Subsidized
Consolidation Loans, and (6) the portion of a Federal Consolidation Loan that is eligibleConsolidation Loans, and (6) the portion of a Federal Consolidation Loan that is eligible for interest benefits during a for interest benefits during a
period of deferment. 34 C.F.R. §685.220(c)(1). period of deferment. 34 C.F.R. §685.220(c)(1).
~~19 T he~~ 21 The unsubsidized component of a Direct Consolidation Loan (also referred to as a of a Direct Consolidation Loan (also referred to as a Direct Unsubsidized Consolidation
Loan) is the portion of a Direct Consolidation Loan attributable to the following loan types (some of which may have ) is the portion of a Direct Consolidation Loan attributable to the following loan types (some of which may have
been made through programs authorized under been made through programs authorized under ~~T itle~~Title IV, Part B and Part E of the HEA and IV, Part B and Part E of the HEA and ~~T itle~~Title VII and VII and ~~T itle~~Title VIII of VIII of
the Public Health Service Act [PHSA]): (1) Federalthe Public Health Service Act [PHSA]): (1) Federal Perkins Loans, (2) National Direct Student Loans, (3) National Perkins Loans, (2) National Direct Student Loans, (3) National
Defense Student Loans, (4) Federal PLUSDefense Student Loans, (4) Federal PLUS Loans, (5) Parent Loans, (5) Parent ~~Lo ans~~Loans for Under Graduate for Under Graduate Students (PLUS), (6) Direct Students (PLUS), (6) Direct
PLUS Loans, (7) Direct PLUSPLUS Loans, (7) Direct PLUS Consolidation Loans, (8) UnsubsidizedConsolidation Loans, (8) Unsubsidized Federal Stafford Loans, (9) Federal Federal Stafford Loans, (9) Federal
Supplemental Loans for Students (SLS),Supplemental Loans for Students (SLS), (10) Direct Unsubsidized(10) Direct Unsubsidized Loans, (11) Direct UnsubsidizedLoans, (11) Direct Unsubsidized ~~Consoli dation~~ Consolidation
Loans, (12) Auxiliary Loans to Assist Students (ALAS),Loans, (12) Auxiliary Loans to Assist Students (ALAS), (13) Health Professions Student Loans (HPSL), (14) Loans for (13) Health Professions Student Loans (HPSL), (14) Loans for
~~Disadvantaged Students (LDS), (15) Health Education Assistance Loans (HEAL), (16) Nursing Loans, and (17) t he~~
~~portion of a Federal Consolidation Loan that is ineligible for interest benefits during a period of deferment. 34 C.F.R.~~
~~§685.220(c)(2). Furthermore, the term Direct PLUS Consolidation Loan refers to the portion of a Direct Consolidation~~
~~Loan attributable to (1) Direct PLUS Loans, (2) Direct PLUS Consolidation Loans, (3) Federal PLUS Loans, and (4)~~
~~Parent Loans for Undergraduate Students that were repaid by the Direct Consolidation Loan.~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

(continued...) Congressional Research Service 5 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Eligibility and Amounts That May Be Borrowed Eligibility for an individual to borrow a loan through the Direct Loan program and the amount they may borrow are governed by HEA provisions and by policies and procedures implemented by ED. implemented by ED. Al All loan types except Direct PLUS Loans are loan types except Direct PLUS Loans are ~~made available~~ available without without
consideration of a borrower’s ability to repay the loan. Eligibilityconsideration of a borrower’s ability to repay the loan. Eligibility to borrow a Direct PLUS Loan to borrow a Direct PLUS Loan
depends on an individual’s creditworthiness. depends on an individual’s creditworthiness.
The The ~~section that follows~~following section identifies and describes factors that determine an individual’s eligibility identifies and describes factors that determine an individual’s eligibility
to borrow one or more types of loans made available through the Direct Loan program. This is to borrow one or more types of loans made available through the Direct Loan program. This is
followed by a section that describes policies and procedures for determining amounts that may be followed by a section that describes policies and procedures for determining amounts that may be
borrowed.borrowed.
Factors Affecting Eligibility to Borrow
For an individualFor an individual to be eligibleto be eligible to borrow a loan through the Direct Loan program, the student to borrow a loan through the Direct Loan program, the student
borrower, or the student on whose behalf a parent borrower would obtain a Direct PLUS Loan, borrower, or the student on whose behalf a parent borrower would obtain a Direct PLUS Loan,
must meet a number of eligibilitymust meet a number of eligibility requirements. A broad set of general eligibilityrequirements. A broad set of general eligibility criteria applies criteria applies
to students who may benefit from a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a to students who may benefit from a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a
Direct PLUS Loan. An additionalDirect PLUS Loan. An additional set of requirements applies set of requirements applies ~~specifical y~~specifically to applicants seeking to to applicants seeking to
borrow a Direct PLUS Loan. borrow a Direct PLUS Loan. ~~Stil~~ Still other requirements apply to applicants for Direct Consolidation other requirements apply to applicants for Direct Consolidation
Loans. EligibilityLoans. Eligibility to borrow various types of loans is also affected by a student’s dependency to borrow various types of loans is also affected by a student’s dependency
status, program level (e.g., undergraduate, graduate, or professional), undergraduate class level, status, program level (e.g., undergraduate, graduate, or professional), undergraduate class level,
financial need, cost of attendance (COA)financial need, cost of attendance (COA)2022 of the academic program, estimated financial of the academic program, estimated financial
assistance (EFA) assistance (EFA) ~~he or she expects~~they expect to receive from other sources, and certain other factors. to receive from other sources, and certain other factors.
Factors that affect eligibility to borrow through the Direct Loan program are discussed below. Factors that affect eligibility to borrow through the Direct Loan program are discussed below.
General Student-Based Eligibility Criteria
In general, for a student to be eligible In general, for a student to be eligible to borrow a Direct Subsidized Loan, a Direct Unsubsidized to borrow a Direct Subsidized Loan, a Direct Unsubsidized
Loan, or a Direct PLUS Loan, or for a parent to borrow a Direct PLUS Loan on behalf of a Loan, or a Direct PLUS Loan, or for a parent to borrow a Direct PLUS Loan on behalf of a
student, the student muststudent, the student must
 • be enrolled on at least a half-time basis as a regular student in either an eligible be enrolled on at least a half-time basis as a regular student in either an eligible
program at a participating eligible program at a participating eligible ~~IHE~~ IHE23, a preparatory program necessary for , a preparatory program necessary for
enrollment in an eligibleenrollment in an eligible program (for up to one year), or a teacher certification program (for up to one year), or a teacher certification
~~program;21~~
~~ not be incarcerated;~~
~~ be a U.S. citizen or national, U.S. permanent resident, or other eligible~~
~~noncitizen;22~~
~~ maintain satisfactory academic progress as defined by the school;23~~

~~20 Cost of attendance is defined at HEA §472. COA is determined by the IHE attended and generally includes tuition~~
~~and fees, an allowance for books, supplies~~ program;24 Disadvantaged Students (LDS), (15) Health Education Assistance Loans (HEAL), (16) Nursing Loans, and (17) the portion of a Federal Consolidation Loan that is ineligible for interest benefits during a period of deferment. 34 C.F.R. §685.220(c)(2). Furthermore, the term Direct PLUS Consolidation Loan refers to the portion of a Direct Consolidation Loan attributable to (1) Direct PLUS Loans, (2) Direct PLUS Consolidation Loans, (3) Federal PLUS Loans, and (4) Parent Loans for Undergraduate Students that were repaid by the Direct Consolidation Loan. 22 Cost of attendance is defined at HEA §472. COA is determined by the IHE attended and generally includes tuition and fees, an allowance for books, supplies and transportation, room and board, and other expenses related to school and transportation, room and board, and other expenses related to school
attendance. attendance.
~~21 Loans may be~~ 23 For additional information on institutional and program eligibility requirements for participation in the HEA Title IV student financial aid programs, see CRS Report R43159, Institutional Eligibility for Participation in Title IV Student Financial Aid Programs. 24 Loans may be obtained through the Direct Loan program for purposes of financing postsecondary expenses obtained through the Direct Loan program for purposes of financing postsecondary expenses ~~a t~~at both both
domestic and foreign institutions. domestic and foreign institutions. ~~T he~~The Direct Loan program is the only HEA, Direct Loan program is the only HEA, ~~T itle~~Title IV program that makes federal IV program that makes federal
student aidstudent aid available for purposes of enrolling in a foreign institution. Congressional Research Service 6 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • not be incarcerated; • be a U.S. citizen or national, U.S. permanent resident, or other eligible noncitizen;25 • have a high school diploma or recognized equivalent, such as a general education development (GED) certificate, or meet other academic requirements;26 • maintain satisfactory academic progress as defined by the school and in accordance with the HEA;27 •~~available for purposes of enrolling in a foreign institution.~~
~~22 Individuals who are citizens of the Freely Associated States (the Federated States of Micronesia, the Republic of~~
~~Palau, and the Republic of the Marshall Islands) are ineligible to borrow Direct Loans. 34 C.F.R. §668.33(b).~~
~~23 See also 34 C.F.R. §668.34. For example, in part, “if a student is enrolled in an educational program of more than~~
~~two academic years, the policy specifies that at the end of the second academic year, the student must have a GPA of at~~
~~least a ‘C’ or its equivalent, or have academic standing consistent with the institution’s requirements for graduation.”~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

 not be in default on a federal student loan, nor owing a refund on a grant or loan not be in default on a federal student loan, nor owing a refund on a grant or loan
made under HEA, made under HEA, Title IV without having made satisfactory repayment Title IV without having made satisfactory repayment
arrangements;arrangements; and
• have on file at the IHE attended a statement of educational purpose stating that have on file at the IHE attended a statement of educational purpose stating that
the loan the loan ~~wil~~ will be used solely for educational expenses.28 ~~be used solely for educational expenses;~~
~~ meet applicable Selective Service System registration requirements;24 and~~
~~ not have been convicted of a federal or state offense of sel ing or possessing~~
~~il egal drugs that occurred during a period of enrollment for which the student~~
~~was receiving federal student aid, unless eligibility is regained under specified~~
~~circumstances including the passage of specified periods of time or the student’s~~
~~completing a qualified drug rehabilitation program.25~~
~~The FAFSA Simplification Act of 2020 (Title VII of Division FF of P.L. 116-260, Consolidated~~
~~Appropriations Act, 2021) eliminated the latter two restrictions on aid eligibility. Beginning with~~
~~the 2021-2022 award year, the latter two restrictions wil no longer impact a student’s eligibility~~
~~for Direct Loans.26~~
Student Dependency Status
For purposes of awarding federal student aid, dependency status determines whether a student is For purposes of awarding federal student aid, dependency status determines whether a student is
~~deemed to be dependent upon his or her~~considered dependent upon their parents’ financial support parents’ financial support, or is independent of their or is independent of their
support. Dependency status is determined by a student’s responses to questions on the Free support. Dependency status is determined by a student’s responses to questions on the Free
Application for Federal Student Aid (FAFSA), which Application for Federal Student Aid (FAFSA), which ~~he or she~~they must complete and submit to ED must complete and submit to ED
when applying for federal student aid. when applying for federal student aid.
A student is A student is ~~deemed to be~~considered an an independent student if if ~~he or she~~
~~ is, or wil~~ they • are, or will be, 24 years of age or older before January 1 of the award year; be, 24 years of age or older before January 1 of the award year;
~~ is~~• are married at the time of completing the FAFSA; married at the time of completing the FAFSA;
~~ wil~~ • will be a graduate or professional student at the start of the award year; be a graduate or professional student at the start of the award year;
~~ is~~• are currently serving on active duty in the Armed Forces for other than training currently serving on active duty in the Armed Forces for other than training
purposes; purposes;
~~ is~~• are a veteran of the a veteran of the U.S. Armed Forces; Armed Forces;
~~ has~~• have legal dependents other than a spouse; legal dependents other than a spouse;
~~ was~~• were an orphan, in foster care, or a ward of the court, at any time since age 13; an orphan, in foster care, or a ward of the court, at any time since age 13;
~~ is~~• are an emancipated minor or an emancipated minor or isare in legal guardianship as determined by a court of in legal guardianship as determined by a court of
competent jurisdiction in the individual’s state of legal residence, or competent jurisdiction in the individual’s state of legal residence, or ~~was~~were when when
reaching the age of majority; reaching the age of majority;

~~24 For additional information on the Selective Service System, see CRS Report R44452,~~ ~~The Selective Service System~~
~~and Draft Registration: Issues for Congress~~.
25 25 Individuals who are citizens of the Freely Associated States (the Federated States of Micronesia, the Republic of Palau, and the Republic of the Marshall Islands) are ineligible to borrow Direct Loans. 34 C.F.R. §668.33(b). 26 For additional information, see U.S. Department of Education, For additional information, see U.S. Department of Education, Office of Federal Student Aid, 2020-2021 2022-2023 Federal
Student Aid Handbook [hereinafter FSA Handbook], vol. , vol. ~~1, pp. 1-29–1-31.~~
~~26 IHEs may implement these changes as early as June 17, 2021, but must implement them no longer than 60 days~~
~~thereafter. U.S Department of Education, Early Implementation of the FAFSA Simplification Act’s Removal of~~
~~Requirements for T itle IV Eligibility Related to Selective Service Registration and Drug-Related Convictions, 86~~ ~~Federal~~
~~Register, 32252-32253, June 17, 2021.~~
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~~link to page 20~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~ is an unaccompanied youth who is homeless, or self-supporting and at risk of~~
~~being homeless; or~~
~~ is~~2, p. 8-14 (hereinafter FSA Handbook). 27 See also 34 C.F.R. §668.34. For example, in part, “if a student is enrolled in an educational program of more than two academic years, the policy specifies that at the end of the second academic year, the student must have a GPA of at least a ‘C’ or its equivalent, or have academic standing consistent with the institution’s requirements for graduation.” 28 Prior to award year 2021-2022, students were ineligible if they did not meet applicable Selective Service System requirements or if they had been convicted of a federal or state offense of selling or possessing illegal drugs that occurred during a period of enrollment for which the student was receiving federal student aid and their eligibility had not been otherwise restored under specified circumstances. The FAFSA Simplification Act of 2020 (Title VII of Division FF of P.L. 116-260, Consolidated Appropriations Act, 2021) eliminated these eligibility restrictions. Congressional Research Service 7 link to page 21 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • are an unaccompanied youth who is homeless, or self-supporting and at risk of being homeless; or • are a student for whom a financial aid administrator makes a documented a student for whom a financial aid administrator makes a documented
determination of independence by reason of other unusual circumstances or determination of independence by reason of other unusual circumstances or
based upon a documented determination of independence that was previously based upon a documented determination of independence that was previously
made by another financial aid administrator in the same award year.made by another financial aid administrator in the same award year.2729
A student who does not satisfy any of the criteria to qualify as an independent student is classified A student who does not satisfy any of the criteria to qualify as an independent student is classified
as a as a dependent student..2830
Dependency status determines the types of loans Dependency status determines the types of loans ~~available to be borrowed by~~ students and their students and their
familiesfamilies may borrow, which in turn affects the amounts that may be borrowed. Of particular importance with , which in turn affects the amounts that may be borrowed. Of particular importance with
regard to undergraduate students is the fact that Direct PLUS Loans—the loans with the most regard to undergraduate students is the fact that Direct PLUS Loans—the loans with the most
flexible borrowing limits—are availableflexible borrowing limits—are available to the parents of dependent students but not to the to the parents of dependent students but not to the
parents of independent students. However, independent undergraduate students are extended parents of independent students. However, independent undergraduate students are extended
higher personal borrowing limits than are dependent students.higher personal borrowing limits than are dependent students.2931 These differential borrowing These differential borrowing
limits are predicated on the expectation that the postsecondary education expenses of dependent limits are predicated on the expectation that the postsecondary education expenses of dependent
~~students wil be~~ students will be financed by some combination of students and their parents, whereas the financed by some combination of students and their parents, whereas the
postsecondary education expenses of independent students postsecondary education expenses of independent students ~~wil typical y~~will typically be financed without be financed without
parental assistance. parental assistance.
Dependency status also determines which individuals in a student’s family Dependency status also determines which individuals in a student’s family ~~wil~~ will have their income have their income
and assets considered in need analysis calculations for the student (discussed below). Need and assets considered in need analysis calculations for the student (discussed below). Need
analysis calculations for a dependent student are based on the income and assets of both the analysis calculations for a dependent student are based on the income and assets of both the
student and the student’s parents,student and the student’s parents,3032 whereas need analysis calculations for an independent student whereas need analysis calculations for an independent student
are based on the income and assets of the student (and if applicable, the student’s spouse). are based on the income and assets of the student (and if applicable, the student’s spouse).
Program Level
The academic level of the program in which a student is enrolled impacts both the types of loans The academic level of the program in which a student is enrolled impacts both the types of loans
~~that he or she~~that they may borrow and certain terms and conditions of such loans. may borrow and certain terms and conditions of such loans.
Undergraduate Studies
Undergraduate students may borrow Direct Subsidized Loans and Direct Unsubsidized Loans, Undergraduate students may borrow Direct Subsidized Loans and Direct Unsubsidized Loans,
and the parents of undergraduate students who are dependent upon them for financial support and the parents of undergraduate students who are dependent upon them for financial support
may borrow Direct PLUS Loans on the student’s behalf. Direct PLUS Loans may not be may borrow Direct PLUS Loans on the student’s behalf. Direct PLUS Loans may not be

27 29 HEA, §480(d); HEA, §480(d); ~~FSA Handbook~~, U.S. Department of Education, 2023-2024 Federal Student Aid Handbook, Application and Verification Guide,Application and Verification Guide, ~~pp. AVG-26 – AVG-27.~~
~~28 34 C.F.R. §668.2(b).~~
~~29 Dependent undergraduates may be eligible to borrow additional amounts in the form of Direct Unsubsidized Loans~~
~~up to the larger loan limits available to independent undergraduate students (displayed in Table 1) in instances where a~~
~~financial aid~~ pp. 20-25 (hereinafter 2023-2024 FSA Handbook). Effective July 1, 2023, institutions may use a documented determination of independence made by another institution in the same or a prior award year. U.S. Department of Education, Dear Colleague Letter GEN-22-15, “FAFSA Simplification Act Changes for Implementation in 2023-24,” November 04, 2022, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2022-11-03/fafsar-simplification-act-changes-implementation-2023-24. 30 34 C.F.R. §668.2(b). 31 Dependent undergraduates may be eligible to borrow additional amounts in the form of Direct Unsubsidized Loans up to the larger loan limits available to independent undergraduate students (displayed in Table 1) in instances where a financial aid administrator determines that the student’s parents are unable to borrow Direct PLUS Loans dueadministrator determines that the student’s parents are unable to borrow Direct PLUS Loans due to certain to certain
exceptional circumstances. Exceptional circumstances may apply in instances of a student whoseexceptional circumstances. Exceptional circumstances may apply in instances of a student whose parent is unableparent is unable to to
qualifyqualify to borrow Direct PLUS Loans dueto borrow Direct PLUS Loans due to having an adverse credit history, whose parent’s only income is from to having an adverse credit history, whose parent’s only income is from
publicpublic assistance or disabilityassistance or disability benefits, whose parent is incarcerated, whose parent’s whereabouts are unknown, or benefits, whose parent is incarcerated, whose parent’s whereabouts are unknown, or
whosewhose parent is not a U.S.parent is not a U.S. citizen or permanent residentcitizen or permanent resident. See FSA Handbook, vol. 3, p. 126. 32.
30 Parental income and assets can be defined Parental income and assets can be defined in a variety of ways in casesin a variety of ways in cases where a student’s parents are not married to where a student’s parents are not married to
each other. For additional information, see CRSeach other. For additional information, see CRS Report R44503, Report R44503, Federal Student Aid: Need Analysis ~~Form ulas~~Formulas and
Expected ~~Fam ily~~Family Contribution. .
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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

borrowed by undergraduate students nor by parents on behalf of undergraduate independent borrowed by undergraduate students nor by parents on behalf of undergraduate independent
students. students.
Graduate and Professional Studies
Graduate and professional students may borrow Direct Unsubsidized Loans and Direct PLUS Graduate and professional students may borrow Direct Unsubsidized Loans and Direct PLUS
Loans. To be eligibleLoans. To be eligible to borrow as a graduate or professional student, an individual must be to borrow as a graduate or professional student, an individual must be
enrolled in a program above the baccalaureate level or in one that leads to a first professional enrolled in a program above the baccalaureate level or in one that leads to a first professional
degree, must have completed at least the equivalent of three years of full-time study either prior degree, must have completed at least the equivalent of three years of full-time study either prior
to entering the program or as part of it, and must not be concurrently receiving Title IV aid as an to entering the program or as part of it, and must not be concurrently receiving Title IV aid as an
undergraduate student.undergraduate student.3133 Graduate and professional students, Graduate and professional students, al all of whom are classified as of whom are classified as
independent students, are extended higher borrowing limits than undergraduate students. independent students, are extended higher borrowing limits than undergraduate students.
Undergraduate Class Level
For undergraduates, a student’s class level determines the maximum amount the student may For undergraduates, a student’s class level determines the maximum amount the student may
borrow on an annual basis. A student’s class level is based on borrow on an annual basis. A student’s class level is based on ~~his or her~~their progression according to progression according to
the academic standards of the school the student attends. For undergraduate students, progression the academic standards of the school the student attends. For undergraduate students, progression
to a higher grade level for purposes of awarding a loan through the Direct Loan program does not to a higher grade level for purposes of awarding a loan through the Direct Loan program does not
necessarily correspond to the start of a new academic year (AY). For instance, a student who necessarily correspond to the start of a new academic year (AY). For instance, a student who
continues to make satisfactory academic progress but does not progress to the next grade level continues to make satisfactory academic progress but does not progress to the next grade level
due to having completed an insufficient number of credits could borrow a loan through the Direct due to having completed an insufficient number of credits could borrow a loan through the Direct
Loan program more than once as a first-year student. Once the student accrues enough credits to Loan program more than once as a first-year student. Once the student accrues enough credits to
progress to the next higher grade level, progress to the next higher grade level, ~~he or she~~they would become eligible for the higher borrowing would become eligible for the higher borrowing
limits availablelimits available to second-year students, and so on.to second-year students, and so on.32
34 Financial Need
Direct Subsidized Loans are need-based and may only be borrowed by students who demonstrate Direct Subsidized Loans are need-based and may only be borrowed by students who demonstrate
having financial need according to federal need analysis procedures.having financial need according to federal need analysis procedures.35 Applicants seeking to Applicants seeking to
borrow Direct Subsidized Loans must undergo a need test through which the expected family borrow Direct Subsidized Loans must undergo a need test through which the expected family
contribution (EFC) to be made by the student, and, if applicable, the student’s family, toward contribution (EFC) to be made by the student, and, if applicable, the student’s family, toward
paying the student’s postsecondary education expenses is determined on the basis of the financial paying the student’s postsecondary education expenses is determined on the basis of the financial
resources available to the student.resources available to the student.3336 According to federal student aid need analysis procedures, the 33 34 C.F.R. §668.2(b). 34 ~~According to federal student aid need analysis procedures, the~~
~~sum of the student’s EFC and the amount of estimated financial assistance (EFA) he or she~~
~~expects to receive from sources other than programs authorized under Title IV of the HEA is~~
~~subtracted from the estimated cost of attendance (COA) of the institution the student attends to~~
~~determine the amount of need-based financial aid that he or she is eligible to receive.~~
~~Additional procedures are followed to determine the composition of the student’s federal student~~
~~aid package. For instance, undergraduate students must receive a determination of their eligibility~~
~~to receive a Federal Pel Grant34 (a form of need-based aid available only to undergraduates) prior~~
~~to being certified by their school as being eligible to borrow a Direct Subsidized Loan. This~~
~~procedure is designed to first provide maximum grant aid to needy students before they incur~~

~~31 34 C.F.R. §668.2(b).~~
32 For additional information on the impact of grade-level progression on annual borrowing limits, see For additional information on the impact of grade-level progression on annual borrowing limits, see FSA Aid
Handbook, vol. 3, Chapter 5—Direct Loan Periods and Amounts. , vol. 3, Chapter 5—Direct Loan Periods and Amounts.
~~33 For additional information on need analysis, see CRS Report R44503,~~ ~~Federal Student Aid: Need Analysis Formulas~~
~~and Expected Fam ily Contribution~~.
~~34 For additional information on the Federal Pell Grant program, see CRS Report R45418,~~ ~~Federal Pell Grant Program~~
~~of the Higher Education Act: Prim er~~.
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~~student loan debt. The amount a student may borrow with a Direct Subsidized Loan may not~~
~~exceed the amount of the student’s unmet financial need after other forms of need-based federal~~
~~student aid available under HEA, Title IV have been awarded. (For additional information, see~~
~~the section on “Limits on Borrowing Determined by Need Analysis and Packaging” below.) Since~~
~~July 1, 2012, only undergraduate students have been eligible to borrow Direct Subsidized Loans.~~
~~Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time~~
~~Borrowers35~~
Since July 1, 2013, a student who is a first-time borrower~~36 may~~35 From July 1, 2013, to August 13, 2021, a student who had no outstanding balance of principal or interest on a Direct Loan program or FFEL program loan on July 1, 2013, or on the date the borrower obtained a loan after July 1, 2013, could only borrow Direct Subsidized ~~only borrow Direct Subsidized~~
Loans for a period Loans for a period ~~that may not~~not to exceed 150% of the published length of the academic program in exceed 150% of the published length of the academic program in
~~which he or she is currently enrolled. This is referred to as the Direct Subsidized Loan~~which they were enrolled (the maximum
~~eligibility period. For undergraduates subject to this provision, a student enrol ed in a two-year~~
~~associate degree program may receive Direct Subsidized Loans for a maximum eligibility period~~
~~of no more than three years, while a student enrolled in a four-year bachelor’s degree program~~
~~may receive Direct Subsidized Loans for a maximum eligibility period of no more than six~~
~~years.37~~
Subsidized usage periods are used to measure a borrower’s progress toward the maximum
~~eligibility period. They are the quotient of dividing the number of days in the borrower’s loan~~
~~period (e.g., semester, quarter) for a Direct Subsidized Loan by the number of days in the~~
~~academic year for which the borrower receives the Direct Subsidized Loan, rounded to the~~
~~nearest tenth of a year. Subsidized usage periods are prorated based on intensity of enrollment~~
~~(i.e., multiplied by 0.75 or 0.50 for three-quarter or half-time enrollment, respectively). A~~
~~borrower’s remaining eligibility period is determined by subtracting a borrower’s cumulative~~
~~subsidized usage periods from the maximum eligibility period.~~
~~This provision also limits a borrower’s eligibility for the interest subsidy on Direct Subsidized~~
~~Loans. If~~eligibility period). In addition, if a Direct Subsidized Loan borrower subject to this a Direct Subsidized Loan borrower subject to this ~~provision remains~~rule remained enrolled in the enrolled in the
same program for which the loan was obtained, or another undergraduate academic program of same program for which the loan was obtained, or another undergraduate academic program of
equal or shorter lengthequal or shorter length, beyond the applicable maximum eligibility beyond the applicable maximum eligibility period, the borrower period, the borrower ~~wil~~ would lose lose
the interest subsidy the interest subsidy ~~and wil~~ otherwise available on their Direct Subsidized Loans and would become responsible for paying the interest that become responsible for paying the interest that ~~accrues on his or her~~
accrued on their Direct Subsidized Loans after the date that the maximum Direct Subsidized Loans after the date that the maximum ~~eligibility~~ eligibility period was exceeded. These rules were known as Subsidized Usage Limit Applies (SULA) and were repealed by the FAFSA Simplification Act of 2020 (Title VII, Division FF of P.L. 116-260). For additional information, see U.S. Department of Education, “Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage Limit Restriction,” 86 Federal Register 31432-31438, June 14, 2021. 36 The FAFSA Simplification Act makes significant changes to the underlying processes and methodologies for determining federal student aid eligibility, including renaming EFC to student aid index (SAI). The act’s general (continued...) Congressional Research Service 9 link to page 22 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program sum of the student’s EFC and the amount of estimated financial assistance (EFA) they expect to receive from sources other than programs authorized under Title IV of the HEA is subtracted from the estimated COA of the institution the student attends to determine the amount of need-based financial aid that they are eligible to receive. Additional procedures are followed to determine the composition of the student’s federal student aid package. For instance, undergraduate students must receive a determination of their eligibility to receive a Federal Pell Grant37 (a form of need-based aid available only to undergraduates) prior to being certified by their school as being eligible to borrow a Direct Subsidized Loan. This procedure is designed to first provide maximum grant aid to needy students before they incur student loan debt. The amount a student may borrow with a Direct Subsidized Loan may not exceed the amount of the student’s unmet financial need after other forms of need-based federal student aid available under HEA, Title IV have been awarded. (For additional information, see the section on “Limits on Borrowing Determined by Need Analysis and Packaging” below.) Since July 1, 2012, only undergraduate students have been eligible to borrow Direct Subsidized Loans. Eligibility Requirements for Direct PLUS Loans In addition to satisfying the general student-based eligibility criteria, an individual must meet certain other eligibility criteria specifically applicable to Direct PLUS Loans. Parent Borrower Eligibility Criteria Direct PLUS Loans may be borrowed by one or both parents of an undergraduate dependent student who meets the general student-based eligibility criteria described above. Eligible ~~period was exceeded.~~
~~Two recently enacted laws affect Direct Subsidized Loan limitations for post-July 1, 2013, first-~~
~~time borrowers. First, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and~~
~~Economic Security (CARES) Act (P.L. 116-136), specifies that ED shal exclude from the~~
~~maximum eligibility period any semester (or equivalent) that a student does not complete due to a~~
~~qualifying emergency.38~~

~~35 T he provisions discussed herein are often referred to as “Subsidized Usage Limit Applies,” or SULA.~~
~~36 For this provision, first-time borrower means “an individual who has no outstanding balance of principal or interest~~
~~on a Direct Loan Program or FFEL Program loan on July 1, 2013, or on the date the borrower obtains a Direct Loan~~
~~Program loan after July 1, 2013.” 34 C.F.R. §685.200(f)(1)(i).~~
~~37 A student who borrows Direct Subsidized Loans to complete an associate’s degree program may subsequently~~
~~borrow Direct Subsidized Loans to attend a bachelor’s degree program and still have remaining eligibility. For~~
~~information on other program types, proration based on other than full-time enrollment intensities, and other~~
~~requirements, see 34 C.F.R. §685.200(f).~~
~~38 T he CARES Act defines a qualifying emergency as (1) “a public health emergency related to the coronavirus~~
~~declared by the Secretary of Health and Human Services pursuant to section 319 of the Public Health Service Act”; (2)~~
~~“an event related to the coronavirus for which the President declared a major disaster or an emergency under section~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~Second, the FAFSA Simplification Act of 2020 repealed these Direct Subsidized Loan limitations~~
~~for post-July 1, 2013, first-time borrowers. Recently published ED regulations effectuate this~~
~~repeal.39 Specifical y, effective August 13, 2021, the Direct Subsidized Loan Limitations for Post-~~
~~July 1, 2013, First-Time Borrowers wil not apply to any borrower who receives a Direct~~
~~Subsidized Loans first disbursed on or after July 1, 2021. In addition, for borrowers who have a~~
~~Direct Subsidized Loan that is outstanding as of July 1, 2021, and on which the borrower has~~
~~been responsible for paying interest because they exceeded the maximum eligibility period, ED~~
~~wil “adjust their account to remove the interest that accrued and reapply the borrower’s payments~~
~~accordingly.”40~~
~~Eligibility Requirements for Direct PLUS Loans~~
~~In addition to satisfying the general student-based eligibility criteria, an individual must meet~~
~~certain other eligibility criteria specifical y applicable to Direct PLUS Loans.~~
~~Parent Borrower Eligibility Criteria~~
~~Direct PLUS Loans may be borrowed by one or both parents of an undergraduate dependent~~
~~student who meets the general student-based eligibility criteria described above. Eligible parents~~
~~include biological parents, adoptive parents, and stepparents (if the stepparent’s income and~~
parents include biological parents, adoptive parents, and stepparents (if the stepparent’s income and assets are taken into account in determining a student’s EFC). A legal guardian may not borrow a assets are taken into account in determining a student’s EFC). A legal guardian may not borrow a
Direct PLUS Loan on behalf of a student as a parent borrower. Parent borrowers must also meet Direct PLUS Loan on behalf of a student as a parent borrower. Parent borrowers must also meet
the same citizenship and residency requirements as student borrowers; may not be in default on a the same citizenship and residency requirements as student borrowers; may not be in default on a
federal student loan, nor owe a refund on a grant or loan made under Title IV without having federal student loan, nor owe a refund on a grant or loan made under Title IV without having
made satisfactory repayment arrangements; and may not be incarcerated. made satisfactory repayment arrangements; and may not be incarcerated.
For a parent to be eligible For a parent to be eligible to borrow a Direct PLUS Loan on behalf of an undergraduate to borrow a Direct PLUS Loan on behalf of an undergraduate
dependent student, the student must have completed a FAFSA. There is no requirement that a dependent student, the student must have completed a FAFSA. There is no requirement that a
parent borrower complete a separate FAFSA. The eligibilityparent borrower complete a separate FAFSA. The eligibility of a noncustodial parent to borrow a of a noncustodial parent to borrow a
Direct PLUS Loan on behalf of Direct PLUS Loan on behalf of ~~his or her~~their child is not impacted by that parent’s financial child is not impacted by that parent’s financial
information not appearing on the student’s FAFSA.information not appearing on the student’s FAFSA.41
38 Creditworthiness Requirements to Borrow Direct PLUS Loans
Eligibility Eligibility for an individualfor an individual to borrow a Direct PLUS Loan also depends on that individual’s to borrow a Direct PLUS Loan also depends on that individual’s
creditworthiness. Only individuals who do not have an adverse credit history, as determined creditworthiness. Only individuals who do not have an adverse credit history, as determined
according to procedures specified in regulations, may borrow Direct PLUS Loans.according to procedures specified in regulations, may borrow Direct PLUS Loans.~~42 The~~
~~creditworthiness criteria apply to both parent borrowers and to graduate and professional student~~
~~borrowers. Creditworthiness is assessed on the basis of a credit report on the applicant obtained~~
~~from at least one consumer reporting agency. An applicant is considered to have an adverse credit~~
~~history if he or she either~~

~~401 or 501, respectively, of the Robert T . Stafford Disaster Relief and Emergency Assistance Act”; or (3) “a national~~
~~emergency related to the coronavirus declared by the President under section 201 of the National Emergencies Act.”~~
~~39 U.S. Department of Education, “Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage~~
~~Limit Restriction,” 86 Federal Register 31432-31438, June 14, 2021.~~
~~40 Ibid., p. 31433.~~
~~41 FSA Handbook, vol. 1, p. 1-108.~~
~~42 34 C.F.R. §685.200.~~
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~~ has~~39 The effective date is July 1, 2024, although some provisions of the act may be implemented before then. For additional information on need analysis, see CRS Report R44503, Federal Student Aid: Need Analysis Formulas and Expected Family Contribution. For additional information on the FAFSA Simplification Act, see CRS Report R46909, The FAFSA Simplification Act. 37 For additional information on the Federal Pell Grant program, see CRS Report R45418, Federal Pell Grant Program of the Higher Education Act: Primer. 38 FSA Handbook, vol. 1, p. 77. 39 34 C.F.R. §685.200. Congressional Research Service 10 link to page 94 link to page 94 link to page 19 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program creditworthiness criteria apply to both parent borrowers and to graduate and professional student borrowers. Creditworthiness is assessed on the basis of a credit report on the applicant obtained from at least one consumer reporting agency. An applicant is considered to have an adverse credit history if they either • have one or more debts totaling more than $2,085 that are 90 days or more one or more debts totaling more than $2,085 that are 90 days or more
delinquent as of the date of the credit report, or that have been placed in delinquent as of the date of the credit report, or that have been placed in
collection or been charged off by the creditor as a loss within the two years prior collection or been charged off by the creditor as a loss within the two years prior
to the credit report;to the credit report;~~43 or~~
~~ has~~40 or • have been the subject of a default determination, bankruptcy discharge, been the subject of a default determination, bankruptcy discharge,
foreclosure, repossession, tax lien, wage garnishment, or write-off of a debt under foreclosure, repossession, tax lien, wage garnishment, or write-off of a debt under
HEA, Title IV within the five years prior to the credit report. HEA, Title IV within the five years prior to the credit report.
An applicant who is determined to have an adverse credit history may not obtain a Direct PLUS An applicant who is determined to have an adverse credit history may not obtain a Direct PLUS
Loan unless Loan unless ~~he or she~~they either either ~~obtains~~obtain an an endorser~~44 or demonstrates~~41 or demonstrate that extenuating circumstances that extenuating circumstances
exist with regard to the applicant’s credit history.exist with regard to the applicant’s credit history.4542 Extenuating circumstances may include an Extenuating circumstances may include an
updated credit report or a letter from a creditor stating that the applicant has made satisfactory updated credit report or a letter from a creditor stating that the applicant has made satisfactory
repayment arrangements on a derogatory debt. In addition, to obtain a Direct PLUS Loan an repayment arrangements on a derogatory debt. In addition, to obtain a Direct PLUS Loan an
applicant who has an adverse credit history must also complete credit counseling. (See the section applicant who has an adverse credit history must also complete credit counseling. (See the section
on on “PLUS Loan Credit Counseling For Borrowers with Adverse Credit.”) An applicant may not, ) An applicant may not,
however, be rejected for a Direct PLUS Loan on the basis of having no credit history. however, be rejected for a Direct PLUS Loan on the basis of having no credit history.
A dependent undergraduate student whose parents are unable to obtain a Direct PLUS Loan due A dependent undergraduate student whose parents are unable to obtain a Direct PLUS Loan due
to their having an adverse credit history may borrow a larger amount in the form of a Direct to their having an adverse credit history may borrow a larger amount in the form of a Direct
Unsubsidized Loan. In such a case, the student may borrow up to the borrowing limit applicable Unsubsidized Loan. In such a case, the student may borrow up to the borrowing limit applicable
to a similarly situated independent undergraduate student. (These amounts are discussed below in to a similarly situated independent undergraduate student. (These amounts are discussed below in
the section on the section on “Amounts That May Be Borrowed.”) ”)
Eligibility Requirements for Direct Consolidation Loans
~~To be eligible~~ Two differing sets of borrower eligibility criteria apply for Direct Consolidation Loans. One set of criteria generally applies across borrowers seeking Direct Consolidation Loans, while another set applies to borrowers seeking to separate their Joint Consolidation Loans into one or two Direct Consolidation Loans. General Direct Consolidation Loan Criteria In general, to be eligible to obtain a Direct Consolidation Loan, a borrower must have an outstanding to obtain a Direct Consolidation Loan, a borrower must have an outstanding
principal balance on at least one loan that was made through either the Direct Loan program or principal balance on at least one loan that was made through either the Direct Loan program or
the FFEL program. In addition, with respect to the loans being consolidated, the applicant must the FFEL program. In addition, with respect to the loans being consolidated, the applicant must
be (1) in the grace period prior to entering repayment; (2) in repayment status, but not in default; be (1) in the grace period prior to entering repayment; (2) in repayment status, but not in default;
or (3) in default, but having made satisfactory repayment arrangements. or (3) in default, but having made satisfactory repayment arrangements.
For the purposes of including a defaulted loan in a Direct Consolidation Loan, making For the purposes of including a defaulted loan in a Direct Consolidation Loan, making
“satisfactory repayment arrangements” means that the defaulted borrower has made at least three “satisfactory repayment arrangements” means that the defaulted borrower has made at least three
consecutive voluntary full monthly payments within 20 days of the due date, or has agreed to consecutive voluntary full monthly payments within 20 days of the due date, or has agreed to
40 Regulations specify that the $2,085 threshold will periodically be adjusted for inflation; however, this has never occurred since the regulations’ implementation in 2015. 34 C.F.R. §685.200(c)(2). 41 An endorser is an individual who does not have an adverse credit history, who signs a promissory note, and who agrees to repay the loan should the borrower not do so. 34 C.F.R. §685.102(b). 42 A dependent student on whose behalf the loan would be made to a parent borrower may not be an endorser. Congressional Research Service 11 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program repay according to one of the Income-Driven Repayment (IDR) plans (described below). A repay according to one of the Income-Driven Repayment (IDR) plans (described below). A
borrower of a defaulted loan who is subject to a court judgment or wage garnishment is ineligible borrower of a defaulted loan who is subject to a court judgment or wage garnishment is ineligible
to obtain a Direct Consolidation Loan. to obtain a Direct Consolidation Loan.
In general, a set of loans may be consolidated only once. However, in select circumstances a In general, a set of loans may be consolidated only once. However, in select circumstances a
borrower may add additional loans to their preexisting Direct Consolidation Loan Direct Consolidation Loan or may use a Direct Consolidation Loan~~may be used~~ to repay a previously obtained Direct Consolidation Loan to repay a previously obtained Direct Consolidation Loan
or a FFEL Consolidation Loan. Loans made to borrowers within 180 days prior to or after the or a FFEL Consolidation Loan. Loans made to borrowers within 180 days prior to or after the
date of obtaining a Direct Consolidation Loan may be added to that Direct Consolidation Loan. A date of obtaining a Direct Consolidation Loan may be added to that Direct Consolidation Loan. A
borrower who has an existing Direct Consolidation Loan and also has other eligibleborrower who has an existing Direct Consolidation Loan and also has other eligible loans that loans that
have not been consolidated, or who subsequently obtains other eligible loans, may consolidate have not been consolidated, or who subsequently obtains other eligible loans, may consolidate
those loans with those loans with ~~his or her~~their existing loans for purposes of obtaining a new Direct Consolidation existing loans for purposes of obtaining a new Direct Consolidation
Loan. A borrower who has an existing FFEL Consolidation Loan and whose loan is in default or Loan. A borrower who has an existing FFEL Consolidation Loan and whose loan is in default or

~~43 T he $2,085 threshold will periodically be adjusted for inflation. 34 C.F.R. §685.200(c)(2).~~
~~44 An endorser is an individual who does not have an adverse credit history , who signs a promissory note, and who~~
~~agrees to repay the loan should the borrower not do so. 34 C.F.R. §685.102(b).~~
~~45 A dependent student on whose behalf the loan would be made to a parent borrower may not be an endorser.~~
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~~has~~ has been referred to a guaranty agency for default aversion been referred to a guaranty agency for default aversion ~~assistance46~~assistance43 may consolidate may consolidate ~~his or her~~
their loan into a Direct Consolidation Loan for purposes of repaying according to one of the IDR plans. loan into a Direct Consolidation Loan for purposes of repaying according to one of the IDR plans.
~~Final y, a~~ A borrower who has an existing FFEL Consolidation Loan may consolidate that loan into borrower who has an existing FFEL Consolidation Loan may consolidate that loan into
a Direct Consolidation Loan for the purposes of applying for loan forgiveness through the a Direct Consolidation Loan for the purposes of applying for loan forgiveness through the ~~Public~~
~~Service Loan Forgiveness (PSLF)~~PSLF Program or to receive the No Accrual of Interest on Loans of Program or to receive the No Accrual of Interest on Loans of
Certain Active Duty Servicemembers benefit that is only availableCertain Active Duty Servicemembers benefit that is only available to borrowers of loans made to borrowers of loans made
~~through the Direct Loan program.~~
through the Direct Loan program. Finally, borrowers with a Joint Consolidation Loan (JCL) made under either the FFEL or the Direct Loan program may apply to separate that loan into two new Direct Consolidation Loans or one new Direct Consolidation Loan and a remaining JCL, depending on the circumstances (see “Criteria to Separate Joint Consolidation Loans into a Direct Consolidation Loan”). A Direct Consolidation Loan must consist of at least one eligible A Direct Consolidation Loan must consist of at least one eligible loan made through either the loan made through either the
Direct Loan or FFEL programs, and may also contain other types of federal student loans. The Direct Loan or FFEL programs, and may also contain other types of federal student loans. The
eligibleeligible types of federal student loans made through the Direct Loan and FFEL programs include types of federal student loans made through the Direct Loan and FFEL programs include
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Direct Consolidation Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Direct Consolidation
Loans, FFEL Subsidized Stafford Loans, FFEL Unsubsidized Stafford Loans, FFEL PLUS Loans, Loans, FFEL Subsidized Stafford Loans, FFEL Unsubsidized Stafford Loans, FFEL PLUS Loans,
and FFEL Consolidation Loans.and FFEL Consolidation Loans.4744 The eligible The eligible types of federal student loans made outside of the types of federal student loans made outside of the
Direct Loan and FFEL programs are Federal Perkins Loans, Guaranteed Student Loans, Federal Direct Loan and FFEL programs are Federal Perkins Loans, Guaranteed Student Loans, Federal
Insured Student Loans, National Direct Student Loans, National Defense Student Loans, Insured Student Loans, National Direct Student Loans, National Defense Student Loans,
Supplemental Loans for Students (SLS), Auxiliary Loans to Assist Students (ALAS), Health Supplemental Loans for Students (SLS), Auxiliary Loans to Assist Students (ALAS), Health
Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Loans for Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Loans for
Disadvantaged Students (LDS), and Nurse Faculty Loans, and Nursing Student Loans.Disadvantaged Students (LDS), and Nurse Faculty Loans, and Nursing Student Loans.48
~~Amounts That May Be Borrowed~~
~~The maximum amounts that a student or a parent may borrow in loans made through the Direct~~
~~Loan program are determined by the interaction of annual and aggregate borrowing limits and~~
~~federal need analysis and packaging procedures. Limitations on borrowing vary by loan type,~~
~~borrower characteristics, program level, and class level.~~
~~Annual Loan Limits~~
~~For undergraduate students, annual loan limits cap both the maximum amount that may be~~
~~borrowed in Direct Subsidized Loans and the total combined amount that may be borrowed~~
~~through Direct Subsidized Loans and Direct Unsubsidized Stafford Loans during a single~~
~~academic year. Annual loan limits for Direct Subsidized Loans vary by undergraduate class level;~~
~~however, at any particular class level these limits are the same for both undergraduate dependent~~
~~students and undergraduate independent students. Annual loan limits for the total combined~~
~~amount of Direct Subsidized Loans and Direct Unsubsidized Loans that may be borrowed by~~
~~undergraduate students vary by both undergraduate class level and by student dependency status.~~
~~For graduate and professional students, annual loan limits cap the maximum that may be~~
~~borrowed in Direct Unsubsidized Loans, irrespective of class level. However, higher exceptional~~
~~annual loan limits are extended to students enrolled in certain health professions programs. There~~
~~is no specified limit to the amount that may be borrowed in Direct PLUS Loans by either parent~~
~~borrowers or by graduate and professional students.~~

~~46 Default aversion activities are means of assistance provided by a guaranty agency to a lender that holds a delinquent~~
~~loan prior to the loan legally entering default status. HEA §§422(h)(8) and 422B(d).~~
~~47 Over the history of the Direct Loan program and the FFEL program, the terminology used to refer to various types of~~
~~loans has changed. A complete listing of loan types eligible for inclusion in a Direct Consolidation Loan is specified in~~
~~regulations at 34 C.F.R. §685.220(b).~~
~~48 Several of these loan types were once made through programs that have since been discontinued.~~
~~Congressional Research Service~~

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link to page 34 link to page 34 link to page 20 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~The annual loan limits apply to the maximum principal amount that may be borrowed in an~~
~~academic year. Any loan origination fees that the borrower is required to pay (see the “Loan~~
~~Origination Fees”~~ ~~below~~45 Criteria to Separate a Joint Consolidation Loan into One or More Direct Consolidation Loans Between October 1, 1992, and July 1, 2006, married borrowers who each had eligible FFEL program and/or Direct Loan program student loans were authorized to consolidate their debt into a single Joint Consolidation Loan (JCL). To do so, each spouse was required to agree “to be held jointly and severally liable for the repayment of the consolidation loan, without regard to the 43 Default aversion activities are means of assistance provided by a guaranty agency to a lender that holds a delinquent loan prior to the loan legally entering default status. HEA §§422(h)(8) and 422B(d). 44 Over the history of the Direct Loan program and the FFEL program, the terminology used to refer to various types of loans has changed. A complete listing of loan types eligible for inclusion in a Direct Consolidation Loan is specified in regulations at 34 C.F.R. §685.220(b). 45 Several of these loan types were once made through programs that have since been discontinued. Congressional Research Service 12 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program amounts of the respective loan obligations” that were to be consolidated and without regard to any subsequent change in the couple’s marital status.46 On October 11, 2022, the Joint Consolidation Loan Separation Act (P.L. 117-200) was enacted to enable borrowers of FFEL and Direct Loan program JCLs to separate their loans into one or two new Direct Consolidation Loans. Each new Direct Consolidation Loan is to be in an amount equal to the proportion of the unpaid principal, interest, and fees of the JCL attributable to the loans of the individual borrower for whom the separate, new Direct Consolidation Loan is being made. The portion of the JCL attributable to the loans of an individual borrower is to be determined on the basis of the original loan obligation of the borrower as of the date the JCL was made, or if requested by both borrowers, on the basis of the debt’s distribution described in a divorce decree, court order, settlement agreement, or other document. For a Direct Consolidation Loan that was the result of a separation a JCL, the interest rate is to be equal to the interest rate on the JCL as of the date before the separation of the JCL. Under the Joint Consolidation Loan Separation Act, borrowers may separate JCLs in one of two ways. First, a married couple (or two individuals who were previously a married couple) may jointly apply to ED to separate the loan. Second, an individual borrower in a married couple (or previously married couple) may apply to separate the loan without regard to whether the other individual borrower in the married couple (or previously married couple) applies for the separation of the loan. To do so, the applicant borrower must certify to ED that they have experienced an act of domestic violence or economic abuse from the other borrower47 or are “unable to reasonably reach or access the loan information from the other individual borrower.”48 If an individual borrower receives a new Direct Consolidation Loan after separating the JCL without application from the other borrower, the non-applicant borrower shall become solely liable for any remaining balance of the JCL following the loan separation. Unlike a general Direct Consolidation Loan, a JCL for which a borrower(s) seeks separation may be in default and applicants need not have entered into a satisfactory repayment arrangement to be eligible to separate a JCL. ED has not yet implemented the terms and procedures of the Joint Consolidation Loan Separation Act.49 Thus, as of the date of this report, borrowers of JCLs are unable to separate their loans. Amounts That May Be Borrowed The maximum amounts that a student or a parent may borrow in loans made through the Direct Loan program are determined by the interaction of annual and aggregate borrowing limits and federal need analysis and packaging procedures. Limitations on borrowing vary by loan type, borrower characteristics, program level, and class level. Annual Loan Limits For undergraduate students, annual loan limits cap both the maximum amount that may be borrowed in Direct Subsidized Loans and the total combined amount that may be borrowed 46 20 U.S.C. §1078-3 (2018), “Editorial Notes.” 47 Domestic abuse and economic abuse are defined in 34 U.S.C. §12291. 48 ED is also authorized to permit individual borrowers to apply individually to separate their JCLs if doing so would be in the best fiscal interest of the federal government. 49 On its website, ED has indicated that the process for borrowers to separate JCLs “will not be fully implemented until late 2024.” U.S. Department of Education, Office of Federal Student Aid, “Joint Consolidation Loan Separate News and Updates,” https://studentaid.gov/announcements-events/joint-consolidation-loans, accessed May 9, 2023. Congressional Research Service 13 link to page 35 link to page 35 link to page 21 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program through Direct Subsidized Loans and Direct Unsubsidized Loans during a single academic year. Annual loan limits for Direct Subsidized Loans vary by undergraduate class level; however, at any particular class level these limits are the same for both undergraduate dependent students and undergraduate independent students. Annual loan limits for the total combined amount of Direct Subsidized Loans and Direct Unsubsidized Loans that may be borrowed by undergraduate students vary by both undergraduate class level and by student dependency status. For graduate and professional students, annual loan limits cap the maximum that may be borrowed in Direct Unsubsidized Loans, irrespective of class level. However, higher exceptional annual loan limits are extended to students enrolled in certain health professions programs. There is no specified dollar limit to the amount that may be borrowed in Direct PLUS Loans by either parent borrowers or by graduate and professional students. The annual loan limits apply to the maximum principal amount that may be borrowed in an academic year. Any loan origination fees that the borrower is required to pay (see the “Loan Origination Fees” section) are included in the amount to be borrowed that is subject to these limits. ) are included in the amount to be borrowed that is subject to these limits.
Borrowing limits for a student who is enrolled for less than one year are prorated based on the Borrowing limits for a student who is enrolled for less than one year are prorated based on the
fraction of the academic year for which the student is enrolled. An academic year is defined in fraction of the academic year for which the student is enrolled. An academic year is defined in
statute as a minimum of 30 weeks of instruction for courses of study measured in credit hours, or statute as a minimum of 30 weeks of instruction for courses of study measured in credit hours, or
26 weeks for courses of study measured in clock hours and during which a full-time student is 26 weeks for courses of study measured in clock hours and during which a full-time student is
expected to complete a minimum of 24 semester or trimester hours, 36 quarter hours, or 900 expected to complete a minimum of 24 semester or trimester hours, 36 quarter hours, or 900
clock hours. clock hours.
Aggregate Loan Limits
Aggregate loan limits cap the total cumulative amount of outstanding loans that a student may Aggregate loan limits cap the total cumulative amount of outstanding loans that a student may
borrow through certain loan types. One limit applies to the total amount that may be borrowed in borrow through certain loan types. One limit applies to the total amount that may be borrowed in
Direct Subsidized Loans and another limit applies to the total combined amount that may be Direct Subsidized Loans and another limit applies to the total combined amount that may be
borrowed in Direct Subsidized Loans and Direct Unsubsidized Loans.borrowed in Direct Subsidized Loans and Direct Unsubsidized Loans.4950 No aggregate limits are No aggregate limits are
placed on Direct PLUS Loan borrowing. The aggregate loan limits apply only to the aggregate placed on Direct PLUS Loan borrowing. The aggregate loan limits apply only to the aggregate
outstanding principal balance (OPB) of the loans a student has borrowed. They do not apply to outstanding principal balance (OPB) of the loans a student has borrowed. They do not apply to
accrued or capitalized interest.accrued or capitalized interest.5051 Annual and aggregate limits that have applied to loans made Annual and aggregate limits that have applied to loans made
~~through the Direct Loan program since July 1, 2012, are presented in Table 1.~~
~~Table 1. Annual and Aggregate Loan Limits,~~
~~by Borrower Type and Program Level: July 1, 2012, to Present~~
~~(dol ars)~~
~~Direct~~
~~Direct Subsidized Loans and~~
~~Direct~~

~~Subsidized~~
~~Direct Unsubsidized Loans,~~
~~PLUS~~
~~Loans~~
~~Combined~~
~~Loans~~
~~Borrower Type~~
~~All Eligible~~
~~Dependent~~
~~Independent~~
~~All Eligible~~
~~and Program Level~~
~~Borrowers~~
~~Students~~
~~Students~~
~~Borrowers~~
~~Undergraduate Students~~
~~Annual Loan Limits~~

~~Preparatory coursework for an~~
~~2,625~~
~~2,625~~
~~8,625a~~
~~n.a.~~
~~undergraduate program~~
~~1st year~~
~~3,500~~
~~5,500~~
~~9,500a~~
~~n.a.~~
~~2nd year~~
~~4,500~~
~~6,500~~
~~10,500a~~
~~n.a.~~
~~3rd year and above~~
~~5,500~~
~~7,500~~
~~12,500a~~
~~n.a.~~
~~Preparatory coursework for a~~
~~5,500~~
~~5,500~~
~~12,500a~~
~~n.a.~~
~~graduate programb~~
~~Teacher certificationb~~
~~5,500~~
~~5,500~~
~~12,500a~~
~~n.a.~~
Aggregate Loan Limitsc,d

~~n.a.~~

49through the Direct Loan program since July 1, 2012, are presented in Table 1. 50 Aggregate loan limits for Direct Subsidized Aggregate loan limits for Direct Subsidized Loans also includeLoans also include ~~Subsidized~~ Subsidized Stafford Loan amounts borrowedStafford Loan amounts borrowed through through
the FFEL program. Aggregate loan limits for Direct Subsidizedthe FFEL program. Aggregate loan limits for Direct Subsidized Loans and Direct UnsubsidizedLoans and Direct Unsubsidized Loans, combined, also Loans, combined, also
includeinclude ~~Subsidized~~ Subsidized Stafford Loans and UnsubsidizedStafford Loans and Unsubsidized Stafford Loans, combined, borrowedStafford Loans, combined, borrowed through the FFEL program. through the FFEL program.
50 51 In addition, recipients of In addition, recipients of ~~T EACH~~TEACH Grants who Grants who fail to meet the requirements of the program may be requiredfail to meet the requirements of the program may be required to repay to repay
the amount of their the amount of their ~~T EACH~~TEACH Grant award Grant award in the form of a Directin the form of a Direct ~~Unsubsidized~~ Unsubsidized Loan. For such individuals,Loan. For such individuals, this Direct this Direct
UnsubsidizedUnsubsidized Loan amount is determined separately from otherwise applicable annual borrowingLoan amount is determined separately from otherwise applicable annual borrowing limits. limits.
Congressional Research Service Congressional Research Service

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link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page 21 link to page ~~21 link to page 21 link to page 21 link to page 21~~22 link to page 22 link to page 22 link to page 21 link to page 22 link to page 22 link to page 22 link to page 22 link to page 22 link to page 22 link to page link to page 22 link to page 22 link to page 2122 link to page link to page 2122 link to page link to page 2122 link to page 22 link to page link to page 2122 link to page 22 link to page link to page 22 link to page 2122 link to page link to page 2122 link to page link to page 2122 link to page link to page 2122 link to page link to page 21 ~~Federal Student Loans Made Through~~ 22 link to page 22 link to page 22 link to page 22 link to page 22 link to page 22 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Table 1. Annual and Aggregate Loan Limits, by Borrower Type and Program Level: July 1, 2012, to Present (dollars) Direct
Direct Subsidized Loans and
Direct

Subsidized
Direct Unsubsidized Loans,
PLUS
Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers Students
Students
~~Students~~
~~Borrowers~~
~~In generale~~
~~23,000~~
~~31,000~~
~~57,500a~~
~~n.a.~~
~~Graduate~~ Borrowers Undergraduate Students Annual Loan Limits Preparatory coursework for an 2,625 2,625 8,625a n.a. undergraduate program 1st year 3,500 5,500 9,500a n.a. 2nd year 4,500 6,500 10,500a n.a. 3rd year and above 5,500 7,500 12,500a n.a. Preparatory coursework for a 5,500 5,500 12,500a n.a. graduate programb Teacher certificationb 5,500 5,500 12,500a n.a. Aggregate Loan Limitsc,d n.a. In generale 23,000 31,000 57,500a n.a. Graduate Students
Annual Loan Limits

In general In general
n.a. n.a.
n.a. n.a.
20,50 20,500f
~~COA-EF~~Ag Up to COA-EFAg
Health professions Health professions programprogramsh
n.a. n.a.
n.a. n.a.
40,500 40,500
~~COA-EF~~Ag Up to COA-EFAg
to 47,16 to 47,167f
Health professions Health professions programprogramsi
n.a. n.a.
n.a. n.a.
33,000 33,000
~~COA-EF~~Ag Up to COA-EFAg
to 37,16 to 37,167f
Aggregate Loan ~~Limits~~Limit sc,d,j

In general In general
65,00 65,000k
n.a. n.a.
138,500 138,500
Not Not ~~limite~~dglimitedg
Health professions Health professions
65,00 65,000k
n.a. n.a.
224,000 224,000
Not Not ~~limitedg~~
~~program~~selimi tedg programse,h,i
Parents of Dependent ~~Undergraduate~~ Undergraduate Students
Annual Loan Limits

Al
All n.a. n.a.
n.a. n.a.
n.a. n.a.
~~COA-EF~~Ag Up to COA-EFAg
Aggregate Loan ~~Limits~~Limit sc,d

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Not Not ~~limite~~dglimitedg
Source: HEA, §§428, 428H, 451, and 455; 34 C.F.R.HEA, §§428, 428H, 451, and 455; 34 C.F.R. §685.203; and U.S. Department§685.203; and U.S. Department of Education, Office of of Education, Office of
Postsecondary Education, Dear Col eague LettersPostsecondary Education, Dear Col eague Letters GEN-05-09, GEN-08-04, and GEN-08-08. GEN-05-09, GEN-08-04, and GEN-08-08.
Notes: “n.a.” means not applicable. “n.a.” means not applicable.
“COA” means cost of attendance. “EFA” means estimated financial assistance. a. These loan limitsa. These loan limits also apply to dependent undergraduate students whose parents are unable to obtain a also apply to dependent undergraduate students whose parents are unable to obtain a
Direct Direct PLUS Loan. PLUS Loan.
b. Applies b. Applies to individuals who have obtained a baccalaureate degree.to individuals who have obtained a baccalaureate degree.
Congressional Research Service 15 link to page 102 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program c. Accrued interest and capitalized interestc. Accrued interest and capitalized interest do not count toward aggregate loan limits.do not count toward aggregate loan limits.
d. If a borrowerd. If a borrower has a Directhas a Direct Consolidation Loan, any DirectConsolidation Loan, any Direct Subsidized Loans or Direct Unsubsidized Loans Subsidized Loans or Direct Unsubsidized Loans
that have been included in the Direct that have been included in the Direct Consolidation Loan remainConsolidation Loan remain attributable to the aggregate attributable to the aggregate ~~limit s~~ limits for for
DirectDirect Subsidized Loans and Total Direct Subsidized Loans and Direct Unsubsidized Loans combined, in Subsidized Loans and Total Direct Subsidized Loans and Direct Unsubsidized Loans combined, in
accordance with their proportionate share of the Directaccordance with their proportionate share of the Direct Consolidation Loan. Aggregate loan limitsConsolidation Loan. Aggregate loan limits also also
include amounts of comparable loan types borrowed through the FFEL program (e.g.,include amounts of comparable loan types borrowed through the FFEL program (e.g., Subsidized Stafford Subsidized Stafford
Loans, Unsubsidized Stafford Loans). Loans, Unsubsidized Stafford Loans).
e. Includes Subsidized Stafford Loans and Unsubsidized Stafford Loans borrowed through the FFEL program. e. Includes Subsidized Stafford Loans and Unsubsidized Stafford Loans borrowed through the FFEL program.
f. f.
Direct Direct Subsidized Loans are not currently available to graduate students. Subsidized Loans are not currently available to graduate students.
g. There is no g. There is no ~~statutory borrowing limit for Direct~~ statutorily specified dol ar limit on borrowing amounts for Direct PLUS Loans; however,PLUS Loans; however, ~~al aid~~ all aid combined may not exceed combined may not exceed
COA. COA.
h. Students enrol ed h. Students enrol ed in programs in the fol owing disciplinesin programs in the fol owing disciplines are eligibleare eligible ~~to annual y~~ to annually borrow an additional borrow an additional
$20,000 more $20,000 more than regular students in Direct Unsubsidized Loans for programsthan regular students in Direct Unsubsidized Loans for programs with 9-month academic with 9-month academic
years, and an additional $26,667 for programs with 12-month academic years:years, and an additional $26,667 for programs with 12-month academic years: Doctor of Doctor of ~~Al opathic~~Allopathic
Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry,Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry, Doctor of VeterinaryDoctor of Veterinary Medicine, Doctor of Medicine, Doctor of
Optometry,Optometry, Doctor of Podiatric Medicine; and, effective May 1, 2005, Doctor of Naturopathic Medicine and Doctor of Podiatric Medicine; and, effective May 1, 2005, Doctor of Naturopathic Medicine and
Doctor of Naturopathy. Amounts are prorated for 10- and 11-month programs. Doctor of Naturopathy. Amounts are prorated for 10- and 11-month programs.
i. i.
Students enrol ed Students enrol ed in programs in the fol owing disciplinesin programs in the fol owing disciplines are eligibleare eligible ~~annual y~~ annually to borrow an additional to borrow an additional
$12,500 more$12,500 more than regular students in Direct Unsubsidized Loans for programsthan regular students in Direct Unsubsidized Loans for programs with 9with 9 ~~-month academic~~
~~Congressional Research Service~~

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~~link to page 97 link to page 97~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

-month academic years, and an additional $16,667 for programs with 12-month academic years:years, and an additional $16,667 for programs with 12-month academic years: Doctor of Pharmacy, Doctor of Pharmacy,
Graduate in Public Health, Doctor of Chiropractic,Graduate in Public Health, Doctor of Chiropractic, Doctoral DegreeDoctoral Degree in Clinical Psychology, and Masters or in Clinical Psychology, and Masters or
Doctoral DegreeDoctoral Degree in Health Administration.in Health Administration. Amounts are prorated for 10- and 11-month programs. Amounts are prorated for 10- and 11-month programs.
j. j.
Aggregate loan limits Aggregate loan limits for graduate and professionalfor graduate and professional students include amounts borrowed for undergraduate students include amounts borrowed for undergraduate
study. study.
k. The aggregate loan limit k. The aggregate loan limit for Direct Subsidized Loans to graduate and professionalfor Direct Subsidized Loans to graduate and professional students applies to loans students applies to loans
borrowed for programs of instruction beginning before July 1, 2012. borrowed for programs of instruction beginning before July 1, 2012.
A listing of the annual and aggregate loan limits that have applied throughout the history of the A listing of the annual and aggregate loan limits that have applied throughout the history of the
Direct Loan program is presented inDirect Loan program is presented in ~~Appendix C~~ in Table C-1.
Limits on Borrowing Determined by Need Analysis and Packaging
The process of awarding one or more forms of federal student aid to a student in accordance with The process of awarding one or more forms of federal student aid to a student in accordance with
federal student aid need analysis procedures and individual program rules is referred to as federal student aid need analysis procedures and individual program rules is referred to as
packaging. Financial aid administrators at IHEs are afforded a degree of discretion in determining . Financial aid administrators at IHEs are afforded a degree of discretion in determining
how aid is packaged. The packaging of aid may affect the amounts how aid is packaged. The packaging of aid may affect the amounts ~~that may be borrowed by a~~
~~student or by a parent on behalf of a student through the various types of loans offered through~~
~~the Direct Loan program~~and types of Direct Loans that a student (or parent on behalf of a student) may borrow. The process for packaging aid provided through the Direct Loan . The process for packaging aid provided through the Direct Loan
program is briefly described below. The following terms are instrumental in describing this program is briefly described below. The following terms are instrumental in describing this
process. process.
• Cost of Attendance (COA). This is an institution-determined amount indicative This is an institution-determined amount indicative
of a student’s educational expenses for a period of enrollment (e.g., an academic of a student’s educational expenses for a period of enrollment (e.g., an academic
year) at the IHE. It is determined by the institution a student attends and may year) at the IHE. It is determined by the institution a student attends and may
include tuition and fees, and include tuition and fees, and ~~al owances~~allowances for room and board, books, supplies, for room and board, books, supplies,
transportation, loan fees, personal expenses, child or dependent care, transportation, loan fees, personal expenses, child or dependent care, ~~etc.51~~and other costs.52 For For
the Direct Loan program, a student’s COA represents an absolute limit on the the Direct Loan program, a student’s COA represents an absolute limit on the
maximum amount of aid maximum amount of aid ~~he or she~~they may receive during an academic year. may receive during an academic year.
 Expected Family Contribution (EFC). 52 HEA §§472 and 479A. For additional information on COA, see FSA Handbook, vol. 3, Chapter 2—Cost of Attendance (Budget). Beginning in award year 2023-2024 (July 1, 2023-June 30, 2024), institutions may only include loan fees associated with federal loans in the COA and may no longer include loan fees for non-federal student loans in the COA. Department of Education, GEN-22-15, “FAFSA Simplification Act Changes for Implementation in 2023-24), November 4, 2022, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2022-11-03/fafsar-simplification-act-changes-implementation-2023-24. Congressional Research Service 16 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • Expected Family Contribution (EFC).53 This is the dollar amount a student and This is the dollar amount a student and
the student’s family (e.g., parents or spouse) are expected to contribute toward the student’s family (e.g., parents or spouse) are expected to contribute toward
~~his or her~~their education expenses for a year. education expenses for a year.5254 A student’s EFC is calculated A student’s EFC is calculated
according to procedures specified in law using information supplied by the according to procedures specified in law using information supplied by the
student on the FAFSA.student on the FAFSA.5355 The formula for calculating a student’s EFC takes into The formula for calculating a student’s EFC takes into
account myriad factors including taxed and untaxed income, financial assets, account myriad factors including taxed and untaxed income, financial assets,
certain benefits (e.g., Social Security, unemployment compensation), family size, certain benefits (e.g., Social Security, unemployment compensation), family size,
and the number of family members to be enrolled in college during an academic and the number of family members to be enrolled in college during an academic
year. year.
• Estimated Financial Assistance (EFA). This is the amount of aid anticipated to This is the amount of aid anticipated to
be made available be made available to a student from federal, state, institutional, or other sources to a student from federal, state, institutional, or other sources
for a period of enrollment. It includes grant, scholarship, for a period of enrollment. It includes grant, scholarship, ~~fel owship~~fellowship, loan, and , loan, and
need-based employment assistance. For purposes of need analysis and packaging, need-based employment assistance. For purposes of need analysis and packaging,
two variations of EFA are relevant: (1) EFA not received under HEA, Title IV two variations of EFA are relevant: (1) EFA not received under HEA, Title IV
programs, and (2) EFA from programs, and (2) EFA from al all sources. EFA does not include Iraq and ~~sources. EFA does not include Iraq and~~

~~51 HEA §§472 and 479A. For additional information on COA, see FSA Handbook, vol. 3, Chapter 2—Cost of~~
~~Attendance (Budget).~~
~~52 HEA T itle IV, Part F—Need Analysis. For additional information on the EFC, see CRS Report R44503,~~ ~~Federal~~
~~Student Aid: Need Analysis Form ulas and Expected Fam ily Contribution~~ .
~~53 For additional information, see HEA, T itle IV, Part F, and FSA Handbook, Application and Verification Guide,~~
~~Chapter 3—Expected Family Contribution (EFC).~~
~~Congressional Research Service~~

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~~link to page 20~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

Afghanistan Service Grants; federal veterans’ education benefits; or, for purposes Afghanistan Service Grants; federal veterans’ education benefits; or, for purposes
of awarding Direct Subsidized Loans, Segal AmeriCorps Education Awards.of awarding Direct Subsidized Loans, Segal AmeriCorps Education Awards.54
56 • Financial Need. This is the amount determined by subtracting a student’s EFC This is the amount determined by subtracting a student’s EFC
and EFA not received under HEA, and EFA not received under HEA, Title IV from the student’s COA.Title IV from the student’s COA.55
57 • Unmet Financial Need. This is the amount determined by subtracting the sum of This is the amount determined by subtracting the sum of
a student’s EFC and EFA from the student’s COA. a student’s EFC and EFA from the student’s COA.56
58 When packaging Title IV aid, the total amount of need-based aid awarded to a student may not When packaging Title IV aid, the total amount of need-based aid awarded to a student may not
exceed the amount of the student’s financial need. A common packaging strategy is to award exceed the amount of the student’s financial need. A common packaging strategy is to award
need-based aid that is not required to be repaid (e.g., Federal need-based aid that is not required to be repaid (e.g., Federal ~~Pel~~ Pell Grant, Federal Supplemental Grant, Federal Supplemental
Educational Opportunity Grant [FSEOG], and Federal Work-Study [FSW] awards) before Educational Opportunity Grant [FSEOG], and Federal Work-Study [FSW] awards) before
awarding loan aid, which must be repaid. With respect to loans made through the Direct Loan awarding loan aid, which must be repaid. With respect to loans made through the Direct Loan
program, only Direct Subsidized Loans are need-based; however, Direct Subsidized Loans, Direct program, only Direct Subsidized Loans are need-based; however, Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans may Unsubsidized Loans, and Direct PLUS Loans may al all be awarded to satisfy a student’s unmet be awarded to satisfy a student’s unmet
financial need. financial need. ~~Additional y,~~ Additionally, once a student’s unmet financial need has been satisfied, non-need-once a student’s unmet financial need has been satisfied, non-need-
based aid, such as Direct Unsubsidized Loans and Direct PLUS Loans, may be awarded to based aid, such as Direct Unsubsidized Loans and Direct PLUS Loans, may be awarded to
replace some or replace some or al all of a student’s EFC. of a student’s EFC. ~~Overal~~ Overall, when packaging Title IV aid, the total amount , when packaging Title IV aid, the total amount
awarded (including both need-based and non-need-based aid) may not exceed the student’s COA, awarded (including both need-based and non-need-based aid) may not exceed the student’s COA,
less EFA. Processes for determining the amount of aid that may be awarded through the various less EFA. Processes for determining the amount of aid that may be awarded through the various
~~types of loans offered through the Direct Loan program are described below.~~
~~Direct Subsidized Loans~~
~~Direct Subsidized Loans are need-based. They may be awarded to satisfy a student’s unmet~~
~~financial need. The maximum Direct Subsidized Loan amount a student is eligible~~ types of loans offered through the Direct Loan program are described below. 53 The FAFSA Simplification Act makes significant changes to the underlying processes and methodologies for determining federal student aid eligibility, including renaming EFC to student aid index (SAI). The act’s general effective date is July 1, 2024, although some provisions of the act may be implemented before then. For additional information on need analysis, see CRS Report R44503, Federal Student Aid: Need Analysis Formulas and Expected Family Contribution. For additional information on the FAFSA Simplification Act, see CRS Report R46909, The FAFSA Simplification Act. 54 HEA Title IV, Part F—Need Analysis. For additional information on the EFC, see CRS Report R44503, Federal Student Aid: Need Analysis Formulas and Expected Family Contribution. 55 For additional information, see HEA, Title IV, Part F, and FSA Handbook, Application and Verification Guide, Chapter 3—Expected Family Contribution (EFC). 56 For additional information on the EFA, see HEA, §§428(a)(2)(C)(ii) and 480(j), 34 C.F.R. §685.102(b), and FSA Handbook, vol. 3, Chapter 7—Packaging Aid. 57 HEA §471. 58 For additional information, see FSA Handbook, vol. 3, pp. 152-154. Congressional Research Service 17 link to page 21 link to page 21 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Direct Subsidized Loans Direct Subsidized Loans are need-based. They may be awarded to satisfy a student’s unmet financial need. The maximum Direct Subsidized Loan amount a student is eligible to borrow is to borrow is
determined by summing the student’s EFC and EFA, and then subtracting that amount from the determined by summing the student’s EFC and EFA, and then subtracting that amount from the
student’s COA for the school attended. As discussed above, Direct Subsidized Loan borrowing is student’s COA for the school attended. As discussed above, Direct Subsidized Loan borrowing is
also capped by applicable annual loan limits. The calculation shown in the text box below is used also capped by applicable annual loan limits. The calculation shown in the text box below is used
to determine the amount that a student may borrow through a Direct Subsidized Loan. to determine the amount that a student may borrow through a Direct Subsidized Loan.
Direct Subsidized Loan Eligibility
Direct Direct Subsidized Loan eligibilitySubsidized Loan eligibility = min[(COA= min[(COA - (EFC + EFA)), Direct Subsidized Loan - (EFC + EFA)), Direct Subsidized Loan ~~limit57~~limit59] ]
Direct Unsubsidized Loans
Direct Unsubsidized Loans are non-need-based. Students are eligible to borrow Direct Direct Unsubsidized Loans are non-need-based. Students are eligible to borrow Direct
Unsubsidized Loans irrespective of the amount of their EFC, in amounts up to the lesser of (1) the Unsubsidized Loans irrespective of the amount of their EFC, in amounts up to the lesser of (1) the
result of subtracting the student’s EFA (including, for undergraduate students, any amount result of subtracting the student’s EFA (including, for undergraduate students, any amount
borrowed through a Direct Subsidized Loan) from COA, or (2) the result of subtracting the borrowed through a Direct Subsidized Loan) from COA, or (2) the result of subtracting the
amount borrowed through a Direct Subsidized Loan from the annual Direct Subsidized Loan and amount borrowed through a Direct Subsidized Loan from the annual Direct Subsidized Loan and
Direct Unsubsidized Loan combined borrowing limit applicable to the student’s program level Direct Unsubsidized Loan combined borrowing limit applicable to the student’s program level

~~54 For additional information on the EFA, see HEA, §§428(a)(2)(C)(ii) and 480(j), 34 CFR §685.102(b), and~~ ~~FSA~~
~~Handbook, vol. 3, Chapter 7—Packaging Aid.~~
~~55 For additional information on unmet financial need, see HEA §471, and FSA Handbook, Appendix A: Federal~~
~~Student Aid Glossary and Acronyms, p. A-34.~~
~~56 For additional information, see FSA Handbook, vol. 3, pp. 3-121, 3-191.~~
~~57 For information on Direct Subsidized Loan limits, see Table 1.~~
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and class level. The calculation shown in the text box below is used to determine the amount that and class level. The calculation shown in the text box below is used to determine the amount that
a student may borrow through a Direct Unsubsidized Loan. a student may borrow through a Direct Unsubsidized Loan.
Direct Unsubsidized Loan Eligibility
Direct Direct Unsubsidized Loan eligibilityUnsubsidized Loan eligibility = min[(COA= min[(COA - EFA), (total Direct- EFA), (total Direct ~~Loan limit58~~ Loan limit60 - Direct Subsidized Loan amt.)] - Direct Subsidized Loan amt.)]
Direct PLUS Loans
Direct PLUS Loans are non-need-based. Graduate and professional students and the parents of Direct PLUS Loans are non-need-based. Graduate and professional students and the parents of
dependent undergraduate students may borrow Direct PLUS Loans irrespective of the student’s dependent undergraduate students may borrow Direct PLUS Loans irrespective of the student’s
EFC. The amount that may be borrowed through a Direct PLUS Loan is limited to the result of EFC. The amount that may be borrowed through a Direct PLUS Loan is limited to the result of
subtracting the EFA (including any amount borrowed through a Direct Subsidized Loan or a subtracting the EFA (including any amount borrowed through a Direct Subsidized Loan or a
Direct Unsubsidized Loan) of the student on whose behalf the loan Direct Unsubsidized Loan) of the student on whose behalf the loan ~~wil~~ will be made from the COA of be made from the COA of
the institution attended. The calculation shown in the text box below is used to determine the the institution attended. The calculation shown in the text box below is used to determine the
amount that a student or a parent may borrow through a Direct PLUS Loan. amount that a student or a parent may borrow through a Direct PLUS Loan.
Direct PLUS Loan Eligibility
Direct Direct PLUS Loan eligibilityPLUS Loan eligibility = COA - EFA = COA - EFA
With regard to parent borrowing, the total Direct PLUS Loan eligibility With regard to parent borrowing, the total Direct PLUS Loan eligibility amount may be borrowed amount may be borrowed
by one parent, or it may be divided among more than one parent (including noncustodial parents) by one parent, or it may be divided among more than one parent (including noncustodial parents)
~~and borrowed in separate amounts by each.~~
and borrowed in separate amounts by each. 59 For information on Direct Subsidized Loan limits, see Table 1. 60 For information on loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans, combined, see Table 1. Congressional Research Service 18 link to page 102 link to page 107 link to page 109 link to page 110 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Interest on Direct Loan Program Loans
Interest is charged on loans made through the Direct Loan program. It constitutes a charge for the is charged on loans made through the Direct Loan program. It constitutes a charge for the
use of borrowed money over a specified period of time. In the Direct Loan program, interest is use of borrowed money over a specified period of time. In the Direct Loan program, interest is
calculated based on rates that are set according to formulas specified in the HEA. Interest accrual calculated based on rates that are set according to formulas specified in the HEA. Interest accrual
is calculated using a simple daily interest formula. The federal government offers several types of is calculated using a simple daily interest formula. The federal government offers several types of
interest subsidies that may limit the amount of interest that accrues on the outstanding principal interest subsidies that may limit the amount of interest that accrues on the outstanding principal
balance of a loan. In certain circumstances, a borrower may be permitted to defer paying some or balance of a loan. In certain circumstances, a borrower may be permitted to defer paying some or
al all of the interest that has accrued on of the interest that has accrued on ~~his or her~~their loan(s) until a later point in time. If a borrower loan(s) until a later point in time. If a borrower
does not pay the interest that has accrued, it may, in certain circumstances, be capitalized (i.e., does not pay the interest that has accrued, it may, in certain circumstances, be capitalized (i.e.,
added to the outstanding principal balance of the borrower’s loan). added to the outstanding principal balance of the borrower’s loan).
Interest Rates
Interest rates on loans made through the Direct Loan program are set according to procedures Interest rates on loans made through the Direct Loan program are set according to procedures
specified by statute. Since the inception of the Direct Loan program in 1994, a variety of different specified by statute. Since the inception of the Direct Loan program in 1994, a variety of different
procedures have been used for setting student loan interest rates. The loans currently being made procedures have been used for setting student loan interest rates. The loans currently being made
through the Direct Loan program have fixed interest rates that remain constant from the time a through the Direct Loan program have fixed interest rates that remain constant from the time a
loan is made until it is paid in full. Since July 1, 2013, Direct Subsidized Loans, Direct loan is made until it is paid in full. Since July 1, 2013, Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans, have been made with fixed interest rates that are Unsubsidized Loans, and Direct PLUS Loans, have been made with fixed interest rates that are
indexed to the interest rates on 10-year U.S. Treasury notes that are auctioned just prior to the indexed to the interest rates on 10-year U.S. Treasury notes that are auctioned just prior to the
start of the academic year during which the loans are made. Since February 1, 1999, Direct start of the academic year during which the loans are made. Since February 1, 1999, Direct
Consolidation Loans have been made with fixed interest rates that are based on the weighted Consolidation Loans have been made with fixed interest rates that are based on the weighted
average of the interest rates on the loans that are included in the Direct Consolidation Loan. average of the interest rates on the loans that are included in the Direct Consolidation Loan.

~~58 For information on loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans, combined, see Table 1.~~
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Previously, other procedures had been used for setting student loan interest rates, and a number of Previously, other procedures had been used for setting student loan interest rates, and a number of
loans that had been made according to these prior procedures remain outstanding. loans that had been made according to these prior procedures remain outstanding.
Procedures for Setting Student Loan Interest Rates
The various procedures that have been used for setting interest rates on loans made through the The various procedures that have been used for setting interest rates on loans made through the
Direct Loan program can be broadly categorized as follows: (1) variable interest rates that are Direct Loan program can be broadly categorized as follows: (1) variable interest rates that are
indexed to the interest rates on short-term U.S. Treasury securities that are auctioned just prior to indexed to the interest rates on short-term U.S. Treasury securities that are auctioned just prior to
the start of the academic year during which the rate the start of the academic year during which the rate ~~wil~~ will be in effect, (2) fixed interest rates that be in effect, (2) fixed interest rates that
are set according to the weighted average of the interest rates of the loans included in a Direct are set according to the weighted average of the interest rates of the loans included in a Direct
Consolidation Loan, (3) fixed interest rates that are specified in statute, and (4) fixed interest rates Consolidation Loan, (3) fixed interest rates that are specified in statute, and (4) fixed interest rates
that are indexed to the interest rates on long-term U.S. Treasury securities that are auctioned just that are indexed to the interest rates on long-term U.S. Treasury securities that are auctioned just
prior to the start of the academic year during which the loans are made. Because loans with prior to the start of the academic year during which the loans are made. Because loans with
interest rates that have been set according to each of these categories interest rates that have been set according to each of these categories ~~stil~~ still remain outstanding, remain outstanding,
each is briefly discussed beloweach is briefly discussed below. Appendix C presents a detailed history of the various procedures presents a detailed history of the various procedures
that have been used to set the interest rates that apply to Direct Subsidized Loans, Direct that have been used to set the interest rates that apply to Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans Unsubsidized Loans, and Direct PLUS Loans (Table C-2); the procedures that have been used to the procedures that have been used to
set the interest rates that apply to Direct Consolidation Loans set the interest rates that apply to Direct Consolidation Loans (Table C-3); and the interest rates ; and the interest rates
that have been in effect on these loans on a year-by-year basisthat have been in effect on these loans on a year-by-year basis (Table C-4). ).
Variable Interest Rates Indexed to Short-Term U.S. Treasury Securities
At the inception of the Direct Loan program in 1994, At the inception of the Direct Loan program in 1994, al all loan types were made with variable loan types were made with variable
interest rates that would adjust once per year on July 1. On variable rate loans, the applicable interest rates that would adjust once per year on July 1. On variable rate loans, the applicable
interest rate is determined according to a formula specified in statute. For each 12-month period interest rate is determined according to a formula specified in statute. For each 12-month period
that extends from July 1 through June 30, the applicable interest rate is indexed to the bond that extends from July 1 through June 30, the applicable interest rate is indexed to the bond
Congressional Research Service 19 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program equivalent rate of 91-day U.S. Treasury equivalent rate of 91-day U.S. Treasury ~~bil s~~bills (or other short-term U.S. Treasury securities) (or other short-term U.S. Treasury securities)
auctioned at the final auction held prior to the preceding June 1.auctioned at the final auction held prior to the preceding June 1.5961 An interest rate add-on An interest rate add-on
increases the rate above the rate of the index. Different interest rate add-ons may apply to loans increases the rate above the rate of the index. Different interest rate add-ons may apply to loans
depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the status of the depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the status of the
loan (e.g., in school, grace, repayment), and when the loan was made. An interest rate cap of loan (e.g., in school, grace, repayment), and when the loan was made. An interest rate cap of
8.25% applies to variable rate Direct Subsidized Loans and Direct Unsubsidized Loans and the 8.25% applies to variable rate Direct Subsidized Loans and Direct Unsubsidized Loans and the
portion of a variable rate Direct Consolidation Loan attributable to such loans. An interest rate portion of a variable rate Direct Consolidation Loan attributable to such loans. An interest rate
cap of 9.0% applies to variable rate Direct PLUS Loans and the portion of a variable rate Direct cap of 9.0% applies to variable rate Direct PLUS Loans and the portion of a variable rate Direct
Consolidation Loan attributable to a PLUS Loan. Direct Consolidation Loans were made with Consolidation Loan attributable to a PLUS Loan. Direct Consolidation Loans were made with
variable interest rates through January 31, 1999, while variable interest rates through January 31, 1999, while al all other types of Direct Loan program other types of Direct Loan program
loans continued to be made with variable interest rates through June 30, 2006. loans continued to be made with variable interest rates through June 30, 2006.
Fixed Interest Rates on Direct Consolidation Loans
Since February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that Since February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that
remain in effect for the duration of the loan.remain in effect for the duration of the loan.~~60 The~~62 In general, the applicable interest rate on a applicable interest rate on a fixed-rate Direct Direct
Consolidation Loan is determined by calculating the weighted average of the interest Consolidation Loan is determined by calculating the weighted average of the interest rates in ~~rates in~~

~~59 T he practice of using the rate of the final auction held prior to the preceding June 1 provides approximately one~~
~~month of lead time for ED to establish interest rates for particular loan types and to communicate this informati on to~~
~~current and prospective borrowers and to loan servicers.~~
~~60 For Direct Consolidation Loans, the determination of whether certain terms and conditions apply to a given loan~~
~~(e.g., which interest rate setting formula applies) is based on the date when t he application for the Direct Consolidation~~
~~Loan is received by the loan servicer.~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

effect on the loans being consolidated, and rounding the result up to the nearest higher one-eighth effect on the loans being consolidated, and rounding the result up to the nearest higher one-eighth
of 1%.of 1%.6163 If a borrower obtains a Direct Consolidation Loan to repay one or more loans having a If a borrower obtains a Direct Consolidation Loan to repay one or more loans having a
variable interest rate, the weighted average of the interest rates in effect on the loans being variable interest rate, the weighted average of the interest rates in effect on the loans being
consolidated consolidated ~~wil~~ will be used to set the fixed rate that be used to set the fixed rate that ~~wil~~ will apply for the duration of the new Direct apply for the duration of the new Direct
Consolidation Loan.Consolidation Loan.6264 For Direct Consolidation Loans made during the period from February 1, For Direct Consolidation Loans made during the period from February 1,
1999, through June 30, 2013, the maximum interest rate was capped at 8.25%.1999, through June 30, 2013, the maximum interest rate was capped at 8.25%.~~63 There is no~~
~~maximum interest rate for Direct Consolidation Loans made on or after July 1, 2013.~~
~~Fixed Interest Rates Specified in the HEA~~
~~During the period from July 1, 2006, through June 30, 2013, al loans made through the Direct~~
~~Loan program, with the exception of Direct Consolidation Loans, were made with fixed interest~~
~~rates that were determined by Congress and specified in statute. Different fixed interest rates~~
~~applied depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the~~
~~program level for which it was borrowed (e.g., undergraduate, graduate), and the academic year~~
~~for which the first disbursement of the loan was made (e.g., AY2007-2008, AY2008-2009). For~~
~~these loans, the interest rate that was in effect when the loan was made remains in effect for the~~
~~duration of the loan.~~
~~Fixed Interest Rates Indexed to Long-Term U.S. Treasury Securities~~
~~With the exception of Direct Consolidation Loans, all loans made through the Direct Loan~~
~~program~~65 For a Direct Consolidation Loan that was the result of a separation a Joint Consolidation Loan (JCL), the interest rate is to be equal to the interest rate on the JCL as of the date before the separation of the JCL. There is no maximum interest rate for Direct Consolidation Loans made on or after July on or after July 1, 2013. 61 The practice of using the rate of the final auction held prior to the preceding June 1 provides approximately one month of lead time for ED to establish interest rates for particular loan types and to communicate this information to current and prospective borrowers and loan servicers. 62 For Direct Consolidation Loans, the determination of whether certain terms and conditions apply to a given loan (e.g., which interest rate setting formula applies) is based on the date when the application for the Direct Consolidation Loan is received by the loan servicer. 63 For variable rate loans made through the FFEL program and the Direct Loan program during the period from July 1, 1995, through June 30, 2006, interest rates are 0.6 percentage points lower during in-school and grace periods than during repayment periods. A borrower may apply to obtain a Direct Consolidation Loan during the six-month grace period after ceasing to be enrolled on at least a half-time basis, and by doing so may lock in the lower grace period interest rate. 64 During the period when Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans were made with variable rates and Direct Consolidation Loans were made with fixed interest rates, the availability of fixed rate Direct Consolidation Loans essentially provided borrowers with an option~~1, 2013, have market-indexed fixed interest rates. For these loans, the~~
~~applicable interest rate is set according to a formula specified in statute and remains in effect for~~
~~the duration of the loan. For new loans made during each 12-month period that extends from July~~
~~1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 10-year~~
~~U.S. Treasury notes auctioned at the final auction held prior to the preceding June 1.64 An interest~~
~~rate add-on increases the applicable borrower rate above the rate of the index. Different interest~~
~~rate add-ons apply depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS~~
~~Loan) and the program level for which it was borrowed (e.g., undergraduate, graduate). An~~
~~interest rate cap of 8.25% applies to Direct Subsidized Loans and to Direct Unsubsidized Loans~~
~~made to undergraduate students; a cap of 9.5% applies to Direct Unsubsidized Loans made to~~

~~61 For variable rate loans made through the FFEL program and the Direct Loan program during the period from July 1,~~
~~1995, through June 30, 2006, interest rates are 0.6 percen tage points lower during in-school and grace periods than~~
~~during repayment periods. A borrower may apply to obtain a Direct Consolidation Loan during the six-month grace~~
~~period after ceasing to be enrolled on at least a half-time basis, and by doing so may lock in the lower grace period~~
~~interest rate.~~
~~62 During the period when Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans were made~~
~~with variable rates and Direct Consolidation Loans were made with fixed interest rates, the availability of fixed rate~~
~~Direct Consolidation Loans provided borrowers with an option essentially~~ to lock in rates determined according to the to lock in rates determined according to the
variable interest rate formula (rounded to the nearest higher one-eighth of 1%) that a borrower may have consideredvariable interest rate formula (rounded to the nearest higher one-eighth of 1%) that a borrower may have considered to to
be advantageous. be advantageous. ~~T he~~The approximate one-month lead between when future interest rates become known and when they approximate one-month lead between when future interest rates become known and when they
go into effect provided borrowers a windowgo into effect provided borrowers a window ~~during~~ during which they could evaluate whether to obtain a Direct Consolidation which they could evaluate whether to obtain a Direct Consolidation
Loan at the then-current rate (should rates for the next year be scheduledLoan at the then-current rate (should rates for the next year be scheduled to to increase) or defer the option to consolidate increase) or defer the option to consolidate
for another year (should rates for the next year be scheduledfor another year (should rates for the next year be scheduled to decrease).to decrease).
63 65 During the period when the 8.25% interest rate cap was in effect, a borrower who had one or more loans with an During the period when the 8.25% interest rate cap was in effect, a borrower who had one or more loans with an
interest rate that was greater than the cap (e.g., a FFEL PLUSinterest rate that was greater than the cap (e.g., a FFEL PLUS Loan made with an 8.5% interest rate) could lowerLoan made with an 8.5% interest rate) could lower the the
applicable interest rate by includingapplicable interest rate by including the loan(s) in a Direct Consolidation Loan.the loan(s) in a Direct Consolidation Loan.
~~64 T he final auction held prior to the preceding June 1 is generally held in May. See U.S. Department of the T reasury,~~
~~T reasury Direct, “General Auction T iming,”~~
~~https://www.treasurydirect.gov/instit/auctfund/work/auctime/auctime.htm#:~:text=20%2Dyear%20bond%20and%2030~~
~~,September%2C%20October%2C%20and%20December, accessed May 17, 2021.~~
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~~graduate and professional students; and a cap of 10.5% applies to al Direct PLUS Loans. The~~
~~interest rates applicable to loans being made through the Direct Loan program for loans first~~
~~disbursed July 1, 2020, through June 30, 2021, and for loans first disbursed July 1, 2021, through~~
~~June 30, 2022, are presented below in Table 2.~~
~~Table 2. Interest Rates on Loans Made Through the Direct Loan Program:~~
~~July 1, 2020, through June 30, 2021, and July 1, 2021, through June 30, 2022~~
~~(percentage)~~

~~Fixed Interest Rate in Effect~~
~~Direct~~
~~Direct~~
~~Direct~~
~~Subsidized~~
~~Unsubsidized~~
~~PLUS~~
~~Borrower Type~~
~~Loans~~
~~Loans~~
~~Loans~~
~~Direct Loans disbursed July 1, 2020-June 30, 2021~~
~~Undergraduate students~~
~~2.75~~
~~2.75~~
~~n.a.~~
~~Graduate and professional students~~
~~n.a.~~
~~4.30~~
~~5.30~~
~~Parents of dependent undergraduate students~~
~~n.a.~~
~~n.a.~~
~~5.30~~
~~Direct Loans disbursed July 1, 2021-June 30, 2022~~
~~Undergraduate students~~
~~3.73~~
~~3.73~~
~~n.a.~~
~~Graduate and professional students~~
~~n.a.~~
~~5.28~~
~~6.28~~
~~Parents of dependent undergraduate students~~
~~n.a.~~
~~n.a.~~
~~6.28~~
Source: HEA §455(b); (20 U.S.C. §1087e(b)); and U.S. Department of Education, Office of Federal Student Aid,
~~“Interest Rates for Direct Loans First Disbursed Between July 1, 2020 and June 30, 2021,” May 15,2020 and U.S.~~
~~Department of Education, Office of Federal Student Aid, LOANS-21-06, “Interest Rates for Direct Loans First~~
~~Disbursed Between July 1, 2021 and June 30, 2022, May 19, 2021.~~
Note: “n.a.” means not applicable.
~~Interest Accrual~~
Interest accrual is the process through which interest accumulates over time. In the Direct Loan
~~program, the accrual of interest is calculated using a simple daily interest formula.65~~ Congressional Research Service 20 link to page 27 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Fixed Interest Rates Specified in the HEA During the period from July 1, 2006, through June 30, 2013, all loans made through the Direct Loan program, with the exception of Direct Consolidation Loans, were made with fixed interest rates that were determined by Congress and specified in statute. Different fixed interest rates applied depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the program level for which it was borrowed (e.g., undergraduate, graduate), and the academic year for which the first disbursement of the loan was made (e.g., AY2007-2008, AY2008-2009). For these loans, the interest rate that was in effect when the loan was made remains in effect for the duration of the loan. Fixed Interest Rates Indexed to Long-Term U.S. Treasury Securities With the exception of Direct Consolidation Loans, all loans made through the Direct Loan program on or after July 1, 2013, have market-indexed fixed interest rates. For these loans, the applicable interest rate is set according to a formula specified in statute and remains in effect for the duration of the loan. For new loans made during each 12-month period that extends from July 1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 10-year U.S. Treasury notes auctioned at the final auction held prior to the preceding June 1.66 An interest rate add-on increases the applicable borrower rate above the rate of the index. Different interest rate add-ons apply depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan) and the program level for which it was borrowed (e.g., undergraduate, graduate). An interest rate cap of 8.25% applies to Direct Subsidized Loans and to Direct Unsubsidized Loans made to undergraduate students; a cap of 9.5% applies to Direct Unsubsidized Loans made to graduate and professional students; and a cap of 10.5% applies to all Direct PLUS Loans. The interest rates applicable to loans being made through the Direct Loan program for loans first disbursed July 1, 2022, through June 30, 2023, and for loans first disbursed July 1, 2023, through June 30, 2024, are presented below in Table 2. Table 2. Interest Rates on Loans Made Through the Direct Loan Program: July 1, 2022, through June 30, 2023, and July 1, 2023, through June 30, 2024 (percentage) Fixed Interest Rate in Effect Direct Direct Direct Subsidized Unsubsidized PLUS Borrower Type Loans Loans Loans Direct Loans disbursed July 1, 2022-June 30, 2023 Undergraduate students 4.99 4.99 n.a. Graduate and professional students n.a. 6.54 7.54 Parents of dependent undergraduate students n.a. n.a. 7.54 Direct Loans disbursed July 1, 2023-June 30, 2024 Undergraduate students 5.50 5.50 n.a. 66 The final auction held prior to the preceding June 1 is generally held in May. See U.S. Department of the Treasury, Treasury Direct, “General Auction Timing,” https://www.treasurydirect.gov/instit/auctfund/work/auctime/auctime.htm#:~:text=20%2Dyear%20bond%20and%2030,September%2C%20October%2C%20and%20December, accessed February 13, 2023. Congressional Research Service 21 link to page 32 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Fixed Interest Rate in Effect Direct Direct Direct Subsidized Unsubsidized PLUS Borrower Type Loans Loans Loans Graduate and professional students n.a. 7.05 8.05 Parents of dependent undergraduate students n.a. n.a. 8.05 Source: HEA §455(b); (20 U.S.C. §1087e(b)); U.S. Department of Education, “Annual Notice of Interest Rates for Fixed-Rate Federal Student Loans Made Under the Wil iam D. Ford Federal Direct Loan program,” 87 Federal Register 50327, August 16, 2022; and U.S. Department of Education, Office of Federal Student Aid, Electronic Announcement, DL-23-03, “FY23 Interest Rates for Direct Loans First Disbursed Between July 1, 2023 and June 30, 2024,” May 16, 2023, https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2023-05-16/interest-rates-direct-loans-first-disbursed-between-july-1-2023-and-june-30-2024, Note: “n.a.” means not applicable. Interest Accrual Interest accrual is the process through which interest accumulates over time. In the Direct Loan program, the accrual of interest is calculated using a simple daily interest formula.67 With this With this
formula, interest accrues only on the outstanding principal balance (OPB) of the loan. This is in formula, interest accrues only on the outstanding principal balance (OPB) of the loan. This is in
contrast to a compound interest formula, in which interest accrues on both the OPB of the loan contrast to a compound interest formula, in which interest accrues on both the OPB of the loan
and any interest that has accrued during a prior period. In a limited set of circumstances, accrued and any interest that has accrued during a prior period. In a limited set of circumstances, accrued
interest that has not been paid by a borrower may be capitalized, or added to the OPB of the loan. interest that has not been paid by a borrower may be capitalized, or added to the OPB of the loan.
(This is discussed below in This is discussed below in ~~the~~ the “Interest Capitalization” ~~section.~~section.)
According to the simple daily According to the simple daily interest formula used in the Direct Loan program, the amount of interest formula used in the Direct Loan program, the amount of
interest that accrues over a certain period of time is the product of (1) the number of days of interest that accrues over a certain period of time is the product of (1) the number of days of
interest being calculated (e.g., days since the last payment was made), (2) the OPB of the loan, interest being calculated (e.g., days since the last payment was made), (2) the OPB of the loan,
and (3) an interest rate factor. The interest rate factor is the quotient of the applicable and (3) an interest rate factor. The interest rate factor is the quotient of the applicable ~~interes t rate~~

~~65 U.S. Department of Education, Office of Federal Student Aid, “ Understand how int erest~~interest rate of the loan68 divided by the number of days in a year (365.25).69 An example of the calculation of accrued interest over a 30-day period is provided in the text box below. Simple Daily Interest Formula: Example of the Calculation of Accrued Interest Days since last payment: 30 Outstanding principal balance: $4,500 Interest rate factor: Applicable interest rate: 0.0550 Days in a year: 365.25 Accrued Interest = [30 x $4,500 x (0.0550 ÷ 365.25)] = $20.33 67 U.S. Department of Education, Office of Federal Student Aid, “Understand how interest is calculated and what fees is calculated and what fees
are associated with your federal student loan: Howare associated with your federal student loan: How is interest calculated?”, is interest calculated?”,
https://studentaid.https://studentaid.~~ed.gov/sa~~gov/understand-aid/types/loans/interest-rates#how-calculated, accessed /types/loans/interest-rates#how-calculated, accessed ~~May 17, 2021.~~
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~~of the loan66 divided by the number of days in a year (365.25).67 An example of the calculation of~~
~~accrued interest over a 30-day period is provided in the text box below.~~
~~Simple Daily Interest Formula: Example of the Calculation of Accrued Interest~~
~~Days since last payment: 30~~
~~Outstanding principal balance: $4,500~~
~~Interest rate factor:~~
~~Applicable interest rate: 0.0373~~
~~Days in a year: 365.25~~
~~Accrued Interest~~ ~~= [30 x $4,500 x (0.0373 ÷ 365.25)] = $13.79~~February 13, 2023. 68 In the simple daily interest formula, the applicable interest rate is expressed in decimal form. For example, 5.50% is expressed in decimal form as 0.0550. 69 In the current loan servicing environment, ED loan servicers utilize established standards to calculate daily interest. The interest rate factor is determined by dividing the applicable interest rate by either 365.25 or 365 days, depending on the loan servicer platform. (CRS email communication with U.S. Department of Education, Office of Legislation and Congressional Affairs, February 28, 2023.) Congressional Research Service 22 link to page 29 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program
For loans made through the Direct Loan program, interest begins to accrue on the OPB once the For loans made through the Direct Loan program, interest begins to accrue on the OPB once the
first first ~~instal ment~~installment of a loan is disbursed. Unless it is subsidized (see of a loan is disbursed. Unless it is subsidized (see the “Subsidized Interest” section), interest ), interest
accrues during the entirety of the period that a loan is in effect, irrespective of whether the accrues during the entirety of the period that a loan is in effect, irrespective of whether the
borrower is expected to be making payments on it. borrower is expected to be making payments on it.
In response to the COVID-19 pandemic, interest accrual on Direct Loan program loans has been suspended temporarily. For information on this flexibility, see Appendix D. Subsidized Interest
In a limitedIn a limited set of circumstances, the federal government subsidizes some or set of circumstances, the federal government subsidizes some or al all of the interest of the interest
that would otherwise accrue on loans made through the Direct Loan program.that would otherwise accrue on loans made through the Direct Loan program.6870 During periods During periods
when an interest subsidy is provided, borrowers are relieved of the requirement to pay the interest when an interest subsidy is provided, borrowers are relieved of the requirement to pay the interest
that would accrue. The availability of an interest subsidy depends on factors such as the type of that would accrue. The availability of an interest subsidy depends on factors such as the type of
loan borrowed, eligibilityloan borrowed, eligibility for an authorized deferment, the repayment plan selected, and the for an authorized deferment, the repayment plan selected, and the
borrower’s status as a servicemember in the Armed Forces.borrower’s status as a servicemember in the Armed Forces.6971 Interest subsidies that may be Interest subsidies that may be
~~available~~ available on loans made through the Direct Loan program are described below.on loans made through the Direct Loan program are described below.70

~~66 In the simple daily interest formula, the applicable interest rate is expressed in decimal form. For example, 3.73% is~~
~~expressed in decimal form as 0.0373.~~
~~67 In the current loan servicing environment, ED loan servicers utilize established standards to calculate daily interest.~~
~~T he interest rate factor is determined by dividing the applicable interest rate by either 365.25 or 365 days, depending on~~
~~the loan servicer platform. (CRS email communication with U.S. Department of Education, Office of Legislation and~~
~~Congressional Affairs, September 25, 2018.)~~
~~68 In this report, the terms subsidized interest and~~ ~~interest~~ 72 Interest Subsidy on Direct Subsidized Loans On Direct Subsidized Loans, and on the subsidized component of Direct Consolidation Loans, interest is subsidized by the government (i.e., interest does not accrue) during in-school periods while a borrower is enrolled in an eligible program on at least a half-time basis, during a six-month grace period, and during periods of authorized deferment. Due to amendments to the HEA made by the Consolidated Appropriations Act, 2012 (P.L. 112-74), interest is not subsidized during the grace period on Direct Subsidized Loans disbursed between July 1, 2012, and June 30, 2014.73 70 In this report, the terms subsidized interest and interest subsidy refer to the government not charging a borrower for refer to the government not charging a borrower for
some or all of the interest that would some or all of the interest that would ~~ot herwise~~otherwise accrue on a loan during accrue on a loan during a specified period of time. a specified period of time. ~~T hese~~These terms are not terms are not
usedused to refer to the interest rate on a loan made through the Direct Loan program being belowto refer to the interest rate on a loan made through the Direct Loan program being below the market rate that the market rate that
wouldwould typically be available on unsecuredtypically be available on unsecured credit extended to a borrower without regard to the borrower’s employment, credit extended to a borrower without regard to the borrower’s employment,
income, assets, or credit history. income, assets, or credit history. ~~T hese~~These terms are also in contrast to the term terms are also in contrast to the term loan subsidy, which is used, which is used for budgeting for budgeting
purposes and is the estimated present value of the cash flows from the purposes and is the estimated present value of the cash flows from the ~~governm ent~~government (e.g., loan disbursements), (e.g., loan disbursements),
excludingexcluding administrative expense, less the estimated present value of the cash flowsadministrative expense, less the estimated present value of the cash flows to the governmentto the government (e.g., (e.g.,
repayments of principal and interest), resulting from a direct loan or loan guarantee, discountedrepayments of principal and interest), resulting from a direct loan or loan guarantee, discounted to the time whento the time when the the
loan is disbursed,loan is disbursed, and taking into account estimated effects of defaults, prepayments, fees, penalties, loan deferments, and taking into account estimated effects of defaults, prepayments, fees, penalties, loan deferments,
loan forgiveness, etc. loan forgiveness, etc.
69 71 In addition, in response to the COVID-19 pandemic, for March 13, 2020 through In addition, in response to the COVID-19 pandemic, for March 13, 2020 through ~~at least September 30, 202 1~~July 31, 2023, the , the
accrual of interest on all types of Direct Loan program loans is suspended.accrual of interest on all types of Direct Loan program loans is suspended. ~~T his~~ This can be viewed can be viewed as as a limited-time interest a limited-time interest
subsidy. subsidy.
7072 In addition to the Direct Loan program interest subsidies In addition to the Direct Loan program interest subsidies ~~described~~ described here, a student loan interest deduction is made here, a student loan interest deduction is made
available through the federal tax code. For information on this interest subsidy, seeavailable through the federal tax code. For information on this interest subsidy, see ~~CRS~~ CRS Report R41967, Report R41967, Higher
Education Tax Benefits: Brief Overview and Budgetary Effects. 73 Between July 1, 2013, and August 13, 2021, borrowers who were first-time borrowers on or after July 1, 2013, had their eligibility to both~~and Budgetary Effects~~.
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~~Interest Subsidy on Direct Subsidized Loans~~
~~On Direct Subsidized Loans, and on the subsidized component of Direct Consolidation Loans,~~
~~interest is subsidized by the government (i.e., interest does not accrue) during in-school periods~~
~~while a borrower is enrolled in an eligible program on at least a half-time basis, during a six-~~
~~month grace period, and during periods of authorized deferment. Due to amendments to the HEA~~
~~made by the Consolidated Appropriations Act, 2012 (P.L. 112-74), interest is not subsidized~~
~~during the grace period on Direct Subsidized Loans disbursed between July 1, 2012, and June 30,~~
~~2014.~~
~~Limit on Direct Subsidized Loan Interest Subsidy if 150% of Published Academic~~
~~Program Length is Exceeded~~
~~For a borrower to whom the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time~~
~~Borrowers applies, eligibility both to~~ borrow a Direct Subsidized Loan and to receive the interest borrow a Direct Subsidized Loan and to receive the interest
subsidy on subsidy on ~~Direct Subsidized Loans~~such previously obtained previously obtained isloans limited limited to a period that to a period that ~~may~~could not not
exceed 150% of the published length of the academic program in which the student exceed 150% of the published length of the academic program in which the student iswas enrolled (the maximum eligibility period). Borrowers subject to these limitations who remained ~~enrolled. If~~
~~a Direct Subsidized Loan borrower subject to this provision remains~~ enrolled enrolled beyond the maximum eligibility period would ~~beyond the~~
~~applicable maximum eligibility period, the borrower wil~~ lose the interest subsidy and lose the interest subsidy and ~~wil~~
would become responsible for paying the interest that become responsible for paying the interest that ~~accrues on his or her~~accrued on their Direct Subsidized Loans Direct Subsidized Loans
after the date that after the date that they exceeded the maximum eligibilitythe maximum eligibility ~~period is exceeded.71~~
period. The FAFSA Simplification Act of 2020 The FAFSA Simplification Act of 2020 ~~repealed these Direct Subsidized Loan limitations for~~
~~post-July 1, 2013, first-time borrowers. Effective August 13, 2021, these limitations wil not~~
~~apply to any borrower who receives a~~(P.L. 116-260) repealed these limitations. Thus, for borrowers with Direct Subsidized Loans first disbursed on or after July 1, Direct Subsidized Loans first disbursed on or after July 1,
~~2021.72 For borrowers who have a Direct Subsidized Loan that is~~2021, these limitations do not apply. In addition, for borrowers with Direct Subsidized Loans outstanding as of July 1, 2021, outstanding as of July 1, 2021,
and on which the borrower and on which the borrower ~~has been~~was responsible for paying interest because they exceeded the responsible for paying interest because they exceeded the
maximum eligibilitymaximum eligibility period, ED period, ED ~~wil~~ was to “adjust their account to remove the interest that “adjust their account to remove the interest that ~~accrued and~~
~~reapply the borrower’s payments accordingly.”73~~(continued...) Congressional Research Service 23 link to page 37 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program
Interest Rate Reduction for Automatic Debit Repayment
The HEA The HEA authorizes the Secretary of Education (the Secretary) to offer borrowers of loans made authorizes the Secretary of Education (the Secretary) to offer borrowers of loans made
through the Direct Loan program an interest rate reduction as an incentive for having loan through the Direct Loan program an interest rate reduction as an incentive for having loan
payments payments ~~automatical y~~automatically debited from a bank account.74 The Secretary currently offers a 0.25 debited from a bank account.74 The Secretary currently offers a 0.25
percentage point interest rate reduction for automatic debit repayment. This option helps ensure percentage point interest rate reduction for automatic debit repayment. This option helps ensure
that borrowers make their student loan payments on time. The interest rate reduction for that borrowers make their student loan payments on time. The interest rate reduction for
automatic debit repayment does not apply during in-school, grace, deferment, or forbearance automatic debit repayment does not apply during in-school, grace, deferment, or forbearance
~~periods.~~

~~71 34 C.F.R. §685.200(f).~~
~~72 U.S. Department of Education, "Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage~~
~~Limit Restriction," 86 Federal Register 31432-31438, June 14, 2021.~~
~~73 Ibid., p. 31433.~~
~~74 HEA, §455(b)(9); 34 C.F.R. §685.211(b). Until June 30, 2012, the Secretary was authorized to offer a variety of~~
~~interest rate reductions to borrowers as a means of encouraging on -time repayment . T hese incentives were required to~~
~~be cost neutral to the government .~~
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~~link to page 36 link to page 36~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

periods. Interest Subsidies on Eligible Loans Repaid According to Certain Income-
Driven Repayment (IDR) Plans During Negative Amortization
Interest subsidies are provided on certain types of loans repaid according to Interest subsidies are provided on certain types of loans repaid according to several of the IDR plans—both of the Income-Based the Income-Based
Repayment (IBR) plans, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As Repayment (IBR) plans, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As
You Earn (REPAYE) repayment planYou Earn (REPAYE) repayment plan —during periods when a borrower’s loans are in negative during periods when a borrower’s loans are in negative
amortization.amortization.75 (Details of these (Details of these ~~income-driven repayment~~IDR plans are described below plans are described below in in “Loan
Repayment Plans” ~~section~~section.) A common characteristic of these IDR plans is that an interest .) A common characteristic of these IDR plans is that an interest
subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct
Consolidation Loans for a maximum of the first three consecutive years that the borrower repays Consolidation Loans for a maximum of the first three consecutive years that the borrower repays
according to the applicable IBR plan. In addition, in the REPAYE according to the applicable IBR plan. In addition, in the REPAYE repayment plan an extended, partial plan an extended, partial
interest subsidy is provided on interest subsidy is provided on ~~al eligible~~ all eligible loan types. These IDR plan interest subsidies are loan types. These IDR plan interest subsidies are
described in greater detail below. described in greater detail below.
Three-Year Interest Subsidy on Direct Subsidized Loans Repaid According to
Certain IDR Plans During Negative Amortization
The structure of the IBR, PAYE, and REPAYE plans provide that in certain instances, a The structure of the IBR, PAYE, and REPAYE plans provide that in certain instances, a
borrower’s required monthly payment amount may be insufficient to pay borrower’s required monthly payment amount may be insufficient to pay al all of the interest that of the interest that
has accrued on the borrower’s Direct Subsidized Loanshas accrued on the borrower’s Direct Subsidized Loans, or on the subsidized component of a or on the subsidized component of a
Direct Consolidation Loan. In such instances, the Secretary does not charge the borrower for the Direct Consolidation Loan. In such instances, the Secretary does not charge the borrower for the
amount of the accrued interest that amount of the accrued interest that ~~is in excess of~~exceeds the applicable monthly payment amount the applicable monthly payment amount
(referred to as the (referred to as the remaining accrued interest) for a period of up to the first three years from the ) for a period of up to the first three years from the
date the borrower began repaying according to date the borrower began repaying according to ~~the IDR plan~~one of those plans. For borrowers who switch . For borrowers who switch
repayment plans and repay their loans repayment plans and repay their loans ~~sequential y~~sequentially according to more than one of the IDR plans according to more than one of the IDR plans
under which a subsidized loan interest subsidy is provided, a cumulative three-year limit on under which a subsidized loan interest subsidy is provided, a cumulative three-year limit on
receipt of the interest subsidy applies to periods of repayment made under any of the receipt of the interest subsidy applies to periods of repayment made under any of the
aforementioned IDR plans.aforementioned IDR plans.7576 Any periods during which the borrower receives an economic Any periods during which the borrower receives an economic
hardship deferment and during which an interest subsidy is provided on Direct Subsidized Loans hardship deferment and during which an interest subsidy is provided on Direct Subsidized Loans
and on the subsidized component of Direct Consolidation Loans are excluded from the three-year and on the subsidized component of Direct Consolidation Loans are excluded from the three-year
~~eligibility limit.~~
~~50% Interest Subsidy on All Eligible Loan Types Repaid According to the~~
~~REPAYE Plan During Negative Amortization~~
~~In addition to the three-year interest subsidy of the remaining accrued interest on Direct~~
~~Subsidized Loans and the subsidized component of Direct Consolidation Loans described above,~~
~~the REPAYE plan includes a 50% subsidy of the remaining accrued interest on al loans.76~~
~~Beyond the three-year period for Direct Subsidized Loans and the subsidized component of~~
~~Direct Consolidation Loans (described above), and during al periods of repayment on other~~
~~eligible loans, in the instance that a borrower’s required monthly payment amount is insufficient~~
~~to pay al of the interest that has accrued on his or her loans, the Secretary charges the borrower~~

~~75 With regard to Direct Consolidation Loans, the three-year period also includes periods during which an interest~~
~~subsidy was provided on the underlying loans while they were being repaid according to an IDR plan during periods of~~
~~negative amortization.~~
~~76 34 C.F.R. §685.209(c)(2)(iii). Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans that~~
~~repaid either a Direct PLUS Loan or a FFEL PLUS Loan made to a parent borrower are ineligible to be repaid~~
~~according to the REPAYE plan.~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~for only 50% of the remaining accrued interest.77 There is no time limit on receipt of the REPAYE~~
~~plan 50% interest subsidy.~~
~~No Accrual of Interest on Loans of Certain Active Duty Servicemembers~~
~~For al~~ eligibility limit. accrued and reapply the borrower’s payments accordingly.” U.S. Department of Education, “Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage Limit Restriction,” 86 Federal Register 31433 June 14, 2021. 74 HEA, §455(b)(9); 34 C.F.R. §685.211(b). Until June 30, 2012, the Secretary was authorized to offer a variety of interest rate reductions to borrowers as a means of encouraging on-time repayment. These incentives were required to be cost neutral to the government. 75 Negative amortization is a period of time during which a borrower’s monthly payment amount is less than the amount of interest that accrues on their loans. 76 With regard to Direct Consolidation Loans, the three-year period also includes periods during which an interest subsidy was provided on the underlying loans while they were being repaid according to an IDR plan during periods of negative amortization. Congressional Research Service 24 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program 50% Interest Subsidy on All Eligible Loan Types Repaid According to the REPAYE Repayment Plan During Negative Amortization In addition to the three-year interest subsidy of the remaining accrued interest on Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans described above, the REPAYE repayment plan includes a 50% subsidy of the remaining accrued interest on all loans.77 Beyond the three-year period for Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans (described above), and during all periods of repayment on other eligible loans, in the instance that a borrower’s required monthly payment amount is insufficient to pay all of the interest that has accrued on their loans, the Secretary charges the borrower for only 50% of the remaining accrued interest.78 There is no time limit on receipt of the REPAYE repayment plan 50% interest subsidy. No Accrual of Interest on Loans of Certain Active Duty Servicemembers For all types of loans made through the Direct Loan program that were first disbursed on or after types of loans made through the Direct Loan program that were first disbursed on or after
October 1, 2008, no interest accrues during a period of up to 60 months while the borrower is October 1, 2008, no interest accrues during a period of up to 60 months while the borrower is
serving on active duty in the Armed Forces or is performing qualifying National Guard duty in an serving on active duty in the Armed Forces or is performing qualifying National Guard duty in an
area of hostilities during a war or national emergency. For Direct Consolidation Loans, the area of hostilities during a war or national emergency. For Direct Consolidation Loans, the no
~~accrual of~~ interest subsidy applies only to the portion of the loan that was used to repay other interest subsidy applies only to the portion of the loan that was used to repay other
loans that were first disbursed on or after October 1, 2008. loans that were first disbursed on or after October 1, 2008.
SCRA 6% Interest Rate Cap on Loans of Borrowers Who Enter Military Service
The Servicemembers Civil Relief Act (SCRA) provides that for individuals who borrow loans The Servicemembers Civil Relief Act (SCRA) provides that for individuals who borrow loans
after August 14, 2008, but prior to their entrance into military service, the interest rate on their after August 14, 2008, but prior to their entrance into military service, the interest rate on their
loans must be capped at a rate of 6% for the duration of their military service.loans must be capped at a rate of 6% for the duration of their military service.7879 The federal The federal
government, as the creditor on loans made through the Direct Loan program, must forgive interest government, as the creditor on loans made through the Direct Loan program, must forgive interest
above the 6% rate and may not accelerate repayment of the loans. Loan servicers are required to above the 6% rate and may not accelerate repayment of the loans. Loan servicers are required to
regularly check with the U.S. Department of Defense Manpower Data Center (DMDC) to regularly check with the U.S. Department of Defense Manpower Data Center (DMDC) to
determine whether borrowers qualify for the SCRA 6% interest rate cap and to extend the benefit determine whether borrowers qualify for the SCRA 6% interest rate cap and to extend the benefit
to borrowers. Borrowers also have the option of completing an to borrowers. Borrowers also have the option of completing an SCRA Interest Rate Limitation
Request and submitting it to their loan servicer to document their eligibility and submitting it to their loan servicer to document their eligibility for the 6% interest for the 6% interest
rate cap.rate cap.7980
SCRA 6% Interest Rate Cap and Direct Consolidation Loans
If a borrower repays one or more loans on which the interest rate has been reduced to 6% under If a borrower repays one or more loans on which the interest rate has been reduced to 6% under
the SCRAthe SCRA with a Direct Consolidation Loan, the 6% interest rate is required to be used as the with a Direct Consolidation Loan, the 6% interest rate is required to be used as the
applicableapplicable interest rate on those loans for purposes of determining the weighted average interest interest rate on those loans for purposes of determining the weighted average interest
~~rate of the new Direct Consolidation Loan.80 In such an occurrence, because Direct Consolidation~~
~~Loans are currently being made with fixed interest rates, the 6% rate would essential y be locked~~
~~in and would remain in effect beyond the end of the borrower’s period of military service.~~
~~Interest Subsidy on All Loan Types During Cancer Treatment Deferment~~
~~A Cancer Treatment Deferment is provided during periods while a borrower is receiving~~
~~treatment for cancer and for the six months thereafter. During periods while a borrower receives~~
~~this deferment, no interest accrues on his or her qualifying loans. The Cancer Treatment~~

~~77 T he~~ 77 34 C.F.R. §685.209(c)(2)(iii). Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans that repaid either a Direct PLUS Loan or a FFEL PLUS Loan made to a parent borrower are ineligible to be repaid according to the REPAYE repayment plan. 78 The borrower is not relieved of responsibility for payment of borrower is not relieved of responsibility for payment of ~~t he~~the 50% of the remaining accrued interest that is 50% of the remaining accrued interest that is
charged. charged.
7879 For additional information on the SCRA, see CRS For additional information on the SCRA, see CRS Report R45283, Report R45283, The Servicemembers Civil Relief Act (SCRA):
Section-by-Section ~~Sum mary~~.
~~79 U.S.~~ Summary. 80 U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, Servicemembers Civil Relief Act (SCRA): Interest Rate
~~Lim itation~~Limitation Request, OMB No. 1845-0135, https://fsapartners.ed.gov/sites/default/files/attachments/2020-, OMB No. 1845-0135, https://fsapartners.ed.gov/sites/default/files/attachments/2020-
01/011020RenewalSCRAIntRateLimitRequestAttach.pdf01/011020RenewalSCRAIntRateLimitRequestAttach.pdf .
~~80 34 C.F.R. §685.202(a); U.S. Department of Education, Dear Colleague Letter GEN-16-20, “Retroactive Adjustments~~
~~for Servicemembers Civil Relief Act (SCRA) from August 14, 2008, Onward,” November 15,~~
~~2016,https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2016-11-15/gen-16-20-subject-~~
~~retroactive-adjustments-servicemembers-civil-relief-act-scra-august-14-2008-onward.~~
. Congressional Research Service Congressional Research Service

25 25

link to page link to page 4647 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program rate of the new Direct Consolidation Loan.81 In such an occurrence, because Direct Consolidation Loans are currently being made with fixed interest rates, the 6% rate would essentially be locked in and would remain in effect beyond the end of the borrower’s period of military service. Interest Subsidy on All Loan Types During Cancer Treatment Deferment A Cancer Treatment Deferment is provided during periods while a borrower is receiving treatment for cancer and for the six months thereafter. During periods while a borrower receives this deferment, no interest accrues on their qualifying loans. The Cancer Treatment Deferment is available on all types of Direct Loan program loans that are either made on or after September 28, 2018, or that had entered repayment status on or before September 28, 2018.82 This benefit does not appear to be available for loans that were made prior to September 28, 2018, but had not yet entered repayment prior to that date.~~the William D. Ford Federal Direct Loan Program~~

~~Deferment is available on al types of Direct Loan program loans that are either made on or after~~
~~September 28, 2018, or that had entered repayment status on or before September 28, 2018.81~~
~~This benefit does not appear to be available for loans that were made prior to September 28,~~
~~2018, but had not yet entered repayment prior to that date.~~
~~No Accrual of Interest During COVID-19~~
~~In response to the COVID-19 pandemic, for March 13, 2020 through at least September 30, 2021,~~
~~the accrual of interest on al types of Direct Loan program loans is suspended.82 Thus, borrowers~~
~~wil not be responsible for paying interest on their Direct Loan program loans during this~~
~~period.83~~
Deferred Payment of Accrued Interest
In certain instances, the obligation of a borrower to pay the interest that accrues on the In certain instances, the obligation of a borrower to pay the interest that accrues on the
outstanding principal balance of loans made through the Direct Loan program may be deferred. outstanding principal balance of loans made through the Direct Loan program may be deferred.
For instance, during in-school, grace, deferment, and forbearance periods, borrowers are not For instance, during in-school, grace, deferment, and forbearance periods, borrowers are not
required to make payments of either principal required to make payments of either principal or the interest that accrues on the OPB. Also, for a the interest that accrues on the OPB. Also, for a
borrower whose loans are in repayment status and who is repaying according to an IDR plan, if borrower whose loans are in repayment status and who is repaying according to an IDR plan, if
the amount of the amount of ~~his or her~~their required monthly payment is less than the amount of interest that has required monthly payment is less than the amount of interest that has
accrued on the loans, the payment of any accrued interest owed that is in excess of the required accrued on the loans, the payment of any accrued interest owed that is in excess of the required
monthly payment amount may be deferred. Nonetheless, except to the extent that a borrower is monthly payment amount may be deferred. Nonetheless, except to the extent that a borrower is
receiving an interest subsidy, interest continues to accrue on receiving an interest subsidy, interest continues to accrue on ~~his or her~~their loans during periods while loans during periods while
repayment of accrued interest is deferred. repayment of accrued interest is deferred.
Negative Amortization
The term The term negative amortization describes the situation in which the amount of interest that describes the situation in which the amount of interest that
accrues on a loan over a given period of time is greater than the amount of payments that are accrues on a loan over a given period of time is greater than the amount of payments that are
made on it. In a case of negative amortization, the accumulation of unpaid accrued interest leads made on it. In a case of negative amortization, the accumulation of unpaid accrued interest leads
to the outstanding balance of principal and interest on the loan increasing over time. The deferred to the outstanding balance of principal and interest on the loan increasing over time. The deferred
payment of accrued interest during periods of repayment according to the IDR plans (see payment of accrued interest during periods of repayment according to the IDR plans (see
the “Income-Driven Repayment (IDR) Plans”” section) may lead to negative amortization. ) may lead to negative amortization.
Interest Capitalization
On certain occasions, any interest that has accrued but not been paid by a borrower may be added On certain occasions, any interest that has accrued but not been paid by a borrower may be added
to the outstanding principal balance of the borrower’s loans. This is to the outstanding principal balance of the borrower’s loans. This is ~~cal ed~~called interest capitalization. interest capitalization.
When interest is capitalized, it becomes part of the OPB and interest begins to accrue on that new, When interest is capitalized, it becomes part of the OPB and interest begins to accrue on that new,
larger loan amount. Over time, interest capitalization increases the total amount a borrower is larger loan amount. Over time, interest capitalization increases the total amount a borrower is
required to repay. Interest is capitalized in the following situations: required to repay. Interest is capitalized in the following situations:

~~81 HEA, §455(f)(3)); U.S. Department of Education, Office of Federal Student Aid,~~ ~~Cancer Treatment Deferment~~
~~Request, OMB No. 1845-0154, https://studentaid.gov/sites/default/files/CancerT reatmentDeferment.pdf.~~
~~82 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students,~~
~~Borrowers, and Parents,” https://studentaid.gov/announcements-events/coronavirus#forbearance-questions, accessed~~
~~May 21, 2021.~~
~~83 For additional information, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19.~~
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~~link to page 46~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

 81 34 C.F.R. §685.202(a); U.S. Department of Education, Dear Colleague Letter GEN-16-20, “Retroactive Adjustments for Servicemembers Civil Relief Act (SCRA) from August 14, 2008, Onward,” November 15, 2016, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2016-11-15/gen-16-20-subject-retroactive-adjustments-servicemembers-civil-relief-act-scra-august-14-2008-onward. 82 HEA, §455(f)(3)); U.S. Department of Education, Office of Federal Student Aid, Cancer Treatment Deferment Request, OMB No. 1845-0154, https://studentaid.gov/sites/default/files/CancerTreatmentDeferment.pdf. Congressional Research Service 26 link to page 47 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program 1. Entering Repayment Status. Any unpaid interest that has accrued on a Any unpaid interest that has accrued on a
borrower’s loans during the in-school and grace periods is capitalized at the time borrower’s loans during the in-school and grace periods is capitalized at the time
a borrower’s loan enters repayment status. a borrower’s loan enters repayment status.
 Loan Consolidation. ~~Any~~2. Annually, in ICR and Alternative Repayment Plans. Any unpaid interest that ~~interest that~~ has accrued on a borrower’s loan has accrued on a borrower’s loan ~~and~~
~~remains unpaid when the borrower includes the loan in a Direct Consolidation~~
~~Loan is capitalized upon consolidation.~~
 ~~Annually, in ICR and Alternative~~while the borrower is repaying according to the ICR plan (a type of IDR plan) or one of the alternative repayment plans is capitalized annually. 3. Exit from or Failure to Recertify Income and Family Size in the IBR Plan. Any unpaid interest that has accrued on a borrower’s loan during a period when they were repaying according to the IBR plan is capitalized at the time the borrower changes to a different repayment plan and when they fail to recertify their income and family size for purposes of annually determining their monthly payments under the plan. 4. Exit from or Failure to Recertify Income and Family Size in the PAYE or REPAYE Repayment Plans. Any unpaid interest that ~~Repayment Plans.~~ ~~Any unpaid interest that~~
has accrued on a has accrued on a borrower’s loan during a period when they were repaying according to the PAYE or REPAYE repayment plans is capitalized at the time the borrower changes to a different repayment plan. For borrowers in the PAYE~~borrower’s loan while the borrower is repaying according to the~~
~~income-contingent repayment (ICR) plan or one of the alternative repayment~~
~~plans is capitalized annual y.~~
 repayment plan, interest may also capitalize in instances in which they fail to recertify their income and family for purposes of annually determining their monthly payments under the plan.83 5. End of Partial Financial Hardship. in IBR Plans. Any unpaid interest that has Any unpaid interest that has accrued on a accrued on a
borrower’s borrower’s ~~loans~~loan during a period when during a period when ~~he or she was repaying according to either~~
~~of the IBR plans or the PAYE repayment~~they were repaying according to the IBR plan and had a plan and had a partial financial
hardship is capitalized when the borrower is determined to no longer have a is capitalized when the borrower is determined to no longer have a
partial financial hardship.84 partial financial hardship.84
 ~~Exit from IBR, PAYE, or REPAYE~~ 6. End of Partial Financial Hardship in PAYE Repayment Plan. Any unpaid Any unpaid interest that interest that
has accrued on a borrower’s loan during a period when has accrued on a borrower’s loan during a period when ~~he or she was~~ they were repaying repaying
according to the according to the ~~IBR, PAYE, or REPAYE repayment plans is capitalized at the~~
~~time the borrower changes to a different repayment plan.~~
 End of Deferment or Forbearance. PAYE repayment plan and had a partial financial hardship is capitalized when the borrower is determined to no longer have a partial financial hardship. 7. End of Forbearance. In general, any unpaid interest that has In general, any unpaid interest that has
accrued on a accrued on a borrower’s loan during a period of borrower’s loan during a period of ~~deferment or~~ forbearance is forbearance is
capitalized at the expiration of capitalized at the expiration of the~~the respective~~ period. However, interest that period. However, interest that
accrues during specified periods of administrative forbearance is not capitalized accrues during specified periods of administrative forbearance is not capitalized
at the end of the administrative forbearance.85 Ifat the end of the administrative forbearance.85 If, during the period of during the period of ~~deferment~~
or forbearanceforbearance, a borrower was enrolled in 83 Regulations do not explicitly state that failure to annually certify income information under the REPAYE repayment plan results in interest capitalization. However, regulations do specify that when a borrower fails to annually certify their income under the REPAYE repayment plan, ED will place them in an alternative repayment plan, and that interest capitalizes when a borrower leaves the REPAYE repayment plan. Thus, in effect, interest capitalizes when a borrower fails to annually recertify their income under the REPAYE repayment plan because they are placed into a different repayment plan. 34 C.F.R. § 685.209(c)(2)(iv) and (c)(4)(iii)(B); U.S. Department of Education, “Income-Driven Repayment (IDR) Plan Request,” OMB No. 1845-0102, https://studentaid.gov/app-static/images/idrPreview.pdf. ~~a borrower was repaying according to either of the IBR plans or~~
~~the PAYE repayment plan and was experiencing a partial financial hardship, any~~
~~interest that accrued during the period of deferment or forbearance wil not be~~
~~capitalized so long as the borrower continues to have a partial financial~~
~~hardship.86~~
~~ Default. Any unpaid interest that has accrued on a borrower’s loan prior to the~~
~~borrower defaulting (e.g., during periods of negative amortization, during~~
~~delinquency) is capitalized at the time of default.~~
~~Limit on Interest Capitalization in the IDR and Alternative Repayment Plans~~
~~For borrowers who are repaying their loans according to some of the IDR plans or an alternative~~
~~repayment plan, the amount of interest that may be capitalized is capped. For borrowers repaying~~

84 Under the IBR and PAYE repayment plans, a borrower is determined to have a 84 Under the IBR and PAYE repayment plans, a borrower is determined to have a partial financial hardship if the total if the total
annual payments for all of annual payments for all of ~~his or her~~their eligible eligible loans, as calculatedloans, as calculated according to a standard according to a standard ~~10 -year repayment period~~repayment plan with a maximum 10-year term, are , are
greater than a specified percentage (15% or 10%greater than a specified percentage (15% or 10%, depending on the plan) of the borrower’s income that is in excess of 150% of the poverty ) of the borrower’s income that is in excess of 150% of the poverty
~~guideline~~ guideline applicable to applicable to ~~his or her~~their family size. For additional information, see the discussion of the IBR family size. For additional information, see the discussion of the IBR and PAYE and PAYE
repayment plans in the repayment plans in the “ Income-Driven Repayment (IDR) Plans”” section. section.
~~85 T he~~ 85 The administrative forbearance must have been granted (for up to 60 days) for purposes of processing a borrower’s administrative forbearance must have been granted (for up to 60 days) for purposes of processing a borrower’s
request for deferment, forbearance, a change in repayment plan, or loan consolidation.request for deferment, forbearance, a change in repayment plan, or loan consolidation. ~~As interest is not accruing on~~
~~loans during the COVID-19 loan payment suspension period (in practice, ED has placed loans in administrative~~
~~forbearance), it cannot be capitalized at the end of the period.~~
~~86 34 C.F.R. §§685.209(a)(2)(iv) and 685.221(b)(4).~~
~~Congressional Research Service~~

27

~~link to page 34 link to page 97~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~their loans according to the ICR plan, the PAYE repayment plan, or the alternative repayment~~
Congressional Research Service 27 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program either of the IBR plans or the PAYE repayment plan and was experiencing a partial financial hardship as defined under those plans, any unpaid interest that accrued on the borrower’s loans during the period of forbearance will not be capitalized as long as the borrower continues to have a partial financial hardship.86 8. End of Deferment. In general, any unpaid interest that has accrued on a borrower’s Direct Unsubsidized Loans, Direct PLUS Loans, or portion of a Direct Consolidation Loan used to repay such loans during a period of deferment is capitalized at the expiration of the deferment period.87 If during the period of deferment a borrower was enrolled in either of the IBR plans or the PAYE repayment plan and was experiencing a partial financial hardship, any unpaid interest that accrued on the borrower’s loans during the period of deferment will not be capitalized as long as the borrower continues to have a partial financial hardship.88 9. Default. Any unpaid interest that has accrued on a borrower’s loan prior to the borrower defaulting (e.g., during periods of negative amortization, during delinquency) is capitalized at the time of default. 10. Loan Consolidation. Any interest that has accrued on a borrower’s loan and remains unpaid when the borrower includes the loan in a Direct Consolidation Loan is capitalized upon consolidation. Effective July 1, 2023, ED regulations eliminate all instances of interest capitalization that are not specified in the HEA.89 Thus, the situations described in 1, 2, 4, 6, 7, and 9 above, will no longer result in interest capitalization. That is, interest capitalization is to only occur: (1) when, while enrolled in an IBR plan, a borrower exits the plan, fails to annually certify their income and family size, or no longer has a partial financial hardship; (2) when a period of deferment ends; and (3) upon consolidation. Limit on Interest Capitalization in the IDR and Alternative Repayment Plans For borrowers who are repaying their loans according to some of the IDR plans or an alternative repayment plan, the amount of interest that may be capitalized is capped. For borrowers repaying their loans according to the ICR plan or the alternative repayment plans, interest may be capitalized until the outstanding principal balance reaches a maximum of plans, interest may be capitalized until the outstanding principal balance reaches a maximum of
110% of the amount of the OPB owed at the time the borrower entered repayment.110% of the amount of the OPB owed at the time the borrower entered repayment.~~87 Once the~~
~~limit is reached, interest wil continue to accrue and accumulate, but it wil~~ 90 For borrowers repaying their loans according to the PAYE repayment plan, the amount of interest that may be capitalized is capped at 10% of the OPB owed at the time the borrower entered into repayment under the PAYE repayment plan. 91 Under all three of these repayment plans, once the limit is reached, interest will continue to accrue and accumulate, but it will no longer be ~~no longer be~~
capitalized as long as the borrower capitalized as long as the borrower remains in the same repayment plan. 86 34 C.F.R. §§685.209(a)(2)(iv) and 685.221(b)(4). 87 34 C.F.R. §685.202(b)(2). 88 34 C.F.R. §§685.209(a)(2)(iv) and 685.221(b)(4). 89 Department of Education, “Institutional Eligibility Under the Higher Education Act of 1965, as Amended; Student Assistance General Provisions; Federal Perkins Loan Program; Federal Family Education Loan Program; and William D. Ford Federal Direct Loan Program,” 87 Federal Register 65904, November 1, 2022 [hereinafter ED, Final Rule, November 1, 2022]. 90 34 C.F.R. §§685.208(l)(5) and 685.209 (b)(3)(iv). 91 34 C.F.R. §685.209(a)(2)(iv)(B). Congressional Research Service 28 link to page 35 link to page 102 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Effective July 1, 2023, ED regulations eliminate instances of interest capitalization in the ICR plan, the PAYE repayment plan, and the alternative repayment plan.92 Accordingly, effective July 1, 2023, the same regulations also eliminate provisions limiting interest capitalization in these plans.~~remains in the same repayment plan.~~
Loan Origination Fees
Loan origination fees are charged to borrowers of Direct Subsidized Loans, Direct Unsubsidized Loan origination fees are charged to borrowers of Direct Subsidized Loans, Direct Unsubsidized
Loans, and Direct PLUS Loans. No fees are charged to borrowers of Direct Consolidation Loans. Loans, and Direct PLUS Loans. No fees are charged to borrowers of Direct Consolidation Loans.
These fees help offset federal loan subsidy costs by passing along some of the costs to These fees help offset federal loan subsidy costs by passing along some of the costs to
borrowers.borrowers.8893 Loan origination fees are calculated as a proportion of the loan principal borrowed Loan origination fees are calculated as a proportion of the loan principal borrowed
and are deducted proportionately from the proceeds of each loan disbursement to the borrower. and are deducted proportionately from the proceeds of each loan disbursement to the borrower.
The amount to be charged for loan origination fees is specified in statute. For Direct Subsidized The amount to be charged for loan origination fees is specified in statute. For Direct Subsidized
Loans and Direct Unsubsidized Loans made on or after July 1, 2010, the HEA specifies a loan Loans and Direct Unsubsidized Loans made on or after July 1, 2010, the HEA specifies a loan
origination fee of 1%. (Higher loan origination fees were charged on loans made prior to July 1, origination fee of 1%. (Higher loan origination fees were charged on loans made prior to July 1,
2010.) Since the inception of the Direct Loan program, the HEA has specified a loan origination 2010.) Since the inception of the Direct Loan program, the HEA has specified a loan origination
fee of 4% for Direct PLUS Loans. fee of 4% for Direct PLUS Loans.
During periods when a budget sequestration order that applies to direct (or mandatory) spending During periods when a budget sequestration order that applies to direct (or mandatory) spending
programs is in effect, such as for the Direct Loan program, special rules apply to loan origination programs is in effect, such as for the Direct Loan program, special rules apply to loan origination
fees.fees.8994 In instances where the first disbursement of a loan is made during a period that is subject In instances where the first disbursement of a loan is made during a period that is subject
to a sequestration order, the loan origination fee is required to be increased by the uniform to a sequestration order, the loan origination fee is required to be increased by the uniform
percentage sequestration amount that is applicable to nondefense, mandatory spending programs. percentage sequestration amount that is applicable to nondefense, mandatory spending programs.
Loan origination fees that apply to loans made during Loan origination fees that apply to loans made during ~~FY2021 and FY2022~~FY2023 and FY2024 (periods of budget (periods of budget
sequestration) are presented below isequestration) are presented below in Table 3. A history of loan origination fees that previously A history of loan origination fees that previously
applied to loans made through the Direct Loan program is presented iapplied to loans made through the Direct Loan program is presented in ~~Appendix C~~ in
Table C-1. Table 3. Origination Fees on Loans Made Through the Direct Loan Program,
~~FY2021 and FY2022~~FY2023 and FY2024
(percentage) (percentage)
Direct
Direct
Direct
Subsidized
Unsubsidized
PLUS
Disbursement Period
Loans
Loans
Loans
October 1, October 1, ~~2020~~2022 - September - September 30, 30, ~~2021~~2023
1.057 1.057
1.057 1.057
4.228 4.228
October 1, October 1, ~~2021~~2023 - September - September 30, 30, ~~2022~~2024
1.057 1.057
1.057 1.057
4.228 4.228
Source: HEA, §455(c); Balanced Budget and Emergency Deficit Control Act (BBEDCA), §256(b); HEA, §455(c); Balanced Budget and Emergency Deficit Control Act (BBEDCA), §256(b); ~~and~~ U.S. U.S.
Department of Education, Office of FederalDepartment of Education, Office of Federal Student Aid,Student Aid, Electronic Announcement GENERAL-Electronic Announcement GENERAL-~~21-31, “FY22~~23-37, “FY24
Sequester-Required Changes to the Title IV Student Aid Programs,”Sequester-Required Changes to the Title IV Student Aid Programs,” May May ~~17, 2021,~~

~~87 34 C.F.R. §§685.208(l)(5) and 685.209(a)(2)(iv)(B) and (b)(3)(iv).~~
8815, 2023, https://fsapartners.ed.gov/ 92 ED, Final Rule, November 1, 2022. 93 When the Direct Loan program was established, When the Direct Loan program was established, the terms and conditions of loans were designedthe terms and conditions of loans were designed to be substantially to be substantially
similar to those of loans that were beingsimilar to those of loans that were being offered through the FFEL program. At that time, borrowers of FFEL program offered through the FFEL program. At that time, borrowers of FFEL program
loans were responsible for paying a loan origination fee and a default fee (which at one time had been referred to as a loans were responsible for paying a loan origination fee and a default fee (which at one time had been referred to as a
loan insurance fee). In the Direct Loan program, the loan origination fee was initially set at 4%, which equaledloan insurance fee). In the Direct Loan program, the loan origination fee was initially set at 4%, which equaled the sum the sum
of the FFEL loan origination fee and the FFEL default fee. of the FFEL loan origination fee and the FFEL default fee.
89 94 For additional information on how budget For additional information on how budget sequestration affects federal student loans, seesequestration affects federal student loans, see ~~CRS~~ CRS Report R42050, Report R42050,
Budget “Sequestration” and Selected Program Exemptions and Special Rules, archived, archived (available to congressional clients upon request). .
Congressional Research Service Congressional Research Service

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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

~~https://fsapartners.ed.gov/~~knowledge-center/library/knowledge-center/library/~~elect ronic~~electronic-announcements/-announcements/~~2021-05-17/fy-22~~2023-05-15/fy-24-sequester--sequester-
required-changes-title-iv-student-aid-programsrequired-changes-title-iv-student-aid-programs~~-ea-id-general-21-31.~~
Loan Repayment
Borrowers are required to make payments on loans made through the Direct Loan program during Borrowers are required to make payments on loans made through the Direct Loan program during
a repayment period that, depending on the loan type, commences either upon the loan being fully a repayment period that, depending on the loan type, commences either upon the loan being fully
disbursed (Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006) or disbursed (Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006) or
after a six-month grace period (Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-after a six-month grace period (Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-
July 1, 2006, Direct Consolidation Loans). Borrowers are afforded the opportunity to choose from July 1, 2006, Direct Consolidation Loans). Borrowers are afforded the opportunity to choose from
among a selection of numerous loan repayment plan options to repay their loans. The repayment among a selection of numerous loan repayment plan options to repay their loans. The repayment
plan selected is a determining factor in the duration of the repayment period. Borrowers may plan selected is a determining factor in the duration of the repayment period. Borrowers may
prepay prepay al all or any part of a loan made through the Direct Loan program at any time without being or any part of a loan made through the Direct Loan program at any time without being
subject to a prepayment penalty.subject to a prepayment penalty.
Grace Period
A A grace period is a six-month period beginning immediately after a borrower of a Direct is a six-month period beginning immediately after a borrower of a Direct
Subsidized Loan, a Direct Unsubsidized Loan, or a pre-July 1, 2006, Direct Consolidation Loan Subsidized Loan, a Direct Unsubsidized Loan, or a pre-July 1, 2006, Direct Consolidation Loan
first ceases to be enrolled in an eligiblefirst ceases to be enrolled in an eligible program on at least a half-time basis. The grace period program on at least a half-time basis. The grace period
excludes any period of up to three years during which a borrower who is a member of a reserve excludes any period of up to three years during which a borrower who is a member of a reserve
component of the Armed Forces is component of the Armed Forces is ~~cal ed~~called or ordered to active duty for a period of more than 30 or ordered to active duty for a period of more than 30
days and thus ceases to be enrolled on at least a half-time basis, as days and thus ceases to be enrolled on at least a half-time basis, as ~~wel~~ well as any additional period as any additional period
necessary for such a borrower to resume enrollment at the next available regular enrollment necessary for such a borrower to resume enrollment at the next available regular enrollment
period.period.
The grace period is distinct from and not part of the repayment period. A loan on which a grace The grace period is distinct from and not part of the repayment period. A loan on which a grace
period is provided does not enter repayment status until the day after the grace period ends. If a period is provided does not enter repayment status until the day after the grace period ends. If a
borrower desires to enter repayment on loans that have a grace period immediately after borrower desires to enter repayment on loans that have a grace period immediately after
completing school or ceasing to be enrolled on at least a half-time basis, completing school or ceasing to be enrolled on at least a half-time basis, ~~he or she~~they may may
consolidate those loans into a Direct Consolidation Loan during the grace period and enter consolidate those loans into a Direct Consolidation Loan during the grace period and enter
repayment on the Direct Consolidation Loan upon its disbursement.repayment on the Direct Consolidation Loan upon its disbursement.9095
Loan Repayment Period
In the Direct Loan program, the In the Direct Loan program, the repayment period is the period during which borrowers are is the period during which borrowers are
~~obliged~~obligated to repay their loans. The repayment period for Direct Subsidized Loans, Direct to repay their loans. The repayment period for Direct Subsidized Loans, Direct
Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loan begins the day after the Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loan begins the day after the
grace period ends. Thus, for these types of loans the loan repayment period begins six months and grace period ends. Thus, for these types of loans the loan repayment period begins six months and
one day after the borrower first ceases to be enrolled in an eligibleone day after the borrower first ceases to be enrolled in an eligible program on at least a half-time program on at least a half-time
basis. The repayment period for Direct PLUS Loans and Direct Consolidation Loans made on or basis. The repayment period for Direct PLUS Loans and Direct Consolidation Loans made on or
after July 1, 2006, begins the day the loan is fully disbursed. (This would be the day of the last after July 1, 2006, begins the day the loan is fully disbursed. (This would be the day of the last
disbursement if the loan has multiple disbursements.) For disbursement if the loan has multiple disbursements.) For al all loan types, the first payment is due loan types, the first payment is due
no later than 60 days after the start of the repayment period.no later than 60 days after the start of the repayment period.
In general, the repayment period excludes any periods of authorized deferment and forbearance; In general, the repayment period excludes any periods of authorized deferment and forbearance;
however, in certain instances of a borrower repaying a loan according to an IDR plan, periods however, in certain instances of a borrower repaying a loan according to an IDR plan, periods

90 95 U.S. U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, Public ServicePublic Service Loan Forgiveness Questions and Loan Forgiveness Questions and
Answers,Answers, “ “Can I waiveCan I waive the six-month grace period on my Direct Subsidizedthe six-month grace period on my Direct Subsidized Loans and Direct UnsubsidizedLoans and Direct Unsubsidized Loans and Loans and
beginbegin making qualifyingmaking qualifying ~~PSLF~~ PSLF payments early?”, https://studentaid.payments early?”, https://studentaid.~~ed.gov/sa/repay-loans/forgiveness-~~
~~cancellation/public-service/questions#qualifying~~gov/help-center/answers/article/waiving-loan-grace-period-to-begin-pslf-payments, accessed -payments, accessed ~~May 17, 2021~~February 27, 2023. .
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during which the borrower is receiving an economic hardship deferment may be considered as during which the borrower is receiving an economic hardship deferment may be considered as
part of the repayment period. In instances where a borrower has entered a period of deferment or part of the repayment period. In instances where a borrower has entered a period of deferment or
forbearance, the next subsequent payment is due no later than 60 days after the end of the forbearance, the next subsequent payment is due no later than 60 days after the end of the
deferment or forbearance period. deferment or forbearance period.
Loan Repayment Plans
Borrowers may choose from among numerous loan repayment plan options to repay their loans. Borrowers may choose from among numerous loan repayment plan options to repay their loans.
The availableThe available repayment plans repayment plans ~~fal~~ fall into five broad categories: standard repayment plans, extended into five broad categories: standard repayment plans, extended
repayment plans, graduated repayment plans, income-driven repayment (IDR) plans, and repayment plans, graduated repayment plans, income-driven repayment (IDR) plans, and
alternative repayment plans.alternative repayment plans.
The particular repayment plans available The particular repayment plans available to any individualto any individual borrower may depend on the type(s) of borrower may depend on the type(s) of
loans borrowed, the date of becoming a loans borrowed, the date of becoming a new borrower, or the date of entering repayment status. , or the date of entering repayment status.
In general, In general, al all of a borrower’s loans made through the Direct Loan program must be repaid of a borrower’s loans made through the Direct Loan program must be repaid
together according to the same repayment plan. However, if a borrower seeking to repay together according to the same repayment plan. However, if a borrower seeking to repay
according to one of the IDR plans has some types of loans that may be repaid according to an according to one of the IDR plans has some types of loans that may be repaid according to an
IDR plan and some that may not, the borrower may repay the eligible loans according to an IDR IDR plan and some that may not, the borrower may repay the eligible loans according to an IDR
plan and the ineligibleplan and the ineligible loans according to a non-IDR plan. If a borrower fails to actively select a loans according to a non-IDR plan. If a borrower fails to actively select a
repayment plan, repayment plan, ~~he or she is~~they are placed into the standard repayment plan that is applicable to the placed into the standard repayment plan that is applicable to the
loans.loans.
In general, a borrower may change from one plan to another eligible plan at any time and may not In general, a borrower may change from one plan to another eligible plan at any time and may not
change to a repayment plan that has a maximum repayment period of fewer than the number of change to a repayment plan that has a maximum repayment period of fewer than the number of
years that the borrower’s loans have already been in repayment status. If a borrower changes years that the borrower’s loans have already been in repayment status. If a borrower changes
plans to any of the standard repayment plans, graduated repayment plans, extended repayment plans to any of the standard repayment plans, graduated repayment plans, extended repayment
plans, or alternative repayment plans, the beginning of the applicable repayment period plans, or alternative repayment plans, the beginning of the applicable repayment period ~~wil be~~
will be measured from the date that the borrower’s loan measured from the date that the borrower’s loan ~~initial y~~ initially entered repayment status. If a borrower entered repayment status. If a borrower
changes to one of the IDR plans, the beginning of the repayment period changes to one of the IDR plans, the beginning of the repayment period ~~wil~~ will be measured from be measured from
the date the borrower satisfied certain plan-specific criteria, as described below, for the applicable the date the borrower satisfied certain plan-specific criteria, as described below, for the applicable
IDR plans. IDR plans.
Under the standard repayment plans, graduated repayment plans, extended repayment plans, and Under the standard repayment plans, graduated repayment plans, extended repayment plans, and
most alternative repayment plans, payment amounts may not be less than the amount of accrued most alternative repayment plans, payment amounts may not be less than the amount of accrued
interest that is due. Negative amortization is permitted in the IDR plans and as part of one interest that is due. Negative amortization is permitted in the IDR plans and as part of one
alternative repayment plan option. Also, for loans with variable interest rates (which had been alternative repayment plan option. Also, for loans with variable interest rates (which had been
made prior to July 1, 2006), monthly payment amounts or the length of the repayment period may made prior to July 1, 2006), monthly payment amounts or the length of the repayment period may
be adjusted under the standard repayment plans, graduate repayment plans, and extended be adjusted under the standard repayment plans, graduate repayment plans, and extended
repayment plans to take into account the effects of annual changes in the variable interest rate. repayment plans to take into account the effects of annual changes in the variable interest rate.
Table 4 provides a summary of selected characteristics of the various loan repayment plans that provides a summary of selected characteristics of the various loan repayment plans that
are made are made ~~general y~~generally available available to borrowers. Following the table, the various repayment plans are to borrowers. Following the table, the various repayment plans are
described in detail.described in detail.

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Table 4. Selected Characteristics of Loan Repayment Plans Generally Available to Borrowers: Standard Repayment Plans,
Extended Repayment Plans, Graduated Repayment Plans, and Income-Driven Repayment Plans
Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Standard ~~Repayment~~ Repayment Plans
Standard Repayment None Standard Repayment None
Level Level payments payments
No No
No No
No No
No No
10 years 10 years
No No
Plan with a Maximum Plan with a Maximum
10-year Term 10-year Term
Standard Repayment Direct Standard Repayment Direct
Level Level payments payments
No No
No No
No No
No No
10 to 30 years, No 10 to 30 years, No
Plan for Direct Plan for Direct
Consolidation Consolidation
based on based on
Consolidation Loans Consolidation Loans
Loans only Loans only
combined loan combined loan
with 10-year to 30- with 10-year to 30-
~~balanc~~ebbalanceb
year Terms year Terms
Extended ~~Repayment~~ Repayment Plans
Extended Fixed Extended Fixed
Loan balance must Level Loan balance must Level payments payments
No No
No No
No No
No No
25 years 25 years
No No
Repayment Plan with exceed $30,000 Repayment Plan with exceed $30,000
a Maximum 25-Year a Maximum 25-Year
Term Term
Extended Graduated Loan balance must Payments increase Extended Graduated Loan balance must Payments increase
No No
No No
No No
No No
25 years 25 years
No No
Repayment Plan with exceed $30,000 Repayment Plan with exceed $30,000
~~incremental y~~ incrementally every every
a Maximum 25-Year a Maximum 25-Year
2 years 2 years
Term Term
Extended Repayment None Extended Repayment None
Level Level payments payments
No No
No No
No No
No No
12 to 30 years, No 12 to 30 years, No
Plan with 12-year to Plan with 12-year to
based on loan based on loan
30-year Terms 30-year Terms
~~balanc~~ecbalancec
(Pre-July 1, 2006) (Pre-July 1, 2006)
CRS- CRS-3132

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Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Graduated ~~Repayment~~ Repayment Plans
Graduated Graduated
None None
Payments increase Payments increase
No No
No No
No No
No No
10 years 10 years
No No
Repayment Plan with Repayment Plan with
~~incremental y~~ incrementally every every
a Maximum 10-year a Maximum 10-year
2 years 2 years
Term Term
Graduated Graduated
Direct Direct
Payments increase Payments increase
No No
No No
No No
No No
10 to 30 years, No 10 to 30 years, No
Repayment Plan for Repayment Plan for
Consolidation Consolidation
~~incremental y~~ incrementally every every
based on based on
Direct Direct Consolidation Loans only Consolidation Loans only
2 years 2 years
combined loan combined loan
Loans with 10-year to Loans with 10-year to
~~balanc~~ebbalanceb
30-year Terms 30-year Terms
Graduated Graduated
None None
Payments increase Payments increase
No No
No No
No No
No No
12 to 30 years, No 12 to 30 years, No
Repayment Plan with Repayment Plan with
~~incremental y~~ incrementally every every
based on loan based on loan
12-year to 30-year 12-year to 30-year
2 years 2 years
~~balanc~~ecbalancec
Terms Terms
(Pre-July 1, 2006) (Pre-July 1, 2006)
Income-Driven Repayment Plans
Income-Contingent Income-Contingent
Direct Direct PLUS PLUS
Lesser Lesser of: of:
Yes. Upon failure to Yes. Upon failure to
No No
Yes Yes
Yes. Accrued interest 25 years Yes. Accrued interest 25 years
Yes Yes
Repayment (ICR) Plan Loans to parents • 12-year Repayment (ICR) Plan Loans to parents • 12-year
certify, accrued certify, accrued
is capitalized once per is capitalized once per
excluded, unless excluded, unless
amortization, amortization,
interest is interest is ~~capitalized~~capitalizedf
year; and year; and
capitalized consolidated into multiplied consolidated into multiplied by an by an
and payment reverts and payment reverts
~~capitalized interest~~interest may not
a Direct a Direct
income percentage to Standard income percentage to Standard
~~may not~~ result in result in
balance Consolidation Consolidation
facto factor,d or or
Repayment Plan with a Repayment Plan with a
~~balance exceeding~~exceeding 110% of
Loan Loan
Maximum 10-year Maximum 10-year
original OPBf • 20% of AG• 20% of AGIe thatthat
~~110% of original OPB~~
Term Term
exceeds 100% of exceeds 100% of
federal poverty federal poverty
guideline guideline
CRS- CRS-3233

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Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Original Income- Original Income-
Must Must ~~initial y~~initially have Lesser have Lesser of: of:
Yes. Upon failure to Yes. Upon failure to
Yes. Remaining Yes. Remaining
Yes Yes
Yes. Accrued interest 25 years Yes. Accrued interest 25 years
Yes Yes
Based Repayment Based Repayment
a partial financial a partial financial
• 15% of AG • 15% of AGIe that certify, accrued that certify, accrued
accrued interest accrued interest
is is ~~general y~~generally capitalized capitalized
(IBR) Plan (IBR) Plan
hardship; hardship;
exceeds 150% of exceeds 150% of
interest is capitalized interest is capitalized
on Direct on Direct
only if a borrower only if a borrower no no
Direct Direct PLUS PLUS
federal poverty federal poverty
and payment reverts and payment reverts
Subsidized Loans Subsidized Loans
longer has a partial longer has a partial
Loans to parents guideline while Loans to parents guideline while
to Standard to Standard
during negative during negative
financial hardship. financial hardship.
and Direct and Direct
borrower borrower has a has a
Repayment Plan with a amortization for Repayment Plan with a amortization for
Consolidation Consolidation
partial financial partial financial
Maximum 10-year Maximum 10-year
first 3 years, first 3 years,
Loans that Loans that
hardship, or hardship, or
Term Term
excluding periods excluding periods
consolidated a consolidated a
of economic of economic
• 10-year • 10-year
parent PLUS Loan parent PLUS Loan
hardship hardship
amortization based amortization based
excluded excluded
defermen defermentftg
on original OPB on original OPB
IBR Plan for Post-July Must IBR Plan for Post-July Must ~~initial y~~initially have Lesser have Lesser of: of:
Yes. Upon failure to Yes. Upon failure to
Yes. Remaining Yes. Remaining
Yes Yes
Yes. Accrued interest 20 years Yes. Accrued interest 20 years
Yes Yes
1, 2014, New 1, 2014, New
a partial financial a partial financial
• 10% of AG • 10% of AGIe that certify, accrued that certify, accrued
accrued interest accrued interest
is is ~~general y~~generally capitalized capitalized
Borrowers Borrowers
hardship; hardship;
exceeds 150% of exceeds 150% of
interest is capitalized interest is capitalized
on Direct on Direct
only if a borrower only if a borrower no no
Direct Direct PLUS PLUS
federal poverty federal poverty
and payment reverts and payment reverts
Subsidized Loans Subsidized Loans
longer has a partial longer has a partial
Loans to parents guideline while Loans to parents guideline while
to Standard to Standard
during negative during negative
financial hardship. financial hardship.
and Direct and Direct
borrower borrower has a has a
Repayment Plan with a amortization for Repayment Plan with a amortization for
Consolidation Consolidation
partial financial partial financial
Maximum 10-year Maximum 10-year
first 3 years, first 3 years,
Loans that Loans that
hardship, or hardship, or
Term Term
excluding periods excluding periods
consolidated a consolidated a
of economic of economic
• 10-year • 10-year
parent PLUS Loan parent PLUS Loan
hardship hardship
amortization based amortization based
excluded excluded
defermen defermentftg
on original OPB on original OPB
CRS- CRS-3334

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Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
Pay As You Earn Pay As You Earn
Must Must ~~initial y~~initially have Lesser have Lesser of: of:
Yes. Upon failure to Yes. Upon failure to
Yes. Remaining Yes. Remaining
Yes Yes
Yes. Accrued interest 20 years Yes. Accrued interest 20 years
Yes Yes
(PAYE) Repayment (PAYE) Repayment
a partial financial a partial financial
• 10% of AG • 10% of AGIe that certify, accrued that certify, accrued
accrued interest accrued interest
is is ~~general y~~generally capitalized capitalized
Plan Plan
hardship; hardship;
exceeds 150% of exceeds 150% of
interest interest ~~is capitalized~~may be
on Direct on Direct
only if a borrower only if a borrower no no
Direct Direct PLUS PLUS
federal poverty federal poverty
~~and payment reverts~~capitalizedf and
Subsidized Loans Subsidized Loans
longer has a partial longer has a partial
Loans to parents guideline while Loans to parents guideline while
~~to Standard~~payment reverts to
during negative during negative
financial hardship; and financial hardship; and
and Direct and Direct
borrower borrower ~~has a~~
~~Repayment Plan with a~~ has a Standard Repayment amortization for amortization for
capitalized interest capitalized interest
Consolidation Consolidation
partial financial partial financial
~~Maximum 10-year~~
Plan with a Maximum first 3 years, first 3 years,
may not may not ~~result in~~exceed 10%
Loans that Loans that
hardship, or hardship, or
10-year Term Term
excluding periods excluding periods
~~balance exceeding~~of original OPBf
consolidated a consolidated a
of economic of economic
• 10-year • 10-year
~~110% of original OPB~~
parent PLUS Loan parent PLUS Loan
hardship hardship
amortization based amortization based
excluded excluded
defermen defermentftg
on original OPB on original OPB
Revised Pay As You Revised Pay As You
Direct Direct PLUS PLUS
10% of AG 10% of AGIgIh that that
Yes. Upon failure to Yes. Upon failure to
Yes. Remaining Yes. Remaining
Yes Yes
Yes. Accrued interest 20 years for Yes. Accrued interest 20 years for
Yes Yes
Earn (REPAYE) Earn (REPAYE)
Loans to parents exceeds 150% of Loans to parents exceeds 150% of
certify income, certify income,
accrued interest accrued interest
is not capitalized as is not capitalized as
borrowers borrowers
Repayment Plan Repayment Plan
and Direct and Direct
federal poverty federal poverty
accrued interest is accrued interest is
on Direct on Direct
long as a borrower long as a borrower
with only with only
Consolidation Consolidation
guideline; and guideline; and
~~capitalized~~ capitalizedf and and
Subsidized Loans Subsidized Loans
remains remains in the in the
undergraduate undergraduate
Loans that Loans that
payment may be payment may be
borrower borrower is placed in during negative is placed in during negative
REPAYE Repayment REPAYE Repayment
debt; and debt; and
consolidated a consolidated a
adjusted for adjusted for
the REPAYE the REPAYE
amortization for amortization for
~~Plan~~Planf
25 years for 25 years for
parent PLUS Loan borrowers parent PLUS Loan borrowers who who
Alternative Alternative Repayment first 3 years, Repayment first 3 years,
borrowers borrowers
excluded excluded
return to the plan return to the plan
Plan; and Plan; and
upon failure excluding periods excluding periods
with any with any
from the REPAYE from the REPAYE
~~upon failure to certify~~to certify family size, a of economic of economic
graduate debt graduate debt
Alternative Alternative
family size family size~~, a family~~ of 1 is
hardship hardship
Repayment Repayment ~~Planh~~
~~size of 1 is assumed~~
~~deferment~~;fPl ani assumed deferment;g and and
50% of remaining 50% of remaining
accrued interest accrued interest
on on al all other loans, other loans,
and on Direct and on Direct
Subsidized Loans Subsidized Loans
beyond the first 3 beyond the first 3
years years
CRS- CRS-3435

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Annual
Loan
Certification of
Forgiveness at
Special
Income and
Negative
Maximum
End of
Eligibility
Payment
Family Size
Subsidized
Amortization
Limit on Interest
Repayment
Repayment
Repayment Plan
Limitationsa
Structure
Required
Interest
Permitted
Capitalization
Term
Term
REPAYE Alternative REPAYE Alternative
Must have Must have
Level Level payments, payments,
No No
No No
No No
No No
Shorter of: Shorter of:
~~Noi~~Noj
Repayment Plan Repayment Plan
previously previously repaid amortized over the repaid amortized over the
• 10 years • 10 years from from
according to the according to the
shorter of: shorter of:
placement into placement into
REPAYE REPAYE
• 10 years • 10 years from from
the plan; or the plan; or
Repayment Plan; Repayment Plan;
placement into the placement into the
• remainder • remainder of of
Direct Direct PLUS PLUS
plan; or plan; or
the 20 year or the 20 year or
Loans to parents • remainder Loans to parents • remainder of the of the
25 year 25 year
and Direct and Direct
20 year or 25 year 20 year or 25 year
REPAYE REPAYE
Consolidation Consolidation
REPAYE REPAYE
Repayment Repayment
Loans that Loans that
repayment term, repayment term, as as
Plan term, Plan term, as as
consolidated a consolidated a
applicable applicable
applicable applicable
parent PLUS Loan parent PLUS Loan
excluded excluded
Source: HEA, §§455 and 493C; 34 C.F.R.HEA, §§455 and 493C; 34 C.F.R. §§685.208, 685.209, and 685.221. §§685.208, 685.209, and 685.221.
Notes: This table excludes the AlternativeThis table excludes the Alternative ~~Repayment Plans. Details about the Alternative~~ Repayment Plans, which are distinct from the REPAYE Alternative Repayment Plan. Details about the Alternative Repayment Plans are communicated to borrowersRepayment Plans are communicated to borrowers by loan servicesby loan services and are and are
~~general y~~generally not made publicly available. AGI = adjusted gross income; OPB = outstanding principal balance. not made publicly available. AGI = adjusted gross income; OPB = outstanding principal balance.
a. Eligibilitya. Eligibility for certain plans may be contingent upon when an individual became a new borrower,for certain plans may be contingent upon when an individual became a new borrower, the period during which a borrowerthe period during which a borrower obtained a loan, or when a obtained a loan, or when a
borrower’s borrower’s loan entered repayment status. For details, seeloan entered repayment status. For details, see ~~the section on~~ the “Loan Repayment Plans.”
” b. The combined loan balance represents b. The combined loan balance represents the sum of (1) the outstanding balances on the sum of (1) the outstanding balances on al all of the borrower’sof the borrower’s loans eligibleloans eligible to be included in the Directto be included in the Direct Consolidation Consolidation
Loan, plus (2) the outstanding balance of other federal education loans and private education loans to the extent that the Loan, plus (2) the outstanding balance of other federal education loans and private education loans to the extent that the ~~ba lance~~balance of the other education loans is not of the other education loans is not
greater than the balance of the Direct Consolidation Loan, the other education loans are not in default, and the other education loans weregreater than the balance of the Direct Consolidation Loan, the other education loans are not in default, and the other education loans were not borrowed from an not borrowed from an
individual. For additional details,individual. For additional details, ~~see~~ see Table 5.
c. The loan balance represents c. The loan balance represents the total amount of the borrower’sthe total amount of the borrower’s loans made through the Direct Loan program. For additional loans made through the Direct Loan program. For additional ~~det ails, see~~details, see Table 6.
d. Income percentage factors range from 50.52% to 200%, depending on a borrower’sd. Income percentage factors range from 50.52% to 200%, depending on a borrower’s AGI and income tax filing status.AGI and income tax filing status.
e. For a marriede. For a married ~~borrower~~ borrower who fileswho files a joint federal tax return with a joint federal tax return with ~~his or her~~their spouse, the AGI for both spouses is used; for a married spouse, the AGI for both spouses is used; for a married ~~borrower~~ borrower who fileswho files a separate a separate
federal federal tax return, only the AGI of the borrowertax return, only the AGI of the borrower is used.is used.
f.
~~Periods during which a borrower has received an interest~~ f. Effective July 1, 2023, ED regulations eliminate this instance of interest capitalization. Accordingly, ED regulations also eliminate provisions limiting the amount of interest capitalization. g. Periods during which a borrower has received an interest subsidy while qualifying for an economic hardship deferment (during which an interestsubsidy while qualifying for an economic hardship deferment (during which an interest subsidy is provided subsidy is provided
on Directon Direct Subsidized Loans and on the subsidized component of a DirectSubsidized Loans and on the subsidized component of a Direct Consolidation Loan) are excluded from the three-year period. Consolidation Loan) are excluded from the three-year period.
gCRS-36 h. For a borrower. For a borrower who is unmarried,who is unmarried, ~~his or her~~ their AGI is used. If the borrower AGI is used. If the borrower is married,is married, and unless certain exceptions apply, the AGI of both the borrowerand unless certain exceptions apply, the AGI of both the borrower ~~and his or~~
~~her~~ and their spouse is used irrespectivespouse is used irrespective of whether the borrowerof whether the borrower files a joint or separate federal tax return with files a joint or separate federal tax return with ~~his or her~~their spouse. spouse. If a borrowerIf a borrower is marriedis married and certifiesand certifies ~~that~~
~~he or she is~~ that they are separated or separated or isare unable to access information on the income of unable to access information on the income of ~~his or her~~their spouse, then the AGI of only the borrower spouse, then the AGI of only the borrower is used. i. ~~is used.~~
~~CRS-35~~

h. For a borrowerFor a borrower who returns to the REPAYE repayment plan after having repaid according to the REPAYE Alternativewho returns to the REPAYE repayment plan after having repaid according to the REPAYE Alternative repayment repayment ~~pla n~~plan, if it is determined, if it is determined that the that the
~~borrower~~ borrower paid less under the REPAYE Alternativepaid less under the REPAYE Alternative repayment plan than would have been required under the REPAYE repayment plan, payment amounts may be repayment plan than would have been required under the REPAYE repayment plan, payment amounts may be
adjusted upwards to recoup the difference. adjusted upwards to recoup the difference.
ij. .
Periods of repayment according to the Periods of repayment according to the ~~Alternative REPAYE Repayment Plan~~REPAYE Alternative repayment plan may count toward the maximum may count toward the maximum repayment termrepayment term to qualify for loan forgivenessto qualify for loan forgiveness under under
other IDR plans. However,other IDR plans. However, such periods do not qualify for loan forgivenesssuch periods do not qualify for loan forgiveness under the PSLF program.under the PSLF program.

CRS- CRS-3637

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Standard Repayment Plans
Standard repayment plans Standard repayment plans ~~al ow~~allow borrowers to make predictable, level payments borrowers to make predictable, level payments (i.e., monthly payments that remain the same over the life of the loan) on their loans ~~on their loans~~
over a defined period of time. Two standard repayment plans are offered. over a defined period of time. Two standard repayment plans are offered.
Standard Repayment Plan with a ~~Maximum~~ Maximum 10-Year Term
Al All borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans, borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans,
and borrowers of Direct Consolidation Loans that entered repayment prior to July 1, 2006, may and borrowers of Direct Consolidation Loans that entered repayment prior to July 1, 2006, may
select a standard repayment plan that has a maximum repayment period of 10 years. According to select a standard repayment plan that has a maximum repayment period of 10 years. According to
this plan, borrowers make fixed monthly payments of not less than $50 over a period of 10 years; this plan, borrowers make fixed monthly payments of not less than $50 over a period of 10 years;
however, loans with however, loans with ~~smal~~ small balances may be repaid in a period that is shorter than 10 years.balances may be repaid in a period that is shorter than 10 years.91
96 Standard Repayment Plan for Direct Consolidation ~~Loans~~
Loans with 10-Year to 30-Year Terms
Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a
standard repayment plan that has a repayment period of between 10 and 30 years. Under this plan, standard repayment plan that has a repayment period of between 10 and 30 years. Under this plan,
borrowers make fixed monthly payments of not than less than $50.borrowers make fixed monthly payments of not than less than $50.9297 The duration of the The duration of the
repayment period is based on the combined balances of the Direct Consolidation Loan and repayment period is based on the combined balances of the Direct Consolidation Loan and al
all other federal and private education loans owed by the borrower.other federal and private education loans owed by the borrower.9398 However, for purposes of However, for purposes of
determining the repayment period, the combined balance of the other education loans may not be determining the repayment period, the combined balance of the other education loans may not be
greater than the balance of the Direct Consolidation Loan. Repayment periods for the Standard greater than the balance of the Direct Consolidation Loan. Repayment periods for the Standard
Repayment Plan for Direct Consolidation Loans are shown Repayment Plan for Direct Consolidation Loans are shown inin Table 5. ( (The repayment periods The repayment periods
shown also apply to the Graduated Repayment Plan for Direct Consolidation Loans, which is shown also apply to the Graduated Repayment Plan for Direct Consolidation Loans, which is
discussed in a later section.) discussed in a later section.)
Table 5. Repayment Periods: Standard Repayment Plan for Direct Consolidation
Loans and Graduated Repayment Plan for Direct Consolidation Loans
(Borrowers who entered repayment on or after July 1, 2006) (Borrowers who entered repayment on or after July 1, 2006)
Combined Loan Balancea
Maximum
at Start of Repayment
Repayment Period
Less Less than $7,500 than $7,500
10 years 10 years
$7,500, but less than $10,000 $7,500, but less than $10,000
12 years 12 years
$10,000, but less $10,000, but less than $20,000 than $20,000
15 years 15 years
$20,000, but less $20,000, but less than $40,000 than $40,000
20 years 20 years
$40,000, but less $40,000, but less than $60,000 than $60,000
25 years 25 years
$60,000 or more $60,000 or more
30 years 30 years
Source: 34 C.F.R. 34 C.F.R. §§685.208(c)(h) and (j), and 685.220(i). 96 The last payment may be for less than $50. 97 The last payment may be for less than $50. 98 For additional details, see 34 C.F.R. ~~§§685.208(c)(h) and (j), and 685.220(i).~~
~~a. The combined loan balance represents the sum of (1) the outstanding balances on al of the borrower’s~~
~~loans eligible to be included in the Direct Consolidation Loan, plus (2) the outstanding balance of other~~

~~91 T he last payment may be for less than $50.~~
~~92 T he last payment may be for less than $50.~~
~~93 For additional details, see 34 C.F.R.~~ §§685.208(c) and (j), 685.220(i), and U.S. Department of Education, Office of §§685.208(c) and (j), 685.220(i), and U.S. Department of Education, Office of
FederalFederal Student Aid, “Student Aid, “ Repayment Plans: Standard Plan.” https://studentaid.gov/manage-Repayment Plans: Standard Plan.” https://studentaid.gov/manage-
loans/repayment/plans/standard, accessed loans/repayment/plans/standard, accessed ~~May 19, 2021~~February 27, 2023. .
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a. The combined loan balance represents the sum of (1) the outstanding balances on all of the borrower’s loans eligible to be included in the Direct Consolidation Loan, plus (2) the outstanding balance of other federal education loans and private education loans to the extent that the balance of the other education federal education loans and private education loans to the extent that the balance of the other education
loans is not greater than the balance of the Direct Consolidation Loan, the other education loans are not in loans is not greater than the balance of the Direct Consolidation Loan, the other education loans are not in
default, and the other education loans weredefault, and the other education loans were not borrowednot borrowed from an individual. from an individual.
Extended Repayment Plans
Al All borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and
Direct Consolidation Loans may elect to repay according to an extended repayment plan. The Direct Consolidation Loans may elect to repay according to an extended repayment plan. The
extended repayment plans afford borrowers with large total loan balances the opportunity to make extended repayment plans afford borrowers with large total loan balances the opportunity to make
lower monthly payments in return for extending the repayment of their loans for a longer lower monthly payments in return for extending the repayment of their loans for a longer
duration. By extending the repayment term, interest accrues over a longer period of time; as a duration. By extending the repayment term, interest accrues over a longer period of time; as a
consequence, a larger amount of interest is paid under an extended repayment plan than would be consequence, a larger amount of interest is paid under an extended repayment plan than would be
paid according to a standard repayment plan with a 10-year term. There are three extended paid according to a standard repayment plan with a 10-year term. There are three extended
repayment plans. Eligibilityrepayment plans. Eligibility to select an extended repayment plan is limited based on when a to select an extended repayment plan is limited based on when a
borrower’s loans entered repayment and the total outstanding principal balance owed on loans borrower’s loans entered repayment and the total outstanding principal balance owed on loans
made through the Direct Loan program. made through the Direct Loan program.
Extended Fixed Repayment Plan with a Maximum 25-Year Term
This repayment plan is available This repayment plan is available to individualsto individuals who are new borrowers on or after October 7, who are new borrowers on or after October 7,
1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance 1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance
of more than $30,000 on loans made through the Direct Loan program. The Extended Fixed of more than $30,000 on loans made through the Direct Loan program. The Extended Fixed
Repayment Plan Repayment Plan ~~al ows~~allows borrowers to make monthly payments in equal amounts over a period of borrowers to make monthly payments in equal amounts over a period of
25 years from the date their loans entered repayment status.25 years from the date their loans entered repayment status.9499 This results in monthly payment This results in monthly payment
amounts being lower than they would be under a standard repayment plan with a 10-year term. amounts being lower than they would be under a standard repayment plan with a 10-year term.
Extended Graduated Repayment Plan with a Maximum 25-Year Term
Like the above plan, this repayment plan is available Like the above plan, this repayment plan is available to individualsto individuals who are new borrowers on or who are new borrowers on or
after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an
outstanding balance of more than $30,000 on loans made through the Direct Loan program. The outstanding balance of more than $30,000 on loans made through the Direct Loan program. The
Extended Graduated Repayment Plan Extended Graduated Repayment Plan ~~al ows~~allows borrowers to make monthly payments that are borrowers to make monthly payments that are
~~initial y~~ initially low and increase in amount every two years over a repayment period of 25 years from low and increase in amount every two years over a repayment period of 25 years from
the date the borrower’s loans entered repayment status.the date the borrower’s loans entered repayment status.95100 Under this plan, monthly payment Under this plan, monthly payment
amounts increase from an initial payment amount that must be at least $50 to an amount that may amounts increase from an initial payment amount that must be at least $50 to an amount that may
not be greater than three times the initialnot be greater than three times the initial monthly payment amount. monthly payment amount.
Extended Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)
This extended repayment plan is available This extended repayment plan is available to borrowers of loans made through the Direct Loan to borrowers of loans made through the Direct Loan
program who entered repayment prior to July 1, 2006. Under this plan, borrowers make monthly program who entered repayment prior to July 1, 2006. Under this plan, borrowers make monthly
payments in equal amounts over a period that may range from 12 to 30 years from the date their payments in equal amounts over a period that may range from 12 to 30 years from the date their
loans entered repayment status.loans entered repayment status.96101 The minimum monthly payment amount is $50, and the The minimum monthly payment amount is $50, and the
duration of the repayment term is dependent upon the outstanding principal balance of the duration of the repayment term is dependent upon the outstanding principal balance of the

94 99 For additional details, see 34 C.F.R. For additional details, see 34 C.F.R. §685.208(e) and U.S. Department of Education, Office of Federal Student Aid, §685.208(e) and U.S. Department of Education, Office of Federal Student Aid,
“Repayment Plans: Extended Plan,” https://studentaid.gov/manage-loans/repayment/plans/extended, accessed “Repayment Plans: Extended Plan,” https://studentaid.gov/manage-loans/repayment/plans/extended, accessed ~~May 19,~~
~~2021.~~
~~95 Ibid.~~
96February 27, 2023. 100 Ibid. 101 For additional details, see 34 C.F.R. For additional details, see 34 C.F.R. §685.208(d). §685.208(d).
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borrower’s loans made through the Direct Loan program. borrower’s loans made through the Direct Loan program.97102 The extension of the repayment term The extension of the repayment term
results in monthly payment amounts being lower than they would be under a standard repayment results in monthly payment amounts being lower than they would be under a standard repayment
plan with a 10-year term. Repayment periods for the extended repayment plan, by loan amount, plan with a 10-year term. Repayment periods for the extended repayment plan, by loan amount,
are shown below iare shown below in Table 6. (The repayment periods shown in this table also apply to the (The repayment periods shown in this table also apply to the
graduated repayment plan for borrowers who entered repayment prior to July 1, 2006, which is graduated repayment plan for borrowers who entered repayment prior to July 1, 2006, which is
discussed in the next section.) discussed in the next section.)
Table 6. Repayment Periods: Extended Repayment Plan
and Graduated Repayment Plan
(Borrowers who entered repayment prior to July 1, 2006) (Borrowers who entered repayment prior to July 1, 2006)
Outstanding
Maximum
Principal Balancea
Repayment Period
Less Less than $10,000 than $10,000
12 years 12 years
$10,000, but less $10,000, but less than $20,000 than $20,000
15 years 15 years
$20,000, but less $20,000, but less than $40,000 than $40,000
20 years 20 years
$40,000, but less $40,000, but less than $60,000 than $60,000
25 years 25 years
$60,000 or more $60,000 or more
30 years 30 years
Source: 34 C.F.R.34 C.F.R. §§685.208(d), (f) and (i). §§685.208(d), (f) and (i).
Notes: These repayment plans are available to borrowersThese repayment plans are available to borrowers of Direct Subsidized Loans, Directof Direct Subsidized Loans, Direct Unsubsidized Unsubsidized
Loans, DirectLoans, Direct PLUS Loans, and DirectPLUS Loans, and Direct Consolidation Loans who entered repayment priorConsolidation Loans who entered repayment prior to July 1, 2006. to July 1, 2006.
a. Total OPB of loans made through the Directa. Total OPB of loans made through the Direct Loan program.Loan program.
Graduated Repayment Plans
Loan repayment according to the graduated repayment plans is structured so that a borrower’s Loan repayment according to the graduated repayment plans is structured so that a borrower’s
monthly payment amount monthly payment amount ~~wil periodical y~~will periodically change over the course of the repayment period. In change over the course of the repayment period. In
general, borrowers general, borrowers ~~wil~~ will be required to make be required to make ~~smal er~~smaller payments at first and larger payments later. payments at first and larger payments later.
Monthly payment amounts may be less than $50; however, in no instance may they be less than Monthly payment amounts may be less than $50; however, in no instance may they be less than
the amount of interest that accrues. There are three graduated repayment plans. A borrower’s the amount of interest that accrues. There are three graduated repayment plans. A borrower’s
~~eligibility~~ eligibility to select one of the graduated repayment plans depends on loan type and when the to select one of the graduated repayment plans depends on loan type and when the
borrower’s loans entered repayment. borrower’s loans entered repayment.
Graduated Repayment Plan with a Maximum 10-Year Term
Al All borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans
that entered repayment after July 1, 2006, may select a graduated repayment plan that has a that entered repayment after July 1, 2006, may select a graduated repayment plan that has a
maximum repayment period of 10 years. Under this plan, monthly payment amounts increase maximum repayment period of 10 years. Under this plan, monthly payment amounts increase
~~incremental y~~incrementally every two years from an initial amount that may be less than $50 to an amount that every two years from an initial amount that may be less than $50 to an amount that
may not be greater than three times the initialmay not be greater than three times the initial monthly payment amount.monthly payment amount.98

97103 102 In contrast to the Standard Repayment plan for Direct Consolidation Loans, amounts owed on other federal student In contrast to the Standard Repayment plan for Direct Consolidation Loans, amounts owed on other federal student
loans and private education loans are not considered for purposes of determining the duration of the repayment term loans and private education loans are not considered for purposes of determining the duration of the repayment term
under this plan. under this plan.
98103 For additional details, see 34 C.F.R. For additional details, see 34 C.F.R. §685.208(g) and U.S.§685.208(g) and U.S. Department of Education, Office of Federal StudentDepartment of Education, Office of Federal Student Aid, Aid,
“Repayment Plans: Graduated Plan,” https://studentaid.“Repayment Plans: Graduated Plan,” https://studentaid.~~ed.gov/sa/repay-loans/understand~~gov/manage-loans/repayment/plans/graduated, accessed /plans/graduated, accessed
~~May 19, 2021~~February 27, 2023. .
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Graduated Repayment Plan for Direct Consolidation Loans
with 10-Year to 30-Year Terms
Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a
graduated repayment plan that has a repayment period of between 10 and 30 years. Under this graduated repayment plan that has a repayment period of between 10 and 30 years. Under this
plan, monthly payment amounts increase plan, monthly payment amounts increase ~~incremental y~~incrementally every two years from an initial amount every two years from an initial amount
that may be less than $50 to an amount that may not be greater than three times the initial that may be less than $50 to an amount that may not be greater than three times the initial
monthly payment amount.monthly payment amount.99104 The duration of the repayment period is based on the combined The duration of the repayment period is based on the combined
balances of the Direct Consolidation Loan and balances of the Direct Consolidation Loan and al all other federal and private education loans owed other federal and private education loans owed
by the borrower. However, for purposes of determining the repayment period, the combined by the borrower. However, for purposes of determining the repayment period, the combined
balance of the other education loans may not be greater than the balance of the Consolidation balance of the other education loans may not be greater than the balance of the Consolidation
Loan. Repayment periods for the Graduated Repayment Plan for Direct Consolidation Loans are Loan. Repayment periods for the Graduated Repayment Plan for Direct Consolidation Loans are
shown above shown above inin Table 5.
Graduated Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)
Borrowers of loans made through the Direct Loan program who entered repayment prior to July Borrowers of loans made through the Direct Loan program who entered repayment prior to July
1, 2006, may repay their loans according to a graduated repayment plan with a term that can 1, 2006, may repay their loans according to a graduated repayment plan with a term that can
range from 12 to 30 years. Under this plan, monthly payment amounts increase range from 12 to 30 years. Under this plan, monthly payment amounts increase ~~incremental y~~incrementally
every two years from an initial amount that may not be less than either $25 or 50% of the amount every two years from an initial amount that may not be less than either $25 or 50% of the amount
that would be required under the Standard Repayment Plan with a Maximum 10-Year Term to an that would be required under the Standard Repayment Plan with a Maximum 10-Year Term to an
amount that may be no more than 150% of the amount that would be required under the Standard amount that may be no more than 150% of the amount that would be required under the Standard
Repayment Plan with a Maximum 10-Year Term.Repayment Plan with a Maximum 10-Year Term.~~100~~105 The duration of the repayment term is The duration of the repayment term is
determined based on the total outstanding principal balance of the borrower’s loans made through determined based on the total outstanding principal balance of the borrower’s loans made through
the Direct Loan program. Repayment periods for this graduated repayment plan vary by loan the Direct Loan program. Repayment periods for this graduated repayment plan vary by loan
balance, and are shown above ibalance, and are shown above in Table 6.
Income-Driven Repayment (IDR) Plans
Since its establishment, the Direct Loan program has included a requirement that Since its establishment, the Direct Loan program has included a requirement that ~~a repayment~~
~~plan be made available~~ ED make available to borrowers (other than to parent borrowers of Direct PLUS Loans) to borrowers (other than to parent borrowers of Direct PLUS Loans)
~~under which~~a repayment plan under which a borrower’s monthly payment amounts monthly payment amounts ~~would~~are to vary according to vary according to ~~the income of the borrower.101~~
their income.106 For the first 15 years that the Direct Loan program was in operation, an Income-Contingent For the first 15 years that the Direct Loan program was in operation, an Income-Contingent
Repayment (ICR) plan Repayment (ICR) plan ~~fulfil ed~~fulfilled this requirement. Over time, this requirement. Over time, ~~additional repayment plans that~~
~~served this purpose became available~~ED and Congress have established additional repayment plans under which a borrower’s monthly payments vary according to their income. Collectively, these plans have come to be referred to as . Collectively, these plans have come to be referred to as
income-driven repayment (IDR) plans. income-driven repayment (IDR) plans.
Several IDR plans are currently available Several IDR plans are currently available to borrowers: the to borrowers: the ~~Income-Contingent Repayment~~ICR plan, plan,
the Income-Based Repayment (IBR) plan (one version of which is available to individualsthe Income-Based Repayment (IBR) plan (one version of which is available to individuals who who
qualify as a new borrower on or after July 1, 2014, and another which is available to individuals qualify as a new borrower on or after July 1, 2014, and another which is available to individuals
who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment
plan, and the Revised Pay As You Earn (REPAYE) repayment plan. plan, and the Revised Pay As You Earn (REPAYE) repayment plan.
The IDR plans afford borrowers the opportunity to make monthly payments in amounts that are The IDR plans afford borrowers the opportunity to make monthly payments in amounts that are
capped at a specified share or proportion of their capped at a specified share or proportion of their discretionary income over a repayment period over a repayment period

99 104 For additional details, see 34 C.F.R. For additional details, see 34 C.F.R. §685.208(h) and U.S. Department of Education, Office of Federal Student§685.208(h) and U.S. Department of Education, Office of Federal Student Aid, Aid,
“Repayment Plans: Graduated Plan,” https://studentaid.“Repayment Plans: Graduated Plan,” https://studentaid.~~ed.gov/sa/repay-loans/understand~~gov/manage-loans/repayment/plans/graduated, accessed /plans/graduated, accessed
~~May 19, 2021.~~
~~100~~February 27, 2023. 105 For additional details, see 34 C.F.R. For additional details, see 34 C.F.R. §685.208(f). §685.208(f).
~~101~~106 HEA, §455(d)(1)(D). HEA, §455(d)(1)(D).
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that may not exceed a specified duration that may not exceed a specified duration. Discretionary income is defined as the portion of a Discretionary income is defined as the portion of a
borrower’s adjusted gross income (AGI) that is in excess of a specified multiple of the federal borrower’s adjusted gross income (AGI) that is in excess of a specified multiple of the federal
poverty guidelines applicable to the borrower’s family size. In general, a borrower’s family size poverty guidelines applicable to the borrower’s family size. In general, a borrower’s family size
includes the borrower, the borrower’s spouse, and the borrower’s children, and may include other includes the borrower, the borrower’s spouse, and the borrower’s children, and may include other
individualsindividuals who both live with the borrower and receive more than half of their support from the who both live with the borrower and receive more than half of their support from the
borrower.borrower.~~102~~107 The portion of a borrower’s income that is below the federal poverty guideline The portion of a borrower’s income that is below the federal poverty guideline
multiple that is applicable to a particular IDR plan may be considered nondiscretionary income, multiple that is applicable to a particular IDR plan may be considered nondiscretionary income,
or income that may be needed for purposes of meeting certain basic needs such as food and or income that may be needed for purposes of meeting certain basic needs such as food and
shelter. Multiples of the federal poverty guidelines that are applicable to the IDR plans are shelter. Multiples of the federal poverty guidelines that are applicable to the IDR plans are
presented below ipresented below in Table 7 for family sizes of one through eight persons. for family sizes of one through eight persons.
Table 7. ~~2021Poverty~~2023Poverty Guidelines for the 48 Contiguous States and the
District of Columbia
(Selected multiples) (Selected multiples)

Number of Persons in Family or Household
Multiple
1
2
3
4
5
6
7
8
100% 100%
$ $~~12,880~~
~~$17,420~~
~~$21,960~~
~~$26,500~~
~~$31,040~~
~~$35,580~~
~~$40,120~~
~~$44,660~~
~~150%~~
~~$19,320~~
~~$26,130~~
~~$32,940~~
~~$39,750~~
~~$46,560~~
~~$53,370~~
~~$60,180~~
~~$66,990~~14,580 $19,720 $24,860 $30,000 $35,140 $40,280 $45,420 $50,560 150% $21,870 $29,580 $37,290 $45,000 $52,710 $60,420 $68,130 $75,840
Source: U.S. Department of Health and Human Services,U.S. Department of Health and Human Services, ~~Office of the Assistant Secretary for Planning and~~
~~Evaluation,~~ “U.S. Federal Poverty Guidelines “U.S. Federal Poverty Guidelines Used to DetermineUsed to Determine Financial EligibilityFinancial Eligibility for Certain Federal for Certain Federal
~~Programs,” January 26, 2021, https://aspe.hhs.gov/2021-poverty-guidelines~~Programs,” 88 Federal Register 3424, January 19, 2023. .
Notes: For families/householdsFor families/households with morewith more than eight persons,than eight persons, add $4,540 for each additional person.add $4,540 for each additional person.
Separate, higher poverty guidelines apply to Alaska and Separate, higher poverty guidelines apply to Alaska and ~~Hawai~~ Hawaii. For example,. For example, 100% of the poverty guideline for a 100% of the poverty guideline for a
one person family/householdone person family/household ~~is $16,090~~ is $18,210 in Alaska, in Alaska, and $and $~~14,820 in Hawai~~ 16,770 in Hawaii. If a borrower. If a borrower is not a resident of a is not a resident of a
state, the poverty guidelines applicable to the 48 contiguous states and the Districtstate, the poverty guidelines applicable to the 48 contiguous states and the District of Columbia are used. of Columbia are used.
Poverty guidelines are adjusted Poverty guidelines are adjusted ~~annual y~~annually based on the percentage change in the Consumer Price Index for based on the percentage change in the Consumer Price Index for Al
All Urban Consumers (CPI-U). Urban Consumers (CPI-U).
The various IDR plans are primarily distinguished by (1) the multiple (e.g., 100%, 150%) of the The various IDR plans are primarily distinguished by (1) the multiple (e.g., 100%, 150%) of the
federal poverty guidelines used to define discretionary income, (2) the percentage of a borrower’s federal poverty guidelines used to define discretionary income, (2) the percentage of a borrower’s
discretionary income (e.g., 10%, 15%, 20%) that is assessed as being available for purposes of discretionary income (e.g., 10%, 15%, 20%) that is assessed as being available for purposes of
making student loan payments, and (3) the maximum duration of the repayment term (e.g., 20 making student loan payments, and (3) the maximum duration of the repayment term (e.g., 20
~~years~~years/240 months, 25 years, 25 years/300 months). The IDR plans also share other common characteristics that include the ). The IDR plans also share other common characteristics that include the
following:following:
 • Required certification of income and family size. The processes for The processes for
determining IDR plan monthly payment amounts take into account a borrower’s determining IDR plan monthly payment amounts take into account a borrower’s
income and family size. Consequently, on an annual basis borrowers must income and family size. Consequently, on an annual basis borrowers must
provide documentation of their income and must certify their family size to provide documentation of their income and must certify their family size to

~~102~~ 107 34 C.F.R. §§685.209(a)(1(iv); 685.209(c)(1)(iii), and 685.221(a)(3). Borrowers are required 34 C.F.R. §§685.209(a)(1(iv); 685.209(c)(1)(iii), and 685.221(a)(3). Borrowers are required to certify their family to certify their family
size once per year. A borrower’ssize once per year. A borrower’s children may includechildren may include unborn children expected to be born duringunborn children expected to be born during the year the the year the
borrower certifies family size. borrower certifies family size.
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become and remain eligible become and remain eligible for IDR plan repayment.for IDR plan repayment.~~103~~108 In addition, borrowers In addition, borrowers
may update their income and family size at any time if either changes.may update their income and family size at any time if either changes.~~104~~
109 • Potential negative amortization. IDR plan payment amounts are capped at no IDR plan payment amounts are capped at no
more than a certain proportion of a borrower’s discretionary income. As a result, more than a certain proportion of a borrower’s discretionary income. As a result,
in some circumstances required payment amounts may be less than the amount of in some circumstances required payment amounts may be less than the amount of
interest that accrues, which may lead to a borrower’s loan(s) becoming interest that accrues, which may lead to a borrower’s loan(s) becoming
negatively amortized.negatively amortized.~~105~~
110 • Potential availability of loan forgiveness. Al All the IDR plans make availablethe IDR plans make available the the
prospect of eventual loan forgiveness if a borrower, after making payments prospect of eventual loan forgiveness if a borrower, after making payments
according to one or more of the IDR plans, has been unable to fully repay according to one or more of the IDR plans, has been unable to fully repay ~~his or~~
~~her~~ their student loan debt by the end of the maximum repayment term.student loan debt by the end of the maximum repayment term.~~106~~111 Payments Payments
made on defaulted loans repaid according to the IDR plans do not count toward a made on defaulted loans repaid according to the IDR plans do not count toward a
borrower’s eligibilityborrower’s eligibility for loan forgiveness. for loan forgiveness.
Each of the IDR plans are described in detail below. Each of the IDR plans are described in detail below.
In April 2022, in response to the COVID-19 pandemic and to address “historical failures in the administration of the federal student loan programs,”112 ED announced a one-time adjustment to borrower loan accounts to revise the number of IDR-qualifying payments for the purposes of satisfying the maximum repayment period in the IDR plans. For information on this adjustment, see Appendix D. Income-Contingent Repayment (ICR) Plan
The Income-Contingent Repayment plan permits borrowers to make payments on eligible student The Income-Contingent Repayment plan permits borrowers to make payments on eligible student
loans in amounts that are determined according to procedures that take into account a borrower’s loans in amounts that are determined according to procedures that take into account a borrower’s
adjusted gross income and family size. Any loan balance that remains unpaid after 25 years of adjusted gross income and family size. Any loan balance that remains unpaid after 25 years of
repayment according to the ICR plan and other qualified plans repayment according to the ICR plan and other qualified plans ~~wil~~ will be forgiven. be forgiven. ~~Specifications for~~
By and large, specifications for the ICR plan are established by the Secretarythe ICR plan are established by the Secretary ~~and are codified in regulations. An income-~~
~~contingent repayment plan has been available to borrowers since the establishment of the Direct~~
~~Loan program in 1994.107~~
Eligibility. The ICR plan is available to al borrowers of Direct Subsidized Loans, Direct
~~Unsubsidized Loans, Direct PLUS Loans made to graduate and professional students, and Direct~~
~~Consolidation Loans.108 Direct PLUS Loans made to parent borrowers are not eligible to be~~

~~103 U.S.~~ in regulations. An income- 108 U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, ~~“In come~~ “Income-Driven Repayment (IDR) Plan Request,” -Driven Repayment (IDR) Plan Request,”
OMB No. 1845-0102. In response to the COVID-19 pandemic, ED has stated that borrowers willOMB No. 1845-0102. In response to the COVID-19 pandemic, ED has stated that borrowers will not be requirednot be required to to
recertify their income through at least recertify their income through at least ~~September 30, 2021, regardless of whether their recertification date would have~~
~~happened prior to that date~~six months after the COVID-19 student loan payment pause ends (i.e., a special administrative forbearance available in light of the COVID-19 pandemic). U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and . U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and
Forbearance Info for Students, Borrowers, and Parents,” https://studentaid.gov/announcements-Forbearance Info for Students, Borrowers, and Parents,” https://studentaid.gov/announcements-
events/events/~~coronavirus#~~covid-19/income-driven-repaymentincome-driven-repayment#when-to-recertify, accessed , accessed ~~May 21, 2021.~~
~~104 T he~~February 27, 2023. 109 The Fostering Undergraduate Fostering Undergraduate ~~T alent~~Talent by Unlocking Resources by Unlocking Resources for Education Act (the for Education Act (the ~~FUT URE~~FUTURE Act; P.L. 116 Act; P.L. 116 -91), -91),
among other provisions, authorizes the Internal Revenue Service (with borrower approval) to disclose relevant tax among other provisions, authorizes the Internal Revenue Service (with borrower approval) to disclose relevant tax
return information to ED for the purpose of determining a Direct Loan borrowerreturn information to ED for the purpose of determining a Direct Loan borrower'’s eligibilitys eligibility for and repayment for and repayment
obligations under IDR plans. Authorized disclosuresobligations under IDR plans. Authorized disclosures ~~include~~ include (1) taxpayer identity information, (2) filing status, (3) (1) taxpayer identity information, (2) filing status, (3)
adjustedadjusted ~~gross~~ gross income, (4) total number of claimed exemptions, (5) the number of dependents taken into account for income, (4) total number of claimed exemptions, (5) the number of dependents taken into account for
determining the Childdetermining the Child ~~T ax~~ Tax Credit under IRC Credit under IRC Section 24, and (6) the fact that no return was filedSection 24, and (6) the fact that no return was filed (if applicable). As of (if applicable). As of
the publication date of this report, it appears these procedures have not yet beenthe publication date of this report, it appears these procedures have not yet been operationalized. operationalized.
~~105 T o~~110 To offset some of the adverse effects of negative amortization, all of the IDR plans except the ICR plan offer some offset some of the adverse effects of negative amortization, all of the IDR plans except the ICR plan offer some
form of interest subsidyform of interest subsidy to borrowers whoseto borrowers whose loans are in a period of negative amortization. loans are in a period of negative amortization.
~~106~~ 111 Forgiven, or discharged, Forgiven, or discharged, ~~indebtedness~~ indebtedness may be subjectmay be subject to being includedto being included as part of a borrower’s grossas part of a borrower’s gross income for income for
federal, and possibly state, income tax purposes. For additional information, see the section onfederal, and possibly state, income tax purposes. For additional information, see the section on “ “Tax Treatment of
Discharged and Forgiven Debt ” ~~below.~~
~~107 T he ICR plan has been modified several times since the Direct Loan program was established. In general, the~~
~~regulations in effect at the time a borrower selects the ICR plan govern the method for determining the borrower’s~~
~~monthly payment amounts. 34 C.F.R. §685.208(k)(3). T his description is based on provisions for the ICR plan~~
~~specified in current regulations. 34 C.F.R. §685.209(b).~~
~~108 T he repayment of Direct Consolidat ion Loans according to the ICR plan is not restricted based on the types of loans~~
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” below. 112 U.S. Department of Education, “Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs,” press release, April 19, 2022, https://www.ed.gov/news/press-releases/department-education-announces-actions-fix-longstanding-failures-student-loan-programs. Congressional Research Service 43 link to page 48 link to page 48 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program contingent repayment plan has been available to borrowers since the establishment of the Direct Loan program in 1994.113 Eligibility. The ICR plan is available to all borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate and professional students, and Direct Consolidation Loans.114 Direct PLUS Loans made to parent borrowers are not eligible to be repaid according to the ICR plan; however, parent borrowers of Direct PLUS Loans may qualify repaid according to the ICR plan; however, parent borrowers of Direct PLUS Loans may qualify
to repay those loans according to the ICR plan by consolidating them into a Direct Consolidation to repay those loans according to the ICR plan by consolidating them into a Direct Consolidation
Loan. There are no specific income restrictions that limit a borrower’s eligibility to repay Loan. There are no specific income restrictions that limit a borrower’s eligibility to repay
according to the ICR plan. according to the ICR plan.
Payment Amounts. Under the ICR plan, monthly payment amounts are calculated according to Under the ICR plan, monthly payment amounts are calculated according to
procedures that take into account factors including the outstanding loan balance at the time the procedures that take into account factors including the outstanding loan balance at the time the
borrower’s loans enter repayment status, the interest rates applicable to those loans, the amount of borrower’s loans enter repayment status, the interest rates applicable to those loans, the amount of
any unpaid accrued interest, the borrower’s any unpaid accrued interest, the borrower’s ~~adjusted gross income (AGI)~~AGI and family size, and an and family size, and an
income percentage factor. For a married borrower who files a joint federal tax return with income percentage factor. For a married borrower who files a joint federal tax return with ~~his or~~
~~her~~their spouse, the AGI for both spouses is used; for a married borrower who files a separate federal spouse, the AGI for both spouses is used; for a married borrower who files a separate federal
tax return, only the AGI of the borrower is used. Consistent with these criteria, monthly payment tax return, only the AGI of the borrower is used. Consistent with these criteria, monthly payment
amounts are the lesser of amounts are the lesser of
• a monthly payment amount calculated according to a 12-year amortization a monthly payment amount calculated according to a 12-year amortization
schedule, multiplied by an income percentage factor that corresponds to the schedule, multiplied by an income percentage factor that corresponds to the
borrower’s AGI and tax filing status;borrower’s AGI and tax filing status;~~109 or~~
115 or • one-twelfth of 20% of the amount by which the borrower’s AGI exceeds 100% of one-twelfth of 20% of the amount by which the borrower’s AGI exceeds 100% of
the federal poverty guideline applicable to the borrower’s family size ( the federal poverty guideline applicable to the borrower’s family size (seesee Table
7)..
Monthly payment amounts may range from $0 for a borrower with an income at or below 100% Monthly payment amounts may range from $0 for a borrower with an income at or below 100%
of the federal poverty guideline to amounts more than sufficient to repay the borrower’s loans in of the federal poverty guideline to amounts more than sufficient to repay the borrower’s loans in
12 years or less. For a borrower whose calculated monthly payment results in an amount that is 12 years or less. For a borrower whose calculated monthly payment results in an amount that is
greater than $0 but less than $5, a minimum monthly payment amount of $5 is required. Monthly greater than $0 but less than $5, a minimum monthly payment amount of $5 is required. Monthly
payment amounts are recalculated payment amounts are recalculated ~~annual y~~annually to take into account changes (e.g., borrower AGI, the to take into account changes (e.g., borrower AGI, the
amount of any unpaid accrued interest) that may have occurred over the past year. amount of any unpaid accrued interest) that may have occurred over the past year.
Joint ICR Plan Repayment for Married Borrowers. Borrowers of loans made through the . Borrowers of loans made through the
Direct Loan program who are married to each other may elect to repay their loans jointly. Married Direct Loan program who are married to each other may elect to repay their loans jointly. Married
borrowers must file a joint federal tax return to qualify for Joint ICR plan repayment. Under this borrowers must file a joint federal tax return to qualify for Joint ICR plan repayment. Under this
option, the sum of the outstanding loan balances of each borrower, as of the time they elect joint option, the sum of the outstanding loan balances of each borrower, as of the time they elect joint
repayment, is used to determine their combined monthly payment amount according to the repayment, is used to determine their combined monthly payment amount according to the
procedures described above for the ICR plan. Payments made by married borrowers repaying procedures described above for the ICR plan. Payments made by married borrowers repaying
~~jointly are applied to each borrower’s loans in proportion to each borrower’s share of the~~
~~combined outstanding balance.110~~
Subsidized Interest. No special interest subsidies are made available to borrowers as part of the
~~ICR plan.~~
Application of Payments. Payments made by borrowers under the ICR plan are first applied to
~~any outstanding charges or collection costs, then to outstanding interest due on the loan, and then~~
~~to principal. Under the ICR plan formula, it is possible that a borrower’s monthly payment~~
~~amount may be for less than the amount of interest that has accrued since the last payment.~~

~~that have been included in a Direct Consolidation Loan.~~
~~109~~ 113 The ICR plan has been modified several times since the Direct Loan program was established. In general, the regulations in effect at the time a borrower selects the ICR plan govern the method for determining the borrower’s monthly payment amounts. 34 C.F.R. §685.208(k)(3). This description is based on provisions for the ICR plan specified in current regulations. 34 C.F.R. §685.209(b). 114 The repayment of Direct Consolidation Loans according to the ICR plan is not restricted based on the types of loans that have been included in a Direct Consolidation Loan. 115 Income percentage factors range from 50.52% to 200%, depending on a borrower’s AGI Income percentage factors range from 50.52% to 200%, depending on a borrower’s AGI and income tax filing and income tax filing
status. Income percentage factors for selected AGIstatus. Income percentage factors for selected AGI amounts and tax filing statuses are specified in a table published amounts and tax filing statuses are specified in a table published
annually by ED; and for borrowers whoseannually by ED; and for borrowers whose AGI fallsAGI falls between amounts listed in the table, linear interpolation is usedbetween amounts listed in the table, linear interpolation is used to to
determine their income determine their income ~~percent age~~percentage factor. See U.S. Department of Education, Office of Federal Student Aid, factor. See U.S. Department of Education, Office of Federal Student Aid, “ “Annual Annual
Updates to the Income Contingent Repayment (ICR) Plan Formula for Updates to the Income Contingent Repayment (ICR) Plan Formula for ~~20 21~~2022—William D. Ford Federal—William D. Ford Federal Direct Loan Direct Loan
Program,” Program,” 8687 Federal Register, , ~~19607-19611, April 14, 2021.~~
~~110 34 C.F.R. §685.209(b)(2)~~50615, August 17, 2022. .
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Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program jointly are applied to each borrower’s loans in proportion to each borrower’s share of the combined outstanding balance.116 Subsidized Interest. No special interest subsidies are made available to borrowers as part of the ICR plan. Application of Payments. Payments made by borrowers under the ICR plan are first applied to any outstanding charges or collection costs, then to outstanding interest due on the loan, and then to principal. Under the ICR plan formula, it is possible that a borrower’s monthly payment amount may be for less than the amount of interest that has accrued since the last payment. ~~the William D. Ford Federal Direct Loan Program~~

Should this occur, interest Should this occur, interest ~~wil~~ will continue to accrue on the outstanding principal balance and unpaid continue to accrue on the outstanding principal balance and unpaid
interest that has accumulated; it interest that has accumulated; it ~~wil~~ will be capitalized into the principal balance of the loan once per be capitalized into the principal balance of the loan once per
year. However, unpaid accrued interest may only be capitalized until the outstanding principal year. However, unpaid accrued interest may only be capitalized until the outstanding principal
balance reaches 110% of the amount of the original principal balance as of when the borrower’s balance reaches 110% of the amount of the original principal balance as of when the borrower’s
loan(s) entered repayment. Once the OPB has reached 110% of the original principal balance, loan(s) entered repayment. Once the OPB has reached 110% of the original principal balance,
unpaid accrued interest may continue to accumulate but unpaid accrued interest may continue to accumulate but ~~wil~~ will no longer be capitalized. Effective July 1, 2023, ED regulations eliminate instances of interest capitalization that are not specified in the HEA, such as annual interest capitalization under the ICR plan, and accordingly, also eliminate provisions limiting the amount of interest capitalization under the ICR plan.117 ~~no longer be capitalized.~~
Failure to Certify Income and Family Size. To qualify and remain eligible To qualify and remain eligible to repay according to to repay according to
the ICR plan, borrowers must the ICR plan, borrowers must ~~annual y~~annually provide certification of their income and family size to provide certification of their income and family size to
ED. Certification of income is ED. Certification of income is ~~normal y~~normally satisfied by providing the borrower’s AGI. However, if satisfied by providing the borrower’s AGI. However, if
the borrower’s AGI does not reflect the borrower’s AGI does not reflect ~~his or her~~their current income, alternative documentation of current income, alternative documentation of
income may be provided. If the borrower fails to provide certification of income, income may be provided. If the borrower fails to provide certification of income, ~~his or her~~
their monthly payment amount monthly payment amount ~~wil~~ will be recalculated to equal the amount the borrower would have paid be recalculated to equal the amount the borrower would have paid
according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount
owed at the time owed at the time ~~he or she~~they first elected to repay according to the ICR plan. The repayment period first elected to repay according to the ICR plan. The repayment period
based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify
~~his or her~~their family size, a family size of one family size, a family size of one ~~wil~~ will be assumed and used for the year. be assumed and used for the year.
Maximum Repayment Period and Loan Forgiveness. The ICR plan has a maximum The ICR plan has a maximum
repayment period of 25 years. If a borrower repays according to the ICR plan and obtains an repayment period of 25 years. If a borrower repays according to the ICR plan and obtains an
additional loan that is eligibleadditional loan that is eligible to be repaid according to the plan, a new, separate repayment to be repaid according to the plan, a new, separate repayment
period period ~~wil~~ will begin for the new loan when it enters repayment. If after 25 years of having repaid a begin for the new loan when it enters repayment. If after 25 years of having repaid a
nondefaulted loan or loans according to the ICR plan or certain other repayment plans, or having nondefaulted loan or loans according to the ICR plan or certain other repayment plans, or having
qualified for and received an economic hardship deferment, a borrower qualified for and received an economic hardship deferment, a borrower ~~stil~~ still has an outstanding has an outstanding
loan balance, the remaining unpaid balance loan balance, the remaining unpaid balance ~~wil~~ will be discharged (i.e., forgiven). The maximum 25-be discharged (i.e., forgiven). The maximum 25-
year repayment period for the ICR plan, after which loan forgiveness may be granted, includes year repayment period for the ICR plan, after which loan forgiveness may be granted, includes
periods during which the borrower periods during which the borrower
• made monthly payments (including payments of $0) according to the ICR plan made monthly payments (including payments of $0) according to the ICR plan,;
• made monthly payments (including payments of $0) according to an IBR plan made monthly payments (including payments of $0) according to an IBR plan
while experiencing a partial financial hardship; while experiencing a partial financial hardship;
• made monthly payments, either as part of an IBR plan after no longer having a made monthly payments, either as part of an IBR plan after no longer having a
partial financial hardship or after leaving an IBR plan, in amounts calculated partial financial hardship or after leaving an IBR plan, in amounts calculated
according to the Standard Repayment Plan with a Maximum 10-Year Term, according to the Standard Repayment Plan with a Maximum 10-Year Term,
based on the outstanding balance as of when the borrower first began repaying based on the outstanding balance as of when the borrower first began repaying
according to an IBR plan; according to an IBR plan;
 116 34 C.F.R. §685.209(b)(2). 117 ED, Final Rule, November 1, 2022. Congressional Research Service 45 link to page 44 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • made monthly payments (including payments of $0) according to the PAYE made monthly payments (including payments of $0) according to the PAYE
repayment plan or the REPAYE repayment plan; repayment plan or the REPAYE repayment plan;
• made monthly payments according to the REPAYE Alternative made monthly payments according to the REPAYE Alternative Repayment plan Repayment plan
prior to changing to an IBR plan; prior to changing to an IBR plan;
• made monthly payments on a Direct Subsidized Loan, a Direct Unsubsidized made monthly payments on a Direct Subsidized Loan, a Direct Unsubsidized
Loan, or a Direct PLUS Loan according to the Standard Repayment Plan with a Loan, or a Direct PLUS Loan according to the Standard Repayment Plan with a
Maximum 10-Year Term during the portion of the maximum 10-year repayment Maximum 10-Year Term during the portion of the maximum 10-year repayment
period that remains after the borrower ceases to repay according to an IBR plan; period that remains after the borrower ceases to repay according to an IBR plan;
• made payments on a Direct Consolidation Loan according to the Standard made payments on a Direct Consolidation Loan according to the Standard
Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms
or the Graduate Repayment Plan for Direct Consolidation Loans with 10-Year to or the Graduate Repayment Plan for Direct Consolidation Loans with 10-Year to
30-Year Terms during the portion of the maximum 10-year to 30-year repayment 30-Year Terms during the portion of the maximum 10-year to 30-year repayment
period that remains after the borrower ceases to repay according to an IBR plan; period that remains after the borrower ceases to repay according to an IBR plan;
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• made monthly payments according to the Standard Repayment Plan with a made monthly payments according to the Standard Repayment Plan with a
Maximum 10-Year Term; Maximum 10-Year Term;
• made monthly payments during periods after October 1, 2007, according to any made monthly payments during periods after October 1, 2007, according to any
repayment plan in amounts not less than the amount required under the Standard repayment plan in amounts not less than the amount required under the Standard
Repayment Plan with a Maximum 10-Year Term; Repayment Plan with a Maximum 10-Year Term;
• only for borrowers who entered repayment prior to October 1, 2007, and only if only for borrowers who entered repayment prior to October 1, 2007, and only if
the applicable repayment term is for not more than 12 years, made payments the applicable repayment term is for not more than 12 years, made payments
according to the Standard Repayment Plan for Direct Consolidation Loans with according to the Standard Repayment Plan for Direct Consolidation Loans with
10-Year to 30-Year Terms, the Extended Repayment Plan for Direct 10-Year to 30-Year Terms, the Extended Repayment Plan for Direct
Consolidation Loans with 10-Year to 30-Year Terms, or the Graduated Consolidation Loans with 10-Year to 30-Year Terms, or the Graduated
Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms
(see(see Table 5);
• received an economic hardship deferment; received an economic hardship deferment;~~111~~118 or or
• had monthly payments suspended under the COVID-19 payment had monthly payments suspended under the COVID-19 payment ~~suspension (see~~
~~section on “COVID-19 Loan Payment Suspension”~~pause (see Appendix D). ).
Income-Based Repayment (IBR) Plans
The Income-Based Repayment plans permit borrowers to repay eligible student loans according The Income-Based Repayment plans permit borrowers to repay eligible student loans according
to procedures that limit monthly payment amounts based on criteria that take into account a to procedures that limit monthly payment amounts based on criteria that take into account a
borrower’s adjusted gross income, family size, and monthly payment amount as calculated borrower’s adjusted gross income, family size, and monthly payment amount as calculated
according to a standard 10-year repayment period, based on the greater of the amount owed at the according to a standard 10-year repayment period, based on the greater of the amount owed at the
time the borrower time the borrower ~~initial y~~initially entered repayment or the amount owed at the time the borrower elects entered repayment or the amount owed at the time the borrower elects
to repay according to the IBR plan. Any loan balance that remains after the maximum repayment to repay according to the IBR plan. Any loan balance that remains after the maximum repayment
period of the plan period of the plan ~~wil~~ will be forgiven. There are two IBR plan versions that function similarly. They be forgiven. There are two IBR plan versions that function similarly. They
are differentiated by (1) the date used to delimit borrower eligibilityare differentiated by (1) the date used to delimit borrower eligibility (July 1, 2014), (2) the (July 1, 2014), (2) the
percentage of discretionary income used to determine borrower eligibility for the plan and percentage of discretionary income used to determine borrower eligibility for the plan and
monthly payment amounts (15% or 10%), and (3) the maximum repayment period (25 years or 20 monthly payment amounts (15% or 10%), and (3) the maximum repayment period (25 years or 20
years). The description that follows distinguishes between the two IBR plan versions as years). The description that follows distinguishes between the two IBR plan versions as
applicable. applicable.
The initial The initial version of the IBR plan was established under the College Cost Reduction and Access version of the IBR plan was established under the College Cost Reduction and Access
Act of 2008 (CCRAA; P.L. 110-84), and on July 1, 2009, it became availableAct of 2008 (CCRAA; P.L. 110-84), and on July 1, 2009, it became available to borrowers of to borrowers of
loans made through the Direct Loan program and the FFEL program, irrespective of when an loans made through the Direct Loan program and the FFEL program, irrespective of when an
~~individual~~ 118 34 C.F.R. §685.209(b)(3)(iii)(B). Congressional Research Service 46 link to page 48 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program individual had borrowed a loan through either program. (Hereinafter, this version is referred to as had borrowed a loan through either program. (Hereinafter, this version is referred to as
the the Original IBR plan.) Amendments to the IBR plan were enacted in 2010 under the SAFRA Act .) Amendments to the IBR plan were enacted in 2010 under the SAFRA Act
(Title II of the HCERA;(Title II of the HCERA; P.L. 111-152), and a revised version of the IBR plan was made available P.L. 111-152), and a revised version of the IBR plan was made available
to individualsto individuals who, on or after July 1, 2014, became new borrowers of loans made through the who, on or after July 1, 2014, became new borrowers of loans made through the
Direct Loan program. (Hereinafter, this version is referred to as the Direct Loan program. (Hereinafter, this version is referred to as the IBR Plan for Post-July 1,
2014, New Borrowers.) .)
Eligibility. With certain exceptions, federal student loans made through both the Direct Loan With certain exceptions, federal student loans made through both the Direct Loan
program and the FFEL program are considered eligible loans for purposes of repayment program and the FFEL program are considered eligible loans for purposes of repayment
according to the Original IBR plan,according to the Original IBR plan,~~112~~119 while only loans made through the Direct Loan program while only loans made through the Direct Loan program
are eligibleare eligible for repayment according to the IBR plan for Post-July 1, 2014, New Borrowers. In for repayment according to the IBR plan for Post-July 1, 2014, New Borrowers. In

~~111 34 C.F.R. §685.209(b)(3)(iii)(B).~~
~~112 For borrowers with loans made through both the Direct Loan program and the FFEL program, repayment is~~
~~coordinated for those who wish to repay both types of loans according to the Original IBR plan. In such cases, payment~~
~~amounts are calculated in proportion to the outstanding balance of eligible loans owed under the respective programs.~~
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~~both cases, exceptions pertain to loans made to parent borrowers.~~both cases, Direct PLUS Loans and FFEL Direct PLUS Loans and FFEL
PLUS Loans that were made to a parent borrower and Direct Consolidation Loans and FFEL PLUS Loans that were made to a parent borrower and Direct Consolidation Loans and FFEL
Consolidation Loans that that were used to repay either a Direct PLUS Loan or a FFEL PLUS Consolidation Loans that that were used to repay either a Direct PLUS Loan or a FFEL PLUS
Loan that was made to a parent borrower are ineligible to be repaid according to either of the IBR Loan that was made to a parent borrower are ineligible to be repaid according to either of the IBR
plans. These loans to parent borrowers are also excluded from being considered when plans. These loans to parent borrowers are also excluded from being considered when
determining a borrower’s eligibility for IBR plan repayment. This discussion addresses the IBR determining a borrower’s eligibility for IBR plan repayment. This discussion addresses the IBR
plans availableplans available through the Direct Loan program. through the Direct Loan program.
Partial Financial Hardship. To be eligible To be eligible to begin repaying according to an IBR plan, a to begin repaying according to an IBR plan, a
borrower must be determined to have a borrower must be determined to have a partial financial hardship. The criteria for determining . The criteria for determining
whether a borrower has a partial financial hardship take into account the borrower’s federal whether a borrower has a partial financial hardship take into account the borrower’s federal
income tax filing status (e.g., single, married filing jointly), AGI, family size, multiples of the income tax filing status (e.g., single, married filing jointly), AGI, family size, multiples of the
federal poverty guidelines applicable to the borrower’s family size, and monthly payment federal poverty guidelines applicable to the borrower’s family size, and monthly payment
amounts as calculated according to a standard 10-year repayment period based on the greater of amounts as calculated according to a standard 10-year repayment period based on the greater of
the amount owed at the time the borrower the amount owed at the time the borrower ~~initial y~~initially entered repayment or the amount owed at the entered repayment or the amount owed at the
time the borrower elects to repay according to the IBR plan. time the borrower elects to repay according to the IBR plan.
If a borrower is single, or is married and files an individual If a borrower is single, or is married and files an individual federal tax return, federal tax return, ~~he or she is~~
they are determined to have a partial financial hardship if the total annual payments for determined to have a partial financial hardship if the total annual payments for al all of the of the
borrower’s eligible loans, as calculated according to a standard 10-year repayment period, are borrower’s eligible loans, as calculated according to a standard 10-year repayment period, are
greater than the applicable percentage (15% greater than the applicable percentage (15% ~~or 10%) of his or her~~for the Original IBR Plan or 10% for the IBR plan for Post-July 1, 2014, New Borrowers) of their discretionary income. If a discretionary income. If a
borrower is married and files a joint federal tax return, borrower is married and files a joint federal tax return, ~~he or she is~~they are determined to have a partial determined to have a partial
financial hardship if the total annual payments for financial hardship if the total annual payments for al all of the eligibleof the eligible loans of the borrower and, if loans of the borrower and, if
applicable, the eligibleapplicable, the eligible loans of the borrower’s spouse, as calculated according to a standard 10-loans of the borrower’s spouse, as calculated according to a standard 10-
year repayment period, are greater than the applicable percentage of the combined discretionary year repayment period, are greater than the applicable percentage of the combined discretionary
income of the borrower and the borrower’s spouse. Discretionary income is defined as the portion income of the borrower and the borrower’s spouse. Discretionary income is defined as the portion
of a borrower’s adjusted gross income that is in excess of 150% of the poverty guideline that is of a borrower’s adjusted gross income that is in excess of 150% of the poverty guideline that is
applicable to applicable to ~~his or her~~their family size. If the total annual payments for family size. If the total annual payments for al all of the borrower’s eligible of the borrower’s eligible
loans, as calculated according to a standard 10-year repayment period, do not exceed 15% or 10% loans, as calculated according to a standard 10-year repayment period, do not exceed 15% or 10%
~~of his or her~~of their discretionary income, as applicable, the borrower is no longer considered as having a discretionary income, as applicable, the borrower is no longer considered as having a
partial financial hardship. partial financial hardship.
Payment Amounts. During periods while a borrower has a partial financial hardship and repays During periods while a borrower has a partial financial hardship and repays
according to an IBR plan, monthly amounts due on according to an IBR plan, monthly amounts due on ~~his or her~~their loans may range from $0, for a loans may range from $0, for a
borrower with an AGI that is at or below 150% of the poverty guideline, to a maximum of one-borrower with an AGI that is at or below 150% of the poverty guideline, to a maximum of one-
twelfth of the specified percentage factor (15% or 10%) of a borrower’s discretionary income. twelfth of the specified percentage factor (15% or 10%) of a borrower’s discretionary income.
For example, based on the For example, based on the ~~2021~~2023 HHS Poverty Guidelines, 150% of the poverty guideline for a HHS Poverty Guidelines, 150% of the poverty guideline for a
family of one in the 48 contiguous states and the District of Columbia is $family of one in the 48 contiguous states and the District of Columbia is $~~19,320~~21,870. (Se. (See Table 7)
 119 For borrowers with loans made through both the Direct Loan program and the FFEL program, repayment is coordinated for those who wish to repay both types of loans according to the Original IBR plan. In such cases, payment amounts are calculated in proportion to the outstanding balance of eligible loans owed under the respective programs. Congressional Research Service 47 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • In the Original IBR plan, a single borrower with an adjusted gross income of $40,000 In the Original IBR plan, a single borrower with an adjusted gross income of $40,000
would have a partial financial hardship if would have a partial financial hardship if ~~his or her~~their annual student loan payments were annual student loan payments were
greater than $greater than $~~3,102, or $258.50~~2,719.50, or $226.63 per month. ($ per month. ($~~3,102~~2,719.50 is 15% of the result of subtracting is 15% of the result of subtracting
~~$19,320~~$21,870 from $40,000.) from $40,000.)
 • In the IBR plan for post-July 1, 2014, New Borrowers, a single borrower with an adjusted In the IBR plan for post-July 1, 2014, New Borrowers, a single borrower with an adjusted
gross income of $40,000 would have a partial financial hardship if gross income of $40,000 would have a partial financial hardship if ~~his or her~~their annual annual
student loan payments were greater than $student loan payments were greater than $~~2,068~~1,813, or $, or $~~172.33~~151.08 per month. ($ per month. ($~~2,068~~1,813 is 10% of is 10% of
the result of subtracting $the result of subtracting $~~19,320~~21,870 from $40,000.) from $40,000.)
For a borrower whose calculated monthly payment results in an amount that is greater than or For a borrower whose calculated monthly payment results in an amount that is greater than or
equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated
monthly payment results in an amount that is less than $5, the monthly payment is set at $0. monthly payment results in an amount that is less than $5, the monthly payment is set at $0.
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Monthly payment amounts are recalculated Monthly payment amounts are recalculated ~~annual y~~annually to take into account changes that may have to take into account changes that may have
occurred over the past year. occurred over the past year.
If a borrower who is repaying according to an IBR plan no longer demonstrates having a partial If a borrower who is repaying according to an IBR plan no longer demonstrates having a partial
financial hardship or no longer desires to make payments based on income, financial hardship or no longer desires to make payments based on income, ~~he or she~~they may remain may remain
in the IBR plan; however, the borrower’s maximum required monthly payment amount in the IBR plan; however, the borrower’s maximum required monthly payment amount ~~wil~~ will no no
longer be calculated according the formula described above. Nonetheless, the required payment longer be calculated according the formula described above. Nonetheless, the required payment
amount may not exceed the monthly amount due, as calculated according to a standard 10-year amount may not exceed the monthly amount due, as calculated according to a standard 10-year
repayment period based on the borrower’s loan balance at the time repayment period based on the borrower’s loan balance at the time ~~he or she~~they elected to begin elected to begin
repaying according to the IBR plan. However, in such a case the duration of the repayment period repaying according to the IBR plan. However, in such a case the duration of the repayment period
may exceed 10 years. may exceed 10 years.
Joint IBR Plan Repayment for Married Borrowers. Since July 1, 2010, the IBR plan has Since July 1, 2010, the IBR plan has
provided for the joint repayment of loans by married borrowers who both have eligible loans and provided for the joint repayment of loans by married borrowers who both have eligible loans and
who file a joint federal tax return. Individual payment amounts are proportional to each spouse’s who file a joint federal tax return. Individual payment amounts are proportional to each spouse’s
share of the couple’s combined loan balances and combined AGI. share of the couple’s combined loan balances and combined AGI.
Subsidized Interest. As part of the IBR plans, an interest subsidy is available As part of the IBR plans, an interest subsidy is available on subsidized loans on subsidized loans
during periods of negative amortization for a maximum of the first three years from the start of a during periods of negative amortization for a maximum of the first three years from the start of a
borrower’s repayment according to an IBR plan. If a borrower’s required monthly payment is not borrower’s repayment according to an IBR plan. If a borrower’s required monthly payment is not
sufficient to cover sufficient to cover al all of the interest that accrues on a Direct Subsidized Loan (or the subsidized of the interest that accrues on a Direct Subsidized Loan (or the subsidized
component of a Direct Consolidation Loan), the portion of the accrued interest not covered by the component of a Direct Consolidation Loan), the portion of the accrued interest not covered by the
borrower’s monthly payment is subsidized, or paid by the Secretary. Any periods during which borrower’s monthly payment is subsidized, or paid by the Secretary. Any periods during which
the borrower has received an interest subsidy under either the PAYE the borrower has received an interest subsidy under either the PAYE repayment plan or the plan or the ~~REPAYE~~ REPAYE repayment plan are plan are
applied toward this three-year period. However, any periods during which a borrower has applied toward this three-year period. However, any periods during which a borrower has
received an interest subsidy while qualifying for an economic hardship deferment (during which received an interest subsidy while qualifying for an economic hardship deferment (during which
an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of a an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of a
Direct Consolidation Loan) are excluded from the three-year period.Direct Consolidation Loan) are excluded from the three-year period. ~~Final y, while a loan would~~
~~not be in negative amortization during the COVID-19 interest suspension period, as no interest is~~
~~accruing, it is unclear whether the COVID-19 interest suspension period is excluded from the~~
~~IBR three-year interest subsidy period.~~
Application of Payments. Payments made by borrowers repaying under an IBR plan are first Payments made by borrowers repaying under an IBR plan are first
appliedapplied to interest due on the loan, then to any fees, and then to principal. If a borrower’s required to interest due on the loan, then to any fees, and then to principal. If a borrower’s required
monthly payment is for an amount that is less than the amount of interest that accrues on a loan monthly payment is for an amount that is less than the amount of interest that accrues on a loan
other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan, other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan,
or that accrues on a subsidized loan type after the three-year interest subsidy period described or that accrues on a subsidized loan type after the three-year interest subsidy period described
above, the unpaid accrued interest above, the unpaid accrued interest ~~wil~~ will accumulate, but not be capitalized, so long as the borrower accumulate, but not be capitalized, so long as the borrower
remains in the IBR plan and continues to have a partial financial hardship. If a borrower’s remains in the IBR plan and continues to have a partial financial hardship. If a borrower’s
required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the
amount of principal due, then the payment of any principal due in excess of the monthly payment amount of principal due, then the payment of any principal due in excess of the monthly payment
amount owed amount owed ~~wil~~ will be postponed until the borrower no longer has a partial financial hardship or be postponed until the borrower no longer has a partial financial hardship or
leaves the IBR plan. Upon a borrower either no longer having a partialleaves the IBR plan. Upon a borrower either no longer having a partial financial hardship or Congressional Research Service 48 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program ~~financial hardship or~~
electing to no longer repay according to an IBR plan, any accumulated accrued interest that has electing to no longer repay according to an IBR plan, any accumulated accrued interest that has
not been paid not been paid ~~wil~~ will be capitalized. be capitalized.
If a borrower chooses to leave an IBR plan, If a borrower chooses to leave an IBR plan, ~~he or she~~they must change to the Standard Repayment must change to the Standard Repayment
Plan that is applicable to the loans—either the Standard Repayment Plan with a Maximum 10-Plan that is applicable to the loans—either the Standard Repayment Plan with a Maximum 10-
Year Term or the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Term or the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-
Year Terms. (The borrower may subsequently change to another repayment plan; however, Year Terms. (The borrower may subsequently change to another repayment plan; however, ~~he or~~
~~she~~they may not change to a repayment plan—other than a different IDR plan—that has maximum may not change to a repayment plan—other than a different IDR plan—that has maximum
term that is less than the number of years the borrower’s loans have already been in term that is less than the number of years the borrower’s loans have already been in
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~~repayment.113~~repayment.120) The monthly payment amount due on the borrower’s loans must be calculated ) The monthly payment amount due on the borrower’s loans must be calculated
according to the applicable standard repayment plan based on the time remaining in the according to the applicable standard repayment plan based on the time remaining in the
repayment period under such plan and the outstanding balance owed at the time the borrower repayment period under such plan and the outstanding balance owed at the time the borrower
ceased repaying according to the IBR plan. A borrower who changes from the IBR plan to a ceased repaying according to the IBR plan. A borrower who changes from the IBR plan to a
standard repayment plan must make at least one monthly payment according to the standard standard repayment plan must make at least one monthly payment according to the standard
repayment plan before changing to another repayment plan for which the borrower may be repayment plan before changing to another repayment plan for which the borrower may be
eligible.eligible. Borrowers may request a forbearance that permits the making of a Borrowers may request a forbearance that permits the making of a ~~smal er~~smaller payment payment
amount than otherwise would be required for purposes of making that one required monthly amount than otherwise would be required for purposes of making that one required monthly
payment according to the Standard Repayment Plan. payment according to the Standard Repayment Plan.
Failure to Certify Income and Family Size. To qualify and remain eligible To qualify and remain eligible to repay according to to repay according to
the IBR plans, borrowers must the IBR plans, borrowers must ~~annual y~~annually provide certification of their income and family size to provide certification of their income and family size to
ED. Certification of income is ED. Certification of income is ~~normal y~~normally satisfied by providing the borrower’s AGI. However, if satisfied by providing the borrower’s AGI. However, if
the borrower’s AGI does not reflect the borrower’s AGI does not reflect ~~his or her~~their current income, alternative documentation of current income, alternative documentation of
income may be provided. If the borrower fails to provide certification of income, any unpaid income may be provided. If the borrower fails to provide certification of income, any unpaid
accrued interest accrued interest ~~wil~~ will be capitalized and be capitalized and ~~his or her~~their monthly payment amount monthly payment amount ~~wil~~ will be recalculated to be recalculated to
equal the amount the borrower would have paid according to the Standard Repayment Plan with a equal the amount the borrower would have paid according to the Standard Repayment Plan with a
Maximum 10-Year Term, based on the amount owed at the time Maximum 10-Year Term, based on the amount owed at the time ~~he or she~~they first elected to repay first elected to repay
according to the IBR plan. The repayment period based on the recalculated payment amount may according to the IBR plan. The repayment period based on the recalculated payment amount may
exceed 10 years. If the borrower fails to certify exceed 10 years. If the borrower fails to certify ~~his or her~~their family size, a family size of one family size, a family size of one ~~wil be~~
will be assumed and used for the year. assumed and used for the year.
Maximum Repayment Period and Loan Forgiveness. The maximum repayment period for the The maximum repayment period for the
Original IBR plan is 25 years, whereas the maximum repayment period for the IBR plan for post-Original IBR plan is 25 years, whereas the maximum repayment period for the IBR plan for post-
July 1, 2014, New Borrowers is 20 years. If after having repaid according to an IBR plan a July 1, 2014, New Borrowers is 20 years. If after having repaid according to an IBR plan a
borrower obtains additional loans that are eligibleborrower obtains additional loans that are eligible to be repaid according to that IBR plan, a new to be repaid according to that IBR plan, a new
repayment period repayment period ~~wil~~ will begin for the new loans when they enter repayment. A borrower who has begin for the new loans when they enter repayment. A borrower who has
participated in one of the IBR plans and has satisfied any combination of the following conditions participated in one of the IBR plans and has satisfied any combination of the following conditions
for the duration of the applicablefor the duration of the applicable repayment period becomes eligible to have any balance that repayment period becomes eligible to have any balance that
remains at the end of the maximum repayment period forgiven: remains at the end of the maximum repayment period forgiven:
• made reduced monthly payments (including payments of $0) according to an IBR made reduced monthly payments (including payments of $0) according to an IBR
plan while experiencing a partial financial hardship; plan while experiencing a partial financial hardship;
• made monthly payments in amounts calculated according to the Standard made monthly payments in amounts calculated according to the Standard
Repayment Plan with a Maximum 10-Year Term after no longer having a partial Repayment Plan with a Maximum 10-Year Term after no longer having a partial
financial hardship; financial hardship;
• made monthly payments on Direct Subsidized Loans, Direct Unsubsidized made monthly payments on Direct Subsidized Loans, Direct Unsubsidized
Loans, or Direct PLUS Loans according to the Standard Repayment Plan with a Loans, or Direct PLUS Loans according to the Standard Repayment Plan with a
Maximum 10-Year Term, or on Direct Consolidation Loans according to the Maximum 10-Year Term, or on Direct Consolidation Loans according to the
Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-
120 34 C.F.R. §§685.210(b)(2) and 685.221(d). Congressional Research Service 49 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Year Terms, as applicable, after choosing to no longer repay according to an IBR Year Terms, as applicable, after choosing to no longer repay according to an IBR
plan; plan;
• made monthly payments according to any repayment plan in amounts not less made monthly payments according to any repayment plan in amounts not less
than the amount required under the Standard Repayment Plan with a Maximum than the amount required under the Standard Repayment Plan with a Maximum
10-Year Term; 10-Year Term;
• made monthly payments according to the Standard Repayment Plan with a made monthly payments according to the Standard Repayment Plan with a
Maximum 10-Year Term based on the amount owed at the time the borrower Maximum 10-Year Term based on the amount owed at the time the borrower
~~initial y~~ initially selected an IBR plan; •~~selected an IBR plan;~~

~~113 34 C.F.R. §§685.210(b)(2) and 685.221(d).~~
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 made monthly payments (including payments of $0) according to the ICR plan, made monthly payments (including payments of $0) according to the ICR plan,
the PAYE repayment plan, or the REPAYE the PAYE repayment plan, or the REPAYE repayment plan; repayment plan;
• made monthly payments according to the REPAYE Alternative made monthly payments according to the REPAYE Alternative Repayment Plan Repayment Plan
prior to changing to an IDR plan; prior to changing to an IDR plan;
• received an economic hardship deferment; received an economic hardship deferment; ~~or114~~
or121 • had monthly payments suspended under the COVID-19 payment had monthly payments suspended under the COVID-19 payment ~~suspension (see~~
~~section on “COVID-19 Loan Payment Suspension”~~pause (see Appendix D). ).
Pay As You Earn (PAYE) Repayment Plan
The Pay As You Earn (PAYE) repayment plan is The Pay As You Earn (PAYE) repayment plan is ~~substantial y~~substantially similar to the IBR plan for post- similar to the IBR plan for post-
July 1, 2014, New Borrowers (see above). The plan permits borrowers to repay eligible loans July 1, 2014, New Borrowers (see above). The plan permits borrowers to repay eligible loans
according to procedures that limit monthly payment amounts based on criteria that take into according to procedures that limit monthly payment amounts based on criteria that take into
account a borrower’s AGI, family size, and monthly payment amount as calculated according to a account a borrower’s AGI, family size, and monthly payment amount as calculated according to a
standard 10-year repayment period based on the greater of the amount owed at the time the standard 10-year repayment period based on the greater of the amount owed at the time the
borrower borrower ~~initial y~~initially entered repayment or the amount owed at the time entered repayment or the amount owed at the time ~~he or she elects~~they elect to repay to repay
according to the PAYE according to the PAYE repayment plan. For borrowers who repay according to this plan, any loan balance plan. For borrowers who repay according to this plan, any loan balance
that remains after 20 years of repayment that remains after 20 years of repayment ~~wil~~ will be forgiven. The plan became available to eligible be forgiven. The plan became available to eligible
borrowers on December 21, 2012.borrowers on December 21, 2012.122
The PAYE repayment plan was established by the Obama Administration through the rulemaking The PAYE repayment plan was established by the Obama Administration through the rulemaking
process under authority provided in the HEA for the Secretary to establish an income-contingent process under authority provided in the HEA for the Secretary to establish an income-contingent
repayment plan.repayment plan.~~115~~123 With the establishment of the PAYE repayment plan, a set of benefits With the establishment of the PAYE repayment plan, a set of benefits
~~substantial y~~substantially similar to those that had been extended to a specific class of borrowers through the similar to those that had been extended to a specific class of borrowers through the
enactment of legislation (the IBR Plan for post-July 1, 2014, New Borrowers) was extended to a enactment of legislation (the IBR Plan for post-July 1, 2014, New Borrowers) was extended to a
broader class of borrowers through the rulemaking process. broader class of borrowers through the rulemaking process.
Eligibility. The PAYE The PAYE repayment plan is availablerepayment plan is available to individuals who are new borrowers on or to individuals who are new borrowers on or
after October 1, 2007, and have received a disbursement on a Direct Subsidized Loan, a Direct after October 1, 2007, and have received a disbursement on a Direct Subsidized Loan, a Direct
Unsubsidized Loan, or a Direct PLUS Loan to graduate and professional students on or after Unsubsidized Loan, or a Direct PLUS Loan to graduate and professional students on or after
October 1, 2011, or a Direct Consolidation Loan based on an application received by ED on or October 1, 2011, or a Direct Consolidation Loan based on an application received by ED on or
after October 1, 2011, and who are identified as having a partial financial hardship. Eligible after October 1, 2011, and who are identified as having a partial financial hardship. Eligible
borrowers may use the plan to repay loans made through the Direct Loan program, with the borrowers may use the plan to repay loans made through the Direct Loan program, with the
exceptions of Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used exceptions of Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used
to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers.to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers. 121 34 C.F.R. §§685.221(d) and (f); 685.208. 122 U.S. Department of Education, “William D. Ford Federal Direct Loan Program,” 77 Federal Register 72960, December 7, 2012. 123 HEA, §455(d)(1)(D) and (e); 34 C.F.R. §685.209(a). Congressional Research Service 50 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program
Partial Financial Hardship. A borrower is considered as having a partial financial hardship if A borrower is considered as having a partial financial hardship if
the total of the total of ~~his or her~~their annual payments on annual payments on ~~al eligible loans,116~~all eligible loans,124 as calculated according to a as calculated according to a
standard 10-year repayment period based on the greater of the amount owed at the time the standard 10-year repayment period based on the greater of the amount owed at the time the
borrower borrower ~~initial y~~ initially entered repayment or the amount owed at the time entered repayment or the amount owed at the time ~~he or she elects~~they elect to repay to repay
according to the PAYE according to the PAYE repayment plan, is greater than 10% of the amount by which the borrower’s AGI plan, is greater than 10% of the amount by which the borrower’s AGI
exceeds 150% of the poverty line applicable to exceeds 150% of the poverty line applicable to ~~his or her~~their family size. If a borrower is single, or is married and files an individual federal tax return, they are ~~family size.~~

~~114 34 C.F.R. §§685.221(d) and (f); 685.208.~~
~~115 HEA, §455(d)(1)(D) and (e); 34 C.F.R. §685.209(a).~~
~~116 While loans made through the FFEL program may not be repaid according to the PAYE repayment plan, all loans~~
~~made on or after October 1, 2007, through the Direct Loan program and the FFEL program (with the exceptions of~~
~~Direct PLUS Loans or FFEL PLUS Loans made to parent borrowers, an d Direct Consolidation Loans or FFEL~~
~~Consolidation Loans that include such loans) are considered eligible loans for purposes of determining whether a~~
~~borrower has a partial financial hardship and for adjusting monthly payment amounts.~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~If a borrower is single, or is married and files an individual federal tax return, he or she is~~
determined to have a partial financial hardship if the total annual payments for determined to have a partial financial hardship if the total annual payments for al all of the of the
borrower’s eligible loans, as calculated according to a standard 10-year repayment period, are borrower’s eligible loans, as calculated according to a standard 10-year repayment period, are
greater than 10% of greater than 10% of ~~his or her~~their discretionary income. If a borrower is married and files a joint discretionary income. If a borrower is married and files a joint
federal tax return, federal tax return, ~~he or she is~~ they are determined to have a partial financial hardship if the total annual determined to have a partial financial hardship if the total annual
payments for payments for al all of the borrower’s eligible loans and, if applicable, the borrower’s spouse’s of the borrower’s eligible loans and, if applicable, the borrower’s spouse’s
~~eligible~~ eligible loans, as calculated according to a standard 10-year repayment period, are greater than loans, as calculated according to a standard 10-year repayment period, are greater than
10% of the combined discretionary income of the borrower and 10% of the combined discretionary income of the borrower and ~~his or her~~their spouse. If the total spouse. If the total
annual payments for annual payments for al all of the borrower’s eligible loans, as calculated according to a standard 10-of the borrower’s eligible loans, as calculated according to a standard 10-
year repayment period, do not exceed 10% of year repayment period, do not exceed 10% of ~~his or her~~their discretionary income, the borrower is no discretionary income, the borrower is no
longer considered as having a partial financial hardship. longer considered as having a partial financial hardship.
Payment Amounts. While repaying according to the PAYE repayment plan, monthly amounts While repaying according to the PAYE repayment plan, monthly amounts
due on borrowers’ loans may range from $0, for those with incomes at or below 150% of the due on borrowers’ loans may range from $0, for those with incomes at or below 150% of the
poverty line, to a maximum of one-twelfth of 10% of any amount by which the borrower’s AGI poverty line, to a maximum of one-twelfth of 10% of any amount by which the borrower’s AGI
exceeds 150% of the poverty line. If a borrower who is repaying according to the plan no longer exceeds 150% of the poverty line. If a borrower who is repaying according to the plan no longer
demonstrates having a partial financial hardship or no longer desires to make payments based on demonstrates having a partial financial hardship or no longer desires to make payments based on
income, the monthly payment amount income, the monthly payment amount ~~wil~~ will be recalculated. In such a case, the maximum monthly be recalculated. In such a case, the maximum monthly
payment amount may not exceed the amount due as calculated according to the Standard payment amount may not exceed the amount due as calculated according to the Standard
Repayment Plan with a Maximum 10-Year Term based on the borrower’s loan balance at the time Repayment Plan with a Maximum 10-Year Term based on the borrower’s loan balance at the time
~~he or she~~they elected to begin repaying according to the PAYE repayment plan. However, the duration elected to begin repaying according to the PAYE repayment plan. However, the duration
of the repayment period may exceed 10 years. of the repayment period may exceed 10 years.
For a borrower whose calculated monthly payment results in an amount that is greater than or For a borrower whose calculated monthly payment results in an amount that is greater than or
equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated
monthly payment results in an amount that is less than $5, the monthly payment is set at $0. monthly payment results in an amount that is less than $5, the monthly payment is set at $0.
Monthly payment amounts are recalculated Monthly payment amounts are recalculated ~~annual y~~annually to take into account changes that may have to take into account changes that may have
occurred over the past year. occurred over the past year.
Joint PAYE Repayment for Married Borrowers. The PAYE repayment plan provides for the The PAYE repayment plan provides for the
joint repayment of loans by married borrowers who both have eligible loans and who file a joint joint repayment of loans by married borrowers who both have eligible loans and who file a joint
federal tax return. For married borrowers repaying jointly according to the plan, individual federal tax return. For married borrowers repaying jointly according to the plan, individual
payment amounts are proportional to each spouse’s share of the couple’s combined loan balances payment amounts are proportional to each spouse’s share of the couple’s combined loan balances
and combined AGI. and combined AGI.
Subsidized Interest. An interest subsidy is available on subsidized loans during periods of An interest subsidy is available on subsidized loans during periods of
negative amortization for a maximum of the first three years from the start of repayment negative amortization for a maximum of the first three years from the start of repayment
according to the PAYE repayment plan. If a borrower’s calculated monthly payment is according to the PAYE repayment plan. If a borrower’s calculated monthly payment is
insufficient to pay insufficient to pay al all of the interest that accrues on a Direct Subsidized Loan (or the subsidized of the interest that accrues on a Direct Subsidized Loan (or the subsidized
component of a Direct Consolidation Loan), the portion of the accrued interest that is not covered component of a Direct Consolidation Loan), the portion of the accrued interest that is not covered
~~by his or her~~ 124 While loans made through the FFEL program may not be repaid according to the PAYE repayment plan, all loans made on or after October 1, 2007, through the Direct Loan program and the FFEL program (with the exceptions of Direct PLUS Loans or FFEL PLUS Loans made to parent borrowers, and Direct Consolidation Loans or FFEL Consolidation Loans that include such loans) are considered eligible loans for purposes of determining whether a borrower has a partial financial hardship and for adjusting monthly payment amounts. Congressional Research Service 51 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program by their monthly payment is subsidized for a period not to exceed three years. Periods during monthly payment is subsidized for a period not to exceed three years. Periods during
which a borrower is receiving an economic hardship deferment are excluded from the three-year which a borrower is receiving an economic hardship deferment are excluded from the three-year
~~eligibility~~ eligibility period. In general, the terms of this interest subsidy for subsidized loans are the same as period. In general, the terms of this interest subsidy for subsidized loans are the same as
the terms that apply to the IBR plans (see above).the terms that apply to the IBR plans (see above). ~~Final y, while a loan would not be in negative~~
~~amortization during the COVID-19 interest suspension period, as no interest is accruing, it is~~
~~unclear whether the COVID-19 interest suspension period is excluded from the PAYE three-year~~
~~interest subsidy period.~~
Application of Payments. Payments made by borrowers repaying according to the PAYE Payments made by borrowers repaying according to the PAYE
repayment plan are credited first to interest due on the loan, then to any fees, and then to repayment plan are credited first to interest due on the loan, then to any fees, and then to
principal. If a borrower’s required monthly payment is for an amount that is less than the amount principal. If a borrower’s required monthly payment is for an amount that is less than the amount
of interest that accrues, the unpaid accrued interest of interest that accrues, the unpaid accrued interest ~~wil~~ will accumulate, but not be capitalized, so accumulate, but not be capitalized, so
long as the borrower remains in the plan and continues to have a partial financial hardship. If a long as the borrower remains in the plan and continues to have a partial financial hardship. If a
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borrower’s required monthly payment is sufficient to pay the accrued interest but is insufficient to borrower’s required monthly payment is sufficient to pay the accrued interest but is insufficient to
repay the amount of principal due, then the payment of any principal due in excess of the monthly repay the amount of principal due, then the payment of any principal due in excess of the monthly
payment amount owed payment amount owed ~~wil~~ will be postponed until be postponed until ~~he or she~~they no longer no longer ~~has~~have a partial financial hardship a partial financial hardship
or leaves the plan.or leaves the plan.
If a borrower no longer has a partial financial hardship but remains in the PAYE repayment plan, If a borrower no longer has a partial financial hardship but remains in the PAYE repayment plan,
accumulated accrued interest is capitalized into the principal balance of the loan. In such a case, accumulated accrued interest is capitalized into the principal balance of the loan. In such a case,
the amount of accrued interest that may be capitalized is limited to 10% of the outstanding the amount of accrued interest that may be capitalized is limited to 10% of the outstanding
principal balance at the time the borrower began repaying according to the plan. Any accrued principal balance at the time the borrower began repaying according to the plan. Any accrued
interest beyond the 10% limit interest beyond the 10% limit ~~wil~~ will remain due but remain due but ~~wil~~ will not be capitalized as long as the borrower not be capitalized as long as the borrower
remains in the plan. remains in the plan.
If a borrower chooses to leave the PAYE repayment plan, If a borrower chooses to leave the PAYE repayment plan, ~~he or she~~they may change to any other may change to any other
repayment plan for which repayment plan for which ~~he or she is~~they are eligible, as long as the new repayment plan has a maximum eligible, as long as the new repayment plan has a maximum
term that is not less than the number of years the borrower’s loans have already been in term that is not less than the number of years the borrower’s loans have already been in
repayment, or is an availablerepayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to IDR plan. Upon a borrower electing to no longer repay according to
the PAYE repayment plan, any accumulated accrued interest that has not been paid the PAYE repayment plan, any accumulated accrued interest that has not been paid ~~wil be~~
~~capitalized.~~will be capitalized. Effective July 1, 2023, ED regulations eliminate instances of interest capitalization that are not specified in the HEA, such as when a borrower no longer has a partial financial hardship and remains in the PAYE repayment plan or when a borrower chooses to leave the PAYE repayment plan. Accordingly, and also effective July 1, 2023, ED regulations eliminate provisions limiting the amount of interest capitalization under the PAYE repayment plan.125
Failure to Certify Income and Family Size. To qualify and remain eligible To qualify and remain eligible to repay according to to repay according to
the PAYE repayment plan, borrowers must the PAYE repayment plan, borrowers must ~~annual y~~annually provide certification of their income and provide certification of their income and
family size. Certification of income is family size. Certification of income is ~~normal y~~normally satisfied by providing the borrower’s AGI. satisfied by providing the borrower’s AGI.
However, if the borrower’s AGI does not reflect However, if the borrower’s AGI does not reflect ~~his or her~~their current income, alternative current income, alternative
documentation of income may be provided. If the borrower fails to provide certification of documentation of income may be provided. If the borrower fails to provide certification of
income, any unpaid accrued interest income, any unpaid accrued interest ~~wil~~ may be capitalized and be capitalized and ~~his or her~~their monthly payment amount monthly payment amount
~~wil~~ will be recalculated to equal the amount the borrower would have paid according to the Standard be recalculated to equal the amount the borrower would have paid according to the Standard
Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time ~~he or she~~
they first elected to repay according to the plan. The repayment period based on the recalculated first elected to repay according to the plan. The repayment period based on the recalculated
payment amount may exceed 10 years. If the borrower fails to certify payment amount may exceed 10 years. If the borrower fails to certify ~~his or her~~their family size, a family size, a
family size of one family size of one ~~wil~~ will be be assumed and used for the year. 125 ED, Final Rule, November 1, 2022. Congressional Research Service 52 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Effective July 1, 2023, ED regulations eliminate instances of interest capitalization that are not specified in the HEA, such as when a borrower fails to provide certification of income under the PAYE repayment plan.126~~assumed and used for the year.~~
Maximum Repayment Period and Loan Forgiveness. In the PAYE repayment plan, the In the PAYE repayment plan, the
maximum repayment period is 20 years. A borrower who at any time participates in the plan maximum repayment period is 20 years. A borrower who at any time participates in the plan
becomes eligible to have any balance that remains on becomes eligible to have any balance that remains on ~~his or her eligible~~ their eligible loans forgiven if during loans forgiven if during
the 20-year repayment period the borrower meets the loan forgiveness eligibility criteria specified the 20-year repayment period the borrower meets the loan forgiveness eligibility criteria specified
in regulations at 34 C.F.R. Section 685.209(a)(6) or had monthly payments suspended under the in regulations at 34 C.F.R. Section 685.209(a)(6) or had monthly payments suspended under the
COVID-19 payment COVID-19 payment ~~suspension~~pause. (These criteria are . (These criteria are ~~substantial y~~substantially similar to the provisions that are similar to the provisions that are
applicable to the IBR plan for post-July 1, 2014, New Borrowers, as described above.) If after applicable to the IBR plan for post-July 1, 2014, New Borrowers, as described above.) If after
having repaid according to the PAYE repayment plan a borrower obtains additional loans that are having repaid according to the PAYE repayment plan a borrower obtains additional loans that are
eligibleeligible to be repaid according to the plan, a new repayment period to be repaid according to the plan, a new repayment period ~~wil~~ will begin for the new loans begin for the new loans
when they enter repayment. when they enter repayment.
Revised Pay As You Earn (REPAYE) Repayment Plan
The Revised Pay As You Earn (REPAYE) repayment plan permits borrowers to repay eligible The Revised Pay As You Earn (REPAYE) repayment plan permits borrowers to repay eligible
loans made through the Direct Loan program according to procedures that limit monthly payment loans made through the Direct Loan program according to procedures that limit monthly payment
amounts based on criteria that take into account a borrower’s AGI and family size. For borrowers amounts based on criteria that take into account a borrower’s AGI and family size. For borrowers
whose student loan debt was obtained exclusively for undergraduate education, the maximum whose student loan debt was obtained exclusively for undergraduate education, the maximum
repayment period is 20 years; for borrowers whose student loan debt includes any amounts repayment period is 20 years; for borrowers whose student loan debt includes any amounts
obtained for graduate education, the maximum repayment period is 25 years. Any loan balance obtained for graduate education, the maximum repayment period is 25 years. Any loan balance
that remains after the maximum repayment period that remains after the maximum repayment period ~~wil~~ will be forgiven. The REPAYE repayment plan be forgiven. The REPAYE repayment plan
became available to eligiblebecame available to eligible borrowers on December 17, 2015.borrowers on December 17, 2015.
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127
Like the PAYE repayment plan, the REPAYE repayment plan was established by the Obama Like the PAYE repayment plan, the REPAYE repayment plan was established by the Obama
Administration through the rulemaking process under authority provided in the HEA for the Administration through the rulemaking process under authority provided in the HEA for the
Secretary to establish an income-contingent repayment plan.Secretary to establish an income-contingent repayment plan.~~117~~128 The REPAYE repayment plan has The REPAYE repayment plan has
a number of characteristics that are similar to the other IDR plans. It also has an enhanced interest a number of characteristics that are similar to the other IDR plans. It also has an enhanced interest
subsidy that is unique to the plan. subsidy that is unique to the plan.
Eligibility. The REPAYE repayment plan is available The REPAYE repayment plan is available to borrowers of loans made through the to borrowers of loans made through the
Direct Loan program except for Direct PLUS Loans made to parent borrowers and Direct Direct Loan program except for Direct PLUS Loans made to parent borrowers and Direct
Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been
made to parent borrowers. The plan is available to borrowers irrespective of when an individual made to parent borrowers. The plan is available to borrowers irrespective of when an individual
became a new borrower. A borrower’s eligibility to repay according to the REPAYE repayment became a new borrower. A borrower’s eligibility to repay according to the REPAYE repayment
plan is not limited based on factors that take into account the relationship between plan is not limited based on factors that take into account the relationship between ~~his or her~~
their student loan debt and discretionary income (i.e., borrowers need not demonstrate anything akin to student loan debt and discretionary income (i.e., borrowers need not demonstrate anything akin to
having a partial financial hardship to repay according to the REPAYE repayment plan). having a partial financial hardship to repay according to the REPAYE repayment plan).
Payment Amounts. While repaying according to the REPAYE repayment plan, monthly amounts While repaying according to the REPAYE repayment plan, monthly amounts
due on borrowers’ loans may range from $0, for those with incomes at or below 150% of the due on borrowers’ loans may range from $0, for those with incomes at or below 150% of the
poverty line, to a maximum of one-twelfth of 10% of any amount by which a borrower’s AGI poverty line, to a maximum of one-twelfth of 10% of any amount by which a borrower’s AGI
exceeds 150% of the poverty line. For a borrower whose calculated monthly payment results in exceeds 150% of the poverty line. For a borrower whose calculated monthly payment results in
an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10.
126 ED, Final Rule, November 1, 2022. 127 U.S. Department of Education, Office of Federal Student Aid, Dear Colleague Letter GEN-15-22, “Approval of the Income-Driven Repayment Plan Request for the Direct Loan and FFEL Programs,” December 17, 2015, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2015-12-17/gen-15-22-subject-approval-income-driven-repayment-plan-request-direct-loan-and-ffel-programs. 128 HEA, §455(d)(1)(D) and (e). Congressional Research Service 53 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program For a borrower whose calculated monthly payment results in an amount that is less than $5, the For a borrower whose calculated monthly payment results in an amount that is less than $5, the
monthly payment is set at $0. Monthly payment amounts are recalculated monthly payment is set at $0. Monthly payment amounts are recalculated ~~annual y~~annually to take into to take into
account changes that may have occurred over the past year. account changes that may have occurred over the past year.
For purposes of calculating monthly payment amounts under the REPAYE repayment plan, if the For purposes of calculating monthly payment amounts under the REPAYE repayment plan, if the
borrower is unmarried borrower is unmarried ~~his or her~~their AGI is used. If the borrower is married, and unless certain AGI is used. If the borrower is married, and unless certain
exceptions apply, the AGI of both the borrower and exceptions apply, the AGI of both the borrower and ~~his or her~~their spouse is used irrespective of spouse is used irrespective of
whether the borrower files a joint or separate federal tax return with whether the borrower files a joint or separate federal tax return with ~~his or her~~their spouse. If a spouse. If a
borrower is married and certifies borrower is married and certifies that they are separated from their~~that he or she is separated from his or her~~ spouse, or is unable to spouse, or is unable to
access information on the income of access information on the income of ~~his or her~~ their spouse, then the AGI of only the borrower is used. spouse, then the AGI of only the borrower is used.
Joint REPAYE Repayment for Married Borrowers. The REPAYE repayment plan provides for The REPAYE repayment plan provides for
the joint repayment of loans by married borrowers who both have eligible loans and who file a the joint repayment of loans by married borrowers who both have eligible loans and who file a
joint federal tax return. For married borrowers repaying jointly according to an IBR plan, joint federal tax return. For married borrowers repaying jointly according to an IBR plan,
individualindividual payment amounts are proportional to each spouse’s share of the couple’s combined payment amounts are proportional to each spouse’s share of the couple’s combined
loan balances and combined AGI. loan balances and combined AGI.
Subsidized Interest. Under the REPAYE repayment plan, an interest subsidy is available Under the REPAYE repayment plan, an interest subsidy is available on both on both
subsidized loans and unsubsidized loans during periods of negative amortization. During the first subsidized loans and unsubsidized loans during periods of negative amortization. During the first
three years from the start of repayment under the plan, for Direct Subsidized Loans and the three years from the start of repayment under the plan, for Direct Subsidized Loans and the
subsidized component of Direct Consolidation Loans, if a borrower’s calculated monthly subsidized component of Direct Consolidation Loans, if a borrower’s calculated monthly
payment is not sufficient to pay payment is not sufficient to pay al all of the interest that accrues, 100% of the portion of the accrued of the interest that accrues, 100% of the portion of the accrued
interest that is not covered by interest that is not covered by ~~his or her~~their monthly payment is subsidized. Periods during which a monthly payment is subsidized. Periods during which a
borrower receives an interest subsidy during an economic hardship deferment are excluded from borrower receives an interest subsidy during an economic hardship deferment are excluded from
the consecutive three-year period.the consecutive three-year period. ~~While a loan would not be in negative amortization during the~~
~~COVID-19 interest suspension period, as no interest is accruing, it is unclear whether the~~
~~COVID-19 interest suspension period is excluded from the REPAYE three-year interest subsidy~~
~~period.~~ After the three-year period for subsidized loans, and during After the three-year period for subsidized loans, and during al all periods for Direct periods for Direct
Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized component of Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized component of Direct ~~Direct~~

~~117 HEA, §455(d)(1)(D) and (e).~~
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Consolidation Loans, 50% of the portion of the accrued interest that is not covered by the Consolidation Loans, 50% of the portion of the accrued interest that is not covered by the
borrower’s monthly payment is subsidized.borrower’s monthly payment is subsidized.~~118~~
129 Graduate students who are borrowers of Direct PLUS Loans may be able to qualify for the 50% Graduate students who are borrowers of Direct PLUS Loans may be able to qualify for the 50%
interest subsidy while they are in school in lieu of receiving an in-school deferment while interest interest subsidy while they are in school in lieu of receiving an in-school deferment while interest
accrues at the otherwise applicable interest rate. For Direct PLUS Loans, the repayment period accrues at the otherwise applicable interest rate. For Direct PLUS Loans, the repayment period
begins the day the loan is fully disbursed. However, borrowers who are enrolled on at least a half-begins the day the loan is fully disbursed. However, borrowers who are enrolled on at least a half-
time basis qualify for and time basis qualify for and ~~typical y~~typically receive an in-school deferment during which they are not receive an in-school deferment during which they are not
required to make payments, but during which interest accrues. Student borrowers are placed in an required to make payments, but during which interest accrues. Student borrowers are placed in an
in-school deferment upon requesting such a deferment or the Secretary receiving notification in-school deferment upon requesting such a deferment or the Secretary receiving notification
from the borrower’s school or the National Student Loan Data System (NSLDS) that the student from the borrower’s school or the National Student Loan Data System (NSLDS) that the student
is enrolled on at least a half-time basis. Nonetheless, borrowers who receive an in-school is enrolled on at least a half-time basis. Nonetheless, borrowers who receive an in-school
deferment have the option to cancel it. Borrowers whose AGI while in school is low enough that deferment have the option to cancel it. Borrowers whose AGI while in school is low enough that
it would result in the calculation of a monthly payment amount according to the REPAYE it would result in the calculation of a monthly payment amount according to the REPAYE
repayment plan that would be insufficient to pay repayment plan that would be insufficient to pay al all of the interest that accrues on their loan may of the interest that accrues on their loan may
consider choosing to cancel receipt of an in-school deferment in favor of receiving a 50% interest consider choosing to cancel receipt of an in-school deferment in favor of receiving a 50% interest
subsidy on the portion of the interest that would not be covered by subsidy on the portion of the interest that would not be covered by ~~his or her~~their monthly payment monthly payment
amount. amount.
Application of Payments. Payments made by borrowers repaying according to the REPAYE Payments made by borrowers repaying according to the REPAYE
repayment plan are credited first to interest due on the loan, then to any fees, and then to repayment plan are credited first to interest due on the loan, then to any fees, and then to
principal. If a borrower’s required monthly payment is for an amount that is less than the amount principal. If a borrower’s required monthly payment is for an amount that is less than the amount
of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized
component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the
129 34 C.F.R. §685.209(c)(2)(iii). Congressional Research Service 54 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program three-year interest subsidy period described above, the unpaid accrued interest three-year interest subsidy period described above, the unpaid accrued interest ~~wil~~ will accumulate, accumulate,
but not be capitalized, so long as the borrower remains in the plan. If a borrower’s required but not be capitalized, so long as the borrower remains in the plan. If a borrower’s required
monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of
principal due, then the payment of any principal due in excess of the monthly payment amount principal due, then the payment of any principal due in excess of the monthly payment amount
owed owed ~~wil~~ will be postponed.be postponed.
If a borrower chooses to leave the REPAYE repayment plan, If a borrower chooses to leave the REPAYE repayment plan, ~~he or she~~they may change to any other may change to any other
repayment plan for which repayment plan for which ~~he or she is~~they are eligible, as long as the new repayment plan has a maximum eligible, as long as the new repayment plan has a maximum
term that is not less than the number of years the borrower’s loans have already been in term that is not less than the number of years the borrower’s loans have already been in
~~repayment,~~repayment or is an available or is an available IDR plan. Upon a borrower electing to no longer repay according to IDR plan. Upon a borrower electing to no longer repay according to
the REPAYEthe REPAYE repayment plan, any accumulated accrued interest that has not been paid repayment plan, any accumulated accrued interest that has not been paid ~~wil be~~
will be capitalized. Effective July 1, 2023, ED regulations eliminate instances of interest capitalization that are not specified in the HEA, such as when a borrower chooses to leave the REPAYE repayment plan.130~~capitalized.~~
Failure to Certify Income and Family Size. To qualify and remain eligible To qualify and remain eligible to repay according to to repay according to
the REPAYEthe REPAYE repayment plan, borrowers must repayment plan, borrowers must ~~annual y~~annually provide certification of their income and provide certification of their income and
family size. Certification of income is family size. Certification of income is ~~normal y~~normally satisfied by providing the borrower’s AGI. satisfied by providing the borrower’s AGI.
However, if the borrower’s AGI does not reflect However, if the borrower’s AGI does not reflect ~~his or her~~their current income, alternative current income, alternative
documentation of income may be provided. If the borrower fails to provide certification of documentation of income may be provided. If the borrower fails to provide certification of
income, any unpaid accrued interest income, any unpaid accrued interest ~~wil~~ will be capitalized and be capitalized and ~~he or she wil~~ they will be placed in the be placed in the
REPAYE Alternative Repayment plan. If the borrower fails to certify REPAYE Alternative Repayment plan. If the borrower fails to certify ~~his or her~~their family size, a family size, a
family size of one family size of one ~~wil~~ will be be assumed and used for the year. Effective July 1, 2023, ED regulations eliminate instances of interest capitalization that are not specified in the HEA, such as when a borrower fails to certify their income under the REPAYE repayment plan and is placed in the REPAYE Alternative plan as a result.131~~assumed and used for the year.~~
REPAYE Alternative Repayment Plan. Borrowers repaying according to the REPAYE Borrowers repaying according to the REPAYE
repayment plan who fail to provide timely certification of their income are subject to being placed repayment plan who fail to provide timely certification of their income are subject to being placed
into the REPAYE Alternative Repayment plan. Under the REPAYE Alternativeinto the REPAYE Alternative Repayment plan. Under the REPAYE Alternative Repayment plan, ~~Repayment plan,~~

~~118 34 C.F.R. §685.209(c)(2)(iii).~~
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monthly payment amounts are calculated to equal the amount necessary to repay the borrower’s monthly payment amounts are calculated to equal the amount necessary to repay the borrower’s
loans in full within the earlier of 10 years from placement into the REPAYE Alternative loans in full within the earlier of 10 years from placement into the REPAYE Alternative
Repayment plan or the ending of the maximum repayment period of 20 years or 25 years, as Repayment plan or the ending of the maximum repayment period of 20 years or 25 years, as
applicable.applicable.~~119~~132 Payments made during periods of repayment according to the REPAYE Alternative Payments made during periods of repayment according to the REPAYE Alternative
Repayment plan count as qualifying payments for loan forgiveness under the various IDR plans; Repayment plan count as qualifying payments for loan forgiveness under the various IDR plans;
however, they do not count as qualifying payments for the Public Service Loan Forgiveness however, they do not count as qualifying payments for the Public Service Loan Forgiveness
program.program.~~120~~133 130 ED, Final Rule, November 1, 2022. 131 ED, Final Rule, November 1, 2022. 132 In establishing the REPAYE repayment plan, ED stated that in the absence of a process that allows for borrowers to consent to multi-year access to information on their income, the REPAYE Alternative Repayment plan provides an incentive for borrowers to comply with the requirement to certify their income information in a timely manner and also provides a disincentive for borrowers to fail to provide updated information if their income increases substantially. Department of Education, “Student Assistance General Provisions, Federal Family Education Loan,” 80 Federal Register 39620, July 9, 2015. 133 In the Public Service Loan Forgiveness (PSLF) program, after 10 years of qualifying payments made while employed full-time in qualifying public service, a borrower’s remaining loan balance may be forgiven. Amounts forgiven under the PSLF program are exempt from taxation under the Internal Revenue Code. For additional information on PSLF, see CRS Report R43571, Federal Student Loan Forgiveness and Loan Repayment Programs. Congressional Research Service 55 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program
Maximum Repayment Period and Loan Forgiveness. In the REPAYE repayment plan, the In the REPAYE repayment plan, the
maximum repayment period is 20 years for borrowers whose student loan debt was obtained maximum repayment period is 20 years for borrowers whose student loan debt was obtained
exclusively for undergraduate education; and 25 years for borrowers whose student loan debt exclusively for undergraduate education; and 25 years for borrowers whose student loan debt
includes any amounts obtained for graduate education. A borrower who at any time participates in includes any amounts obtained for graduate education. A borrower who at any time participates in
the REPAYEthe REPAYE repayment plan becomes eligible to have any balance that remains on repayment plan becomes eligible to have any balance that remains on ~~his or her~~
~~eligible~~ their eligible loans forgiven if for 20 years or 25 years, as applicable, the borrower meets the loan loans forgiven if for 20 years or 25 years, as applicable, the borrower meets the loan
forgiveness forgiveness ~~eligibility~~ eligibility criteria specified in regulations at 34 C.F.R. Section 685.209(c)(5) or had criteria specified in regulations at 34 C.F.R. Section 685.209(c)(5) or had
monthly payments suspended under the COVID-19 payment monthly payments suspended under the COVID-19 payment ~~suspension~~pause. (These criteria are . (These criteria are
~~substantial y~~ substantially similar to the provisions that are applicable to the IBR plans, as described above.) If similar to the provisions that are applicable to the IBR plans, as described above.) If
after having repaid according to the REPAYE repayment plan a borrower obtains additional loans after having repaid according to the REPAYE repayment plan a borrower obtains additional loans
that are that are ~~eligible~~ eligible to be repaid according to the plan, a new repayment period to be repaid according to the plan, a new repayment period ~~wil~~ will begin for the new begin for the new
loans when they enter repayment. loans when they enter repayment.
Adjusted Payment Amounts for Borrowers Who Return to the REPAYE Repayment Plan. If If
a borrower seeks to return to the REPAYE repayment plan after having left and repaid according a borrower seeks to return to the REPAYE repayment plan after having left and repaid according
to any other repayment plan (including the REPAYE Alternative Repayment plan), to any other repayment plan (including the REPAYE Alternative Repayment plan), ~~he or she~~they must must
provide documentation of income for the entire period that provide documentation of income for the entire period that ~~he or she~~they repaid according to another repaid according to another
plan. If it is determined that the borrower paid a lesser amount under the other repayment plan (or plan. If it is determined that the borrower paid a lesser amount under the other repayment plan (or
plans) than plans) than ~~he or she~~they would have been required to repay according to the REPAYE repayment would have been required to repay according to the REPAYE repayment
plan, upon returning to the REPAYE repayment plan the borrower’s monthly payment amounts plan, upon returning to the REPAYE repayment plan the borrower’s monthly payment amounts
~~wil~~ will be adjusted upward to ensure that the difference between the two amounts be adjusted upward to ensure that the difference between the two amounts ~~wil~~ will be paid before be paid before
the end of the maximum repayment period of 20 or 25 years, as applicable. the end of the maximum repayment period of 20 or 25 years, as applicable.
Alternative Repayment Plans
Alternative repayment plans are available Alternative repayment plans are available in in more limited situations, on a case-by-case basis, to more limited situations, on a case-by-case basis, to
borrowers who demonstrate that due to exceptional circumstances they are unable to repay borrowers who demonstrate that due to exceptional circumstances they are unable to repay
according to other available repayment plans.according to other available repayment plans.~~121~~134 Loan servicers have discretion in determining Loan servicers have discretion in determining
what constitutes “exceptional circumstances” for purposes of permitting individual borrowers to what constitutes “exceptional circumstances” for purposes of permitting individual borrowers to
repay according to any of the alternative repayment plans.repay according to any of the alternative repayment plans.~~122~~135 If a borrower is permitted to repay according to an alternative repayment plan, they are notified in writing of the terms of the plan and may either accept those terms or select one of the other available repayment plans discussed above.136 Four variations of alternative repayment plans are available:137 1. Alternative Fixed Payment Repayment, 2. Alternative Fixed Term Repayment, 3. Alternative Graduated Payment Repayment, and 4. ~~If a borrower is permitted to repay~~

~~119 In establishing the REPAYE repayment plan, ED stated that in the absence of a process that allows for borrowers to~~
~~consent to multi-year access to information on their income, the REPAYE Alternative Repayment pla n provides an~~
~~incentive for borrowers to comply with the requirement to certify their income information in a timely manner and also~~
~~provides a disincentive for borrowers to fail to provide updated information if their income increases substantially.~~
~~Department of Education, “ Student Assistance General Provisions, Federal Family Education Loan,” 80~~ ~~Federal~~
~~Register~~ ~~39620, July 9, 2015.~~
~~120 In the Public Service Loan Forgiveness (PSLF) program, after 10 years of qualifying payments made while~~
~~employed full-time in qualifying public service, a borrower’s remaining loan balance may be forgiven. Amounts~~
~~forgiven under the PSLF program are exempt from taxation under the Internal Revenue Code. For additional~~
~~information on PSLF, see CRS Report R43571, Federal Student Loan Forgiveness and Loan Repaym ent Program s.~~
~~121 34 C.F.R. §685.208(l).~~
~~122 U.S. Department of Education, Office of Federal Student Aid, Loan Servicing and Collection —Frequently Asked~~
~~Questions, “ ARP-Q1: Are there any standard criteria for alternative repayment plans?”,~~
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~~according to an alternative repayment plan, he or she is notified in writing of the terms of the plan~~
~~and may either accept those terms or select one of the other available repayment plans discussed~~
~~above.123 Four variations of alternative repayment plans are available:124~~
~~ Alternative Fixed Payment Repayment,~~
~~ Alternative Fixed Term Repayment,~~
~~ Alternative Graduated Payment Repayment, and~~
 Alternative Negative Amortization Repayment. Alternative Negative Amortization Repayment.
The alternative repayment plans are established in accordance with general guidelines specified in The alternative repayment plans are established in accordance with general guidelines specified in
regulations. Details on specific provisions of these plans are communicated to eligible borrowers regulations. Details on specific provisions of these plans are communicated to eligible borrowers
by loan servicers. A borrower may be provided up to a maximum of 30 years to repay according by loan servicers. A borrower may be provided up to a maximum of 30 years to repay according
to an alternative repayment plan, not including periods of deferment and forbearance. There is a to an alternative repayment plan, not including periods of deferment and forbearance. There is a
minimum monthly payment amount of $5 and payments cannot vary by more than three times the minimum monthly payment amount of $5 and payments cannot vary by more than three times the
134 34 C.F.R. §685.208(l). 135 U.S. Department of Education, Office of Federal Student Aid, Loan Servicing and Collection—Frequently Asked Questions, “ARP-Q1: Are there any standard criteria for alternative repayment plans?”, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-asked-questions, accessed March 1, 2023. 136 34 C.F.R. §685.208(l)((3). 137 These alternative repayment plans are distinct from the REPAYE Alternative Repayment plan. Congressional Research Service 56 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program amount of the smallest payment.138 ~~amount of the smal est payment.125~~ Under the Alternative Negative Amortization Repayment Under the Alternative Negative Amortization Repayment
plan, a borrower may be permitted for one year to make monthly payments of less than the plan, a borrower may be permitted for one year to make monthly payments of less than the
amount of the interest that accrues on the loan.amount of the interest that accrues on the loan.~~126~~139 In such a case, any unpaid interest In such a case, any unpaid interest ~~wil~~ will be be
capitalized; however, capitalization of unpaid interest may not result in the loan balance capitalized; however, capitalization of unpaid interest may not result in the loan balance
exceeding 110% of the originalexceeding 110% of the original principal amount. If this occurs, any additional interest that principal amount. If this occurs, any additional interest that
accrues must be paid by the borrower. Payments made according to an alternative repayment plan accrues must be paid by the borrower. Payments made according to an alternative repayment plan
do not count toward the periods of repayment that may qualify a borrower for loan forgiveness do not count toward the periods of repayment that may qualify a borrower for loan forgiveness
~~under the IDR plans or the PSLF program.~~under the IDR plans or the PSLF program. Effective July 1, 2023, ED regulations eliminate instances of interest capitalization that are not specified in the HEA, such as following a permitted one-year period of negative amortization under the Alternative Negative Amortization Repayment plan. Accordingly, and also effective July 1, 2023, ED regulations eliminate provisions limiting the amount of interest capitalization under the Alternative Negative Amortization Repayment plan.140
Prepayment
The portion of any payment that is in excess of the amount due is considered a The portion of any payment that is in excess of the amount due is considered a prepayment. .
Borrowers of loans made through the Direct Loan program may prepay Borrowers of loans made through the Direct Loan program may prepay al all or any part of their or any part of their
loans at any time without penalty. Borrowers may obtain information from their Direct Loan loans at any time without penalty. Borrowers may obtain information from their Direct Loan
servicer on how to provide prepayment, with instructions regarding the application of servicer on how to provide prepayment, with instructions regarding the application of
overpayments. The procedures for applying prepayments to borrowers’ accounts are specified in overpayments. The procedures for applying prepayments to borrowers’ accounts are specified in
regulations issued by ED.regulations issued by ED.~~127~~
141 The procedures that apply for crediting a prepayment to a borrower’s loan balance depend on the The procedures that apply for crediting a prepayment to a borrower’s loan balance depend on the
size of the prepayment amount relative to the borrower’s scheduled monthly payment. A borrower size of the prepayment amount relative to the borrower’s scheduled monthly payment. A borrower
with more than one loan who wants a prepayment to be applied to a certain loan or loans (e.g., the with more than one loan who wants a prepayment to be applied to a certain loan or loans (e.g., the
loan with the highest interest rate) must specify such when making the prepayment; otherwise, loan with the highest interest rate) must specify such when making the prepayment; otherwise,
the prepayment the prepayment ~~wil~~ will be applied in accordance with HEA regulations and guidelines, which, among other provisions, generally require all of a borrower’s loans to be repaid together and under the same repayment plan.142 In general, if the amount of a prepayment is less than the next scheduled monthly payment ~~be applied in accordance with HEA regulations and guidelines, which,~~

~~https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-asked-questions, accessed~~
~~May 21, 2021.~~
~~123 34 C.F.R. §685.208(l)((3).~~
~~124 T hese alternative repayment plans are distinct from the REPAYE Alternative Repayment plan.~~
~~125 U.S. Department of Education, Office of Federal Student Aid, Loan Repayment Plans, “ Alternative Repayment~~
~~Plans,” p. 9, https://fsapartners.ed.gov/sites/default/files/attachments/presentations/41LoanRepaymentPlansV1.pdf .~~
~~126 Email communication with staff of U.S. Department of Education, Office of Legislation and Congression al Affairs,~~
~~July 9, 2019.~~
~~127 34 C.F.R. §685.211(a).~~
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~~among other provisions, general y require al of a borrower’s loans to be repaid together and~~
~~under the same repayment plan.128~~
~~In general, if the amount of a prepayment is less than the next scheduled monthly payment~~
amount according to the borrower’s repayment plan, the prepayment is applied in the following amount according to the borrower’s repayment plan, the prepayment is applied in the following
order: (1) to charges and collection costs,order: (1) to charges and collection costs,~~129~~143 (2) to accrued interest, and then (3) to outstanding (2) to accrued interest, and then (3) to outstanding
principal. However, if the amount of the prepayment is less than the next scheduled monthly principal. However, if the amount of the prepayment is less than the next scheduled monthly
payment amount and the borrower is repaying according to the IBR, PAYE, or REPAYE payment amount and the borrower is repaying according to the IBR, PAYE, or REPAYE
repayment plans and has a scheduled monthly payment of $0.00, the prepayment is applied in the repayment plans and has a scheduled monthly payment of $0.00, the prepayment is applied in the
~~following order: (1) to accrued interest, (2) to collection costs, (3) to late charges, and then (4) to~~
following order: (1) to accrued interest, (2) to collection costs, (3) to late charges, and then (4) to 138 U.S. Department of Education, Office of Federal Student Aid, Loan Repayment Plans, “Alternative Repayment Plans,” p. 9, https://fsapartners.ed.gov/sites/default/files/attachments/presentations/41LoanRepaymentPlansV1.pdf. 139 Email communication with staff of U.S. Department of Education, Office of Legislation and Congressional Affairs, March 16, 2023. 140 ED, Final Rule, November 1, 2022. 141 34 C.F.R. §685.211(a). 142 U.S. Department of Education, Office of Federal Student Aid, Master Promissory Note (MPN) for Direct Subsidized/ Unsubsidized Loans William D. Ford Federal Direct Loan Program, OMN No. 1845-007; and 34 C.F.R. §685.208(a)(4). 143 While the regulations permit the charging of late fees (see 34 C.F.R. §685.202(d)), in practice Direct Loan servicing has never assessed such fees or charges. U.S. Department of Education, Office of Legislation and Congressional Affairs (OLCA), email communication with the author, March 31, 2023. Congressional Research Service 57 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program outstanding principal. For example, consider a borrower whose next scheduled monthly payment outstanding principal. For example, consider a borrower whose next scheduled monthly payment
was $200 in January and who was current on making payments. If at the time of making the was $200 in January and who was current on making payments. If at the time of making the
January payment the borrower made a payment of $300, this would result in a prepayment of January payment the borrower made a payment of $300, this would result in a prepayment of
$100. The $100 prepayment would be applied toward reducing the outstanding principal balance $100. The $100 prepayment would be applied toward reducing the outstanding principal balance
on the borrower’s loans, because on the borrower’s loans, because ~~he or she~~they did not have any outstanding charges or accrued did not have any outstanding charges or accrued
interest. The borrower’s next scheduled monthly payment of $200 would remain due in February. interest. The borrower’s next scheduled monthly payment of $200 would remain due in February.
If the amount of the prepayment is equal to or greater than the next scheduled monthly payment If the amount of the prepayment is equal to or greater than the next scheduled monthly payment
amount under the borrower’s repayment plan, the prepayment is applied in the same order as amount under the borrower’s repayment plan, the prepayment is applied in the same order as
described above, and, unless the borrower requests otherwise, the due date of the borrower’s next described above, and, unless the borrower requests otherwise, the due date of the borrower’s next
payment is advanced and payment is advanced and ~~he or she is~~they are notified of the due date for the next payment. For example, notified of the due date for the next payment. For example,
consider again a borrower whose next monthly payment was $200 in January and who was consider again a borrower whose next monthly payment was $200 in January and who was
current on making payments. If at the time of making the January payment the borrower made a current on making payments. If at the time of making the January payment the borrower made a
payment of $600, this would result in a prepayment of $400. Because this borrower did not have payment of $600, this would result in a prepayment of $400. Because this borrower did not have
any outstanding charges or accrued interest, the $400 prepayment would be applied toward the any outstanding charges or accrued interest, the $400 prepayment would be applied toward the
next two payments due (i.e., the February and March payments) and the due date of the next two payments due (i.e., the February and March payments) and the due date of the
borrower’s next payment would be advanced to April. If the borrower instead wanted the $400 borrower’s next payment would be advanced to April. If the borrower instead wanted the $400
prepayment to be applied toward reducing the outstanding principal balance and the next prepayment to be applied toward reducing the outstanding principal balance and the next
scheduled payment to remain due in February, scheduled payment to remain due in February, ~~he or she~~they would need to request this at the time of would need to request this at the time of
making the prepayment.making the prepayment.~~130~~
144 Application of Payments on Delinquent Loans
The loans of borrowers who The loans of borrowers who ~~fal~~ fall behind on making payments are considered to be delinquent.behind on making payments are considered to be delinquent.~~131~~145
In general, a federal student loan is considered delinquent when the full payment amount is not In general, a federal student loan is considered delinquent when the full payment amount is not
satisfied by the payment due date.satisfied by the payment due date.146 A borrower may restore a delinquent loan to current status A borrower may restore a delinquent loan to current status by making payments that are applied to past due amounts. When borrowers make payments on delinquent loans, their payments are generally credited first to the oldest past due amounts owed. An example of how a delinquent loan may be restored to current status is provided by ED in its contracts for its loan servicers.147 The example considers a borrower whose scheduled monthly payment amount of $225 is due on the 14th of the month. If as of January 14th, the borrower had paid only $200 for the January payment, the loan would become delinquent, as $25 would remain unpaid. However, if on February 14th, the borrower paid $250, $25 would be applied to the past due amount for January and $225 would be applied to the amount due for February. This would restore the borrower’s loan to current status. 144 Theby

~~128 U.S. Department of Education, Office of Federal Student Aid, Master Promissory Note (MPN) for Direct~~
~~Subsidized/ Unsubsidized Loans William D. Ford Federal Direct Loan Program, OMN No. 1845 -007; and 34 C.F.R.~~
~~§685.208(a)(4).~~
~~129 While the regulations permit the charging of late fees and fees for dishonored checks, in practice Direct Loan~~
~~servicing has never assessed such fees or charges. U.S. Department of Education, Office of Legislation and~~
~~Congressional Affairs (OLCA), email communication with the author, August 3, 2016.~~
~~130 T he~~ Department of Education’s loan servicers provide additional information to borrowers on the treatment of Department of Education’s loan servicers provide additional information to borrowers on the treatment of
prepayments and on how to submit special payment instructions. For example,prepayments and on how to submit special payment instructions. For example, see MOHELA, see MOHELA, ~~Paym ent Inform ation:~~
~~How Paym ents~~Payment Information: How Payments Are Applied, https://www.mohela.com/DL/resourceCenter/, https://www.mohela.com/DL/resourceCenter/~~PayingAhead.aspx , accessed May 21, 2021.~~
~~131~~HowPaymentsAreApplied.aspx#:~:text=Payments%20made%20over%20the%20required,then%20to%20the%20subsidized%20loan., accessed March 2, 2023. 145 In general, a borrower who is 270 days or more delinquent In general, a borrower who is 270 days or more delinquent on a loan is consideredon a loan is considered to be in default. Once in default, to be in default. Once in default,
the entire remaining balance of the loan becomes duethe entire remaining balance of the loan becomes due immediately, and ED, via its contracted loan servicers, private immediately, and ED, via its contracted loan servicers, private
collections agencies, or other authorized means (e.g., the collections agencies, or other authorized means (e.g., the ~~T reasury~~Treasury Offset Program) may attempt to recoup the entire outstanding balance of the loan. 146 See, U.S. Department of Education, Office of Federal Student Aid, “When does a loan become delinquent,” https://studentaid.gov/help-center/answers/article/delinquent, accessed March 2, 2023. 147 See, for example, U.S. Department of Education, Office of Federal Student Aid, Loan Servicing Contracts, Title IV Additional Servicing (TIVAS) Contracts (2014): Nelnet Servicing, LLC, p. 14, https://studentaid.gov/sites/default/files/ED-FSA-09-D-0013_MOD_0082_Nelnet.pdf#page=14. Congressional Research Service 58 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program ~~Offset Program) may attempt to recoup the entire~~
~~outstanding balance of the loan.~~
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~~making payments that are applied to past due amounts. When borrowers make payments on~~
~~delinquent loans, their payments are general y credited first to the oldest past due amounts owed.~~
~~An example of how a delinquent loan may be restored to current status is provided by ED in its~~
~~contracts for its loan servicers.132 The example considers a borrower whose scheduled monthly~~
~~payment amount of $225 is due on the 14th of the month. If as of January 14th, the borrower had~~
~~paid only $200 for the January payment, the loan would become delinquent, as $25 would remain~~
~~unpaid. However, if on February 14th, the borrower paid $250, $25 would be applied to the past~~
~~due amount for January and $225 would be applied to the amount due for February. This would~~
~~restore the borrower’s loan to current status.~~
Deferment and Forbearance
Periods of deferment and forbearance provide borrowers with temporary relief from the Periods of deferment and forbearance provide borrowers with temporary relief from the
obligation to make monthly payments that would otherwise be due on their loans. In certain obligation to make monthly payments that would otherwise be due on their loans. In certain
instances, interest subsidies may be provided during periods of deferment; however, with limited instances, interest subsidies may be provided during periods of deferment; however, with limited
exceptions, interest subsidies are not available during periods of forbearance. In general, periods exceptions, interest subsidies are not available during periods of forbearance. In general, periods
during which borrowers are in a deferment or forbearance are excluded from the repayment during which borrowers are in a deferment or forbearance are excluded from the repayment
period. However, for borrowers who are repaying according to any of the IDR plans, periods of period. However, for borrowers who are repaying according to any of the IDR plans, periods of
up to three years while in receipt of an economic hardship deferment are included as part of the up to three years while in receipt of an economic hardship deferment are included as part of the
repayment period. The various forms of deferment and forbearance that are available to repayment period. The various forms of deferment and forbearance that are available to
borrowers of loans made through the Direct Loan program are described below. borrowers of loans made through the Direct Loan program are described below.
Deferments
A A deferment is a temporary period during which a borrower’s obligation to make regular monthly is a temporary period during which a borrower’s obligation to make regular monthly
payments of principal and interest is suspended, and during which an interest subsidy may be payments of principal and interest is suspended, and during which an interest subsidy may be
provided. Deferments are available during periods while a student is pursuing postsecondary provided. Deferments are available during periods while a student is pursuing postsecondary
education, participating in a graduate education, participating in a graduate ~~fel owship~~fellowship program or a training program, unemployed or program or a training program, unemployed or
experiencing an economic hardship, performing or has recently completed military service, or experiencing an economic hardship, performing or has recently completed military service, or
receiving treatment for cancer. Deferments are not available to borrowers whose loans are in receiving treatment for cancer. Deferments are not available to borrowers whose loans are in
default status. default status.
In most instances, a borrower must proactively apply for and request a deferment. To qualify for In most instances, a borrower must proactively apply for and request a deferment. To qualify for
it, the borrower (or, in certain instances, the individual on whose behalf the loan was made for it, the borrower (or, in certain instances, the individual on whose behalf the loan was made for
parent borrowers of Direct PLUS Loans) must satisfy certain eligibilityparent borrowers of Direct PLUS Loans) must satisfy certain eligibility criteria. Several criteria. Several
deferment types have no maximum period of eligibility,deferment types have no maximum period of eligibility, while other types are while other types are ~~initial y~~ initially granted for granted for
a limited period of time and may be subsequently renewed up to a maximum period of eligibility a limited period of time and may be subsequently renewed up to a maximum period of eligibility
for the deferment type. Periods of eligibilityfor the deferment type. Periods of eligibility for deferments are specific to the borrower, as for deferments are specific to the borrower, as
opposed to the borrower’s loans. Thus, for those deferment types that have a maximum period of opposed to the borrower’s loans. Thus, for those deferment types that have a maximum period of
eligibility,eligibility, if a borrower exhausts if a borrower exhausts ~~his or her eligibility~~ their eligibility with one set of loanswith one set of loans, no eligibility no eligibility would would
remain to qualify for the same type of deferment on any other loans for which remain to qualify for the same type of deferment on any other loans for which ~~he or she~~they had not had not
received the deferment. received the deferment.
Unless an interest subsidy applies to a borrower’s loans, interest Unless an interest subsidy applies to a borrower’s loans, interest ~~wil~~ will continue to accrue during a continue to accrue during a
period of deferment. While in receipt of a deferment, borrowers have the option either to pay the period of deferment. While in receipt of a deferment, borrowers have the option either to pay the
interest as it accrues or pay it at a later time. In most instances, if the interest that accrues during a interest as it accrues or pay it at a later time. In most instances, if the interest that accrues during a
period of deferment is not paid as it accruesperiod of deferment is not paid as it accrues, it will ~~it wil be capitalized at the end of the deferment~~

~~132 See, for example, U.S. Department of Education, Office of Federal Student Aid, Loan Servicing Contracts, T itle IV~~
~~Additional Servicing (T IVAS) Contracts (2014): Pennsylvania Higher Education Assistance Agency , p. 14,~~
~~https://studentaid.gov/sites/default/files/ED-FSA-09-D-0014_MOD_0072_PHEAA.pdf#page=14.~~
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be capitalized at the end of the deferment period. However, if a borrower’s deferment coincides with the individual having a partial period. However, if a borrower’s deferment coincides with the individual having a partial
financial hardship while repaying according to either of the IBR plans or the PAYE repayment financial hardship while repaying according to either of the IBR plans or the PAYE repayment
plan, any interest that has accrued during the deferment plan, any interest that has accrued during the deferment ~~wil~~ will not be capitalized so long as the not be capitalized so long as the
borrower continues to have a partial financial hardship. borrower continues to have a partial financial hardship.
The following types of deferments are available to borrowers of loans made through the Direct The following types of deferments are available to borrowers of loans made through the Direct
~~Loan program.133~~
~~In-School Deferment~~
~~A borrower is eligible to receive an in-school deferment134 for any period during which he or she~~
~~is enrolled at an eligible~~ Loan program.148 148 A borrower who had an outstanding balance on one or more loans that were made through the FFEL program prior to July 1, 1993, when the borrower first obtained a loan through the Direct Loan program may also be able to qualify for additional types of deferments. These additional deferments are specified at 34 C.F.R. §682.210(b). Congressional Research Service 59 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program In-School Deferment A borrower is eligible to receive an in-school deferment149 for any period during which they are enrolled at an eligible institution on at least a half-time basis, as determined by the institution institution on at least a half-time basis, as determined by the institution
attended. Graduate student borrowers of Direct PLUS Loans first disbursed on or after July 1, attended. Graduate student borrowers of Direct PLUS Loans first disbursed on or after July 1,
2008, (which enter repayment upon being fully dispersed) are also eligible2008, (which enter repayment upon being fully dispersed) are also eligible to receive an in-school to receive an in-school
deferment while they are enrolleddeferment while they are enrolled in school and during the six-month period after ceasing to be in school and during the six-month period after ceasing to be
enrolled on at least a half-time basis.enrolled on at least a half-time basis.~~135~~
150 During an in-school deferment, an interest subsidy is provided on Direct Subsidized Loans and on During an in-school deferment, an interest subsidy is provided on Direct Subsidized Loans and on
the subsidized component of Direct Consolidation Loans. There is no maximum period of the subsidized component of Direct Consolidation Loans. There is no maximum period of
~~eligibility~~ eligibility for an in-school deferment. for an in-school deferment.
Eligible Eligible borrowers are borrowers are ~~typical y~~typically placed in an in-school deferment placed in an in-school deferment ~~automatical y~~automatically on the basis of on the basis of
being enrolled in an eligiblebeing enrolled in an eligible institution on at least a half-time basis. However, eligibleinstitution on at least a half-time basis. However, eligible borrowers borrowers
may also proactively request an in-school deferment.may also proactively request an in-school deferment.~~136~~151 Borrowers who have been Borrowers who have been ~~automatical y~~
automatically placed in an in-school deferment have the option to cancel it. If these borrowers wish to do so, placed in an in-school deferment have the option to cancel it. If these borrowers wish to do so,
they have the option to pay any principal and interest that had already been deferred or they may they have the option to pay any principal and interest that had already been deferred or they may
let the interest that had accrued on the deferred payments be capitalized upon let the interest that had accrued on the deferred payments be capitalized upon ~~cancel ation~~cancellation of the of the
deferment. deferment.
In-School Deferment for Parent Borrowers of Direct PLUS Loans
Parent borrowers of Direct PLUS Loans for which the first disbursement was made on or after Parent borrowers of Direct PLUS Loans for which the first disbursement was made on or after
July 1, 2008, are eligibleJuly 1, 2008, are eligible for a deferment for any period during which the student on whose behalf for a deferment for any period during which the student on whose behalf
the loan was made would qualify for an in-school deferment.the loan was made would qualify for an in-school deferment.~~137~~152 This deferment is also available This deferment is also available
during the six-month grace period after the student on whose behalf the loan was made first during the six-month grace period after the student on whose behalf the loan was made first
~~ceases to be enrolled on at least a half-time basis.~~

~~133 A borrower who had an outstanding balance on one or more loans that were made through the FFEL program prior~~
~~to July 1, 1993, when the borrower first obtained a loan through the Direct Loan program may also be able to qualify~~
~~for additional types of deferments. T hese additional deferments are specified at 34 C.F.R. §682.210(b).~~
~~134 34 C.F.R. §685.204(b).~~
~~135~~ceases to be enrolled on at least a half-time basis. Graduate Fellowship Deferment A borrower may receive a deferment while pursuing a course of study in a graduate fellowship program.153 Eligibility requirements include that the borrower has earned a bachelor’s degree, and that the program operates on a full-time basis, provides financial support for at least six months, and requires the applicant to submit a written statement of objectives and periodic progress reports. There is no maximum period of eligibility for this deferment. It is not available to borrowers who are serving in medical residency or internship programs, except for residency programs in dentistry. During a graduate fellowship deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. 149 34 C.F.R. §685.204(b). 150 As a grace period is not offered on Direct PLUS Loans, the six-month period corresponds to the grace period As a grace period is not offered on Direct PLUS Loans, the six-month period corresponds to the grace period
available on Direct Subsidizedavailable on Direct Subsidized Loans and Direct UnsubsidizedLoans and Direct Unsubsidized Loans. Loans.
~~136~~ 151 U.S. U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, “ “In-School Deferment RequestIn-School Deferment Request ,” OMB No. 1845-,” OMB No. 1845-
0011, 0011,
https://https://~~studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=inschool&localeCode=~~
~~en-us&_ga=2.124675085.684834368.1556119313-753213604.1539381477.~~
~~137~~studentaid.gov/sites/default/files/GEN1602Attach18450011SCHFINAL.pdf. 152 34 C.F.R. §685.204(c); U.S. Department of Education, Office of Federal Student 34 C.F.R. §685.204(c); U.S. Department of Education, Office of Federal Student Aid, “Aid, “ Parent PLUS Borrower Parent PLUS Borrower
Deferment RequestDeferment Request ,” OMB No. 1845-0011, ,” OMB No. 1845-0011,
https://https://~~studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=parentplus&localeCod~~
~~e=en-us&_ga=2.56140076.684834368.1556119313 -753213604.1539381477.~~
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~~Graduate Fellowship Deferment~~
~~A borrower may receive a deferment while pursuing a course of study in a graduate fel owship~~
~~program.138 Eligibility requirements include that the borrower has earned a bachelor’s degree, and~~
~~that the program operates on a full-time basis, provides financial support for at least six months,~~
~~and requires the applicant to submit a written statement of objectives and periodic progress~~
~~reports. There is no maximum period of eligibility for this deferment. It is not available to~~
~~borrowers who are serving in medical residency or internship programs, except for residency~~
~~programs in dentistry.~~
~~During a graduate fel owship deferment, an interest subsidy is provided on Direct Subsidized~~
~~Loans and on the subsidized component of Direct Consolidation Loans.~~studentaid.gov/sites/default/files/ParentPLUSBorrowerDeferment.pdf. 153 34 C.F.R. §685.204(d); U.S. Department of Education, Office of Federal Student Aid, “Graduate Fellowship Deferment Request,” OMB No. 1845-0011, https://studentaid.gov/sites/default/files/GraduateFellowshipDeferment.pdf. Congressional Research Service 60 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program
Rehabilitation Training Program Deferment
A borrower may receive a deferment while pursuing a course of study in a rehabilitation training A borrower may receive a deferment while pursuing a course of study in a rehabilitation training
program for individuals with disabilities.program for individuals with disabilities.~~139~~154 For a borrower to be eligible, the rehabilitation For a borrower to be eligible, the rehabilitation
training program must be licensed, approved, certified, or recognized by a state agency or the training program must be licensed, approved, certified, or recognized by a state agency or the
U.S. Department of Veterans Affairs. It also must provide services according to a written, U.S. Department of Veterans Affairs. It also must provide services according to a written,
individualizedindividualized plan that specifies an expected completion date and must require a substantial plan that specifies an expected completion date and must require a substantial
commitment by the borrower toward rehabilitation to the extent that it would commitment by the borrower toward rehabilitation to the extent that it would ~~normal y~~normally prevent an prevent an
individualindividual from being employed full-time (i.e., 30 or more hours per week) for at least three from being employed full-time (i.e., 30 or more hours per week) for at least three
months. There is no maximum period of eligibilitymonths. There is no maximum period of eligibility for this deferment. for this deferment.
During a rehabilitation During a rehabilitation training program deferment, an interest subsidy is provided on Direct training program deferment, an interest subsidy is provided on Direct
Subsidized Loans and on the subsidized component of Direct Consolidation Loans. Subsidized Loans and on the subsidized component of Direct Consolidation Loans.
Unemployment Deferment
A borrower who is seeking to obtain full-time employment and is either not employed or is A borrower who is seeking to obtain full-time employment and is either not employed or is
employed less than full-time may be granted an unemployment deferment.employed less than full-time may be granted an unemployment deferment.~~140~~155 To be eligible, a To be eligible, a
borrower must be either receiving unemployment benefits or must document that borrower must be either receiving unemployment benefits or must document that ~~he or she has~~they have
registered with a public or private employment agency (if one is availableregistered with a public or private employment agency (if one is available within 50 miles) and is within 50 miles) and is
~~diligently~~ diligently seeking to obtain full-time employment. A borrower may receive the deferment for a seeking to obtain full-time employment. A borrower may receive the deferment for a
maximum cumulative period of three years, which may include one or more episodes of maximum cumulative period of three years, which may include one or more episodes of
unemployment. unemployment. ~~He or she is~~They are not required to have been employed previously to qualify for it. not required to have been employed previously to qualify for it.
A borrower may request that an unemployment deferment begin the date that A borrower may request that an unemployment deferment begin the date that ~~he or she~~they became unemployed or began working less than full-time, but that date may be no earlier than six months prior to requesting the deferment. The deferment may be granted for an initial period of six months and may be extended in six-month increments. During an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans ~~became~~
~~unemployed or began working less than full-time, but that date may be no earlier than six months~~

~~138 34 C.F.R. §685.204(d); U.S. Department of Education, Office of Federal Student Aid, “ Graduate Fellowship~~
~~Deferment Request ,” OMB No. 1845-0011,~~
~~https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=gradflship&localeCod~~
~~e=en-us&_ga=2.219521438.684834368.1556119313 -753213604.1539381477.~~
~~139 34 C.F.R. §685.204(e); U.S. Department of Education, Office of Federal Student Aid, “ Rehabilitation T raining~~
~~Deferment Request ,” OMB No. 1845-0011,~~
~~https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=rehabtrn&localeCode=~~
~~en-us&_ga=2.119580047.684834368.1556119313-753213604.1539381477.~~
~~140 34 C.F.R. §685.204(f); U.S. Department of Education, Office of Federal Student Aid, “ Unemployment Deferment~~
~~Request,” OMB No. 1845-0011,~~
~~https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=unemploy&localeCod~~
~~e=en-us&_ga=2.212772371.684834368.1556119313 -753213604.1539381477.~~
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~~prior to requesting the deferment. The deferment may be granted for an initial period of six~~
~~months and may be extended in six-month increments.~~
~~During an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans~~
and on the subsidized component of Direct Consolidation Loans. and on the subsidized component of Direct Consolidation Loans.
Economic Hardship Deferment
A borrower may qualify for a deferment during periods while A borrower may qualify for a deferment during periods while ~~he or she is~~they are experiencing an experiencing an
~~economic hardship or is serving as a volunteer in the Peace Corps.141~~economic hardship.156 To qualify for this deferment To qualify for this deferment
on a loan made through the Direct Loan program, a borrower must satisfy at least one of the on a loan made through the Direct Loan program, a borrower must satisfy at least one of the
following criteria: following criteria:
• the borrower has been granted an economic hardship deferment under the FFEL the borrower has been granted an economic hardship deferment under the FFEL
program or the Perkins Loan program for the same period of time for which the program or the Perkins Loan program for the same period of time for which the
borrower requests an economic hardship defermentborrower requests an economic hardship deferment on their Direct Loan program loan; •;
 the borrower is receiving payments under a federal or state public assistance the borrower is receiving payments under a federal or state public assistance
program (e.g., Temporary Assistance for Needy Families [TANF], Supplemental program (e.g., Temporary Assistance for Needy Families [TANF], Supplemental
154 34 C.F.R. §685.204(e); U.S. Department of Education, Office of Federal Student Aid, “Rehabilitation Training Deferment Request,” OMB No. 1845-0011, https://studentaid.gov/sites/default/files/RehabilitationTrainingDeferment.pdf. 155 34 C.F.R. §685.204(f); U.S. Department of Education, Office of Federal Student Aid, “Unemployment Deferment Request,” OMB No. 1845-0011, https://studentaid.gov/sites/default/files/UnemploymentDeferment.pdf. 156 34 C.F.R. §685.204(g); U.S. Department of Education, Office of Federal Student Aid, “Economic Hardship Deferment Request,” OMB No. 1845-0011, https://studentaid.gov/sites/default/files/EconomicHardshipDeferment.pdf. Congressional Research Service 61 link to page 48 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Security Income [SSI], Supplemental Nutrition Assistance Program [SNAP], Security Income [SSI], Supplemental Nutrition Assistance Program [SNAP],
state general public assistance, other means-tested benefits);state general public assistance, other means-tested benefits);
 • the borrower is working full-time and has a monthly income that does not exceed the borrower is working full-time and has a monthly income that does not exceed
an amount equal to 150% of the poverty line applicable to the borrower’s family an amount equal to 150% of the poverty line applicable to the borrower’s family
size, (size, (seesee Table 7) as calculated on a monthly basis; or as calculated on a monthly basis; or
• the borrower is serving as a volunteer in the Peace Corps. the borrower is serving as a volunteer in the Peace Corps.
The deferment may be granted for periods of up to one year at a time, and may be extended up to The deferment may be granted for periods of up to one year at a time, and may be extended up to
a cumulative maximum of three years.a cumulative maximum of three years.~~142~~157 Periods of up to three years while a borrower qualifies Periods of up to three years while a borrower qualifies
for an economic hardship deferment may be counted as part of the repayment period for each of for an economic hardship deferment may be counted as part of the repayment period for each of
the IDR plans. During an economic hardship deferment, an interest subsidy is provided on Direct the IDR plans. During an economic hardship deferment, an interest subsidy is provided on Direct
Subsidized Loans and on the subsidized component of Direct Consolidation Loans. Subsidized Loans and on the subsidized component of Direct Consolidation Loans.
Military Service Deferment
A borrower may qualify for a military service deferment on the basis of serving on active duty or A borrower may qualify for a military service deferment on the basis of serving on active duty or
performing qualifying National Guard duty during a war or other military operation or national performing qualifying National Guard duty during a war or other military operation or national
emergency.emergency.~~143~~158 The deferment is provided for the entire period of qualifying military service, and for an additional 180 days following the completion of military service for borrowers whose ~~The deferment is provided for the entire period of qualifying military service, and~~

~~141 34 C.F.R. §685.204(g); U.S. Department of Education, Office of Federal Student Aid, “Economic Hardship~~
~~Deferment Request ,” OMB No. 1845-0011,~~
~~https://studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=ecohardshp&localeCo~~
~~de=en-us&_ga=2.9995570.684834368.1556119313 -753213604.1539381477.~~
~~142 If a borrower qualifies for this deferment based on service in the Peace Corps, it may be granted for the lesser of the~~
~~duration of his or her Peace Corps service, or the remainder of his or her period of eligibility without the borrower~~
~~being required to request an extension.~~
~~143 Qualifying National Guard duty is that which is full-time, performed for more than 30 consecutive days, and a call~~
~~to active duty authorized by the President or the Secretary of Defense. It does not include National Guard active duty~~
~~activated by the governor of a state. 34 C.F.R. §685.204(h); U.S. Department of Education, Office of Federal Student~~
~~Aid, “Military Service and Post -Active Duty Student Deferment Request,” OMB No. 1845-0080,~~
~~https://st udentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=milstdnt&localeCode=~~
~~en-us&_ga=2.220161438.684834368.1556119313-753213604.1539381477.~~
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~~for an additional 180 days following the completion of military service for borrowers whose~~
period of qualifying service includes or began after October 1, 2007. period of qualifying service includes or began after October 1, 2007.
During a military service deferment, an interest subsidy is provided on Direct Subsidized Loans During a military service deferment, an interest subsidy is provided on Direct Subsidized Loans
and on the subsidized component of Direct Consolidation Loans.and on the subsidized component of Direct Consolidation Loans.~~144~~
159 Post-Active Duty Student Deferment
A borrower may qualify for a post-active duty student deferment if A borrower may qualify for a post-active duty student deferment if ~~he or she is~~they are a member of the a member of the
National National ~~Guard145~~Guard160 or other reserve component of the Armed Forces (or is a member in retired or other reserve component of the Armed Forces (or is a member in retired
status) and is status) and is ~~cal ed~~called or ordered to active duty while or ordered to active duty while ~~he or she is~~they are enrolled on at least a half-time enrolled on at least a half-time
basis at an eligiblebasis at an eligible institution, or within six months of being enrolled.institution, or within six months of being enrolled.~~146~~161 To qualify, the borrower To qualify, the borrower
must have been required to perform at least 30 consecutive days of active duty service on or after must have been required to perform at least 30 consecutive days of active duty service on or after
October 1, 2007. The deferment is available for a period of up to the lesser of 13 months October 1, 2007. The deferment is available for a period of up to the lesser of 13 months
following the completion of active duty service or until the borrower re-enrolls in an eligible following the completion of active duty service or until the borrower re-enrolls in an eligible
institution on at least a half-time basis. If a borrower qualifies for both the military service institution on at least a half-time basis. If a borrower qualifies for both the military service
~~deferment and the post-active duty student deferment, the 180-day post-demobilization period~~
~~and the 13-month post-active duty service period apply concurrently.~~
~~During a post-active duty student deferment, an interest subsidy is provided on Direct Subsidized~~
~~Loans and on the subsidized component of Direct Consolidation Loans.~~
~~Cancer Treatment Deferment~~
~~A borrower may receive a cancer treatment deferment on eligible loans during periods while he or~~
~~she is receiving treatment for cancer and for the six months thereafter.147 To qualify for the~~
~~deferment, the borrower must submit an application on which a physician who is a Doctor of~~
~~Medicine (M.D.) or a Doctor of Osteopathy (D.O.) certifies that the borrower is receiving~~
~~treatment for cancer under the physician’s care.148~~
~~During periods while a borrower receives a cancer treatment deferment, no interest accrues on the~~
~~qualifying loans. Qualifying loans include Direct Subsidized Loans, Direct Unsubsidized Loans,~~
~~Direct PLUS Loans, and Direct Consolidation Loans that were either made on or after September~~
~~28, 2018, or had entered repayment status on or before September 28, 2018.149 Loans made prior~~

~~144~~ 157 If a borrower qualifies for this deferment based on service in the Peace Corps, it may be granted for the lesser of the duration of their Peace Corps service, or the remainder of their period of eligibility under the three-year maximum without the borrower being required to request an extension. 158 Qualifying National Guard duty is that which is full-time, performed for more than 30 consecutive days, and a call to active duty authorized by the President or the Secretary of Defense. It does not include National Guard active duty activated by the governor of a state. 34 C.F.R. §685.204(h); U.S. Department of Education, Office of Federal Student Aid, “Military Service and Post-Active Duty Student Deferment Request,” OMB No. 1845-0080, https://studentaid.gov/sites/default/files/MilitaryServiceandPostActiveDutyStudentDeferment.pdf. 159 In addition, for all types of loans made through the Direct Loan program that were first disbursed In addition, for all types of loans made through the Direct Loan program that were first disbursed on or after on or after
October 1, 2008, no interest accrues duringOctober 1, 2008, no interest accrues during a period of up to 60 months while the borrower is serving on active duty or a period of up to 60 months while the borrower is serving on active duty or
is performing qualifyingis performing qualifying National GuardNational Guard duty in an area of hostilities duringduty in an area of hostilities during a wara war or national emergencyor national emergency .
~~145~~. 160 Unlike military service deferment, Post Unlike military service deferment, Post -Active Duty Student Deferment qualifying service includes National Guard -Active Duty Student Deferment qualifying service includes National Guard
active duty activated by the governor of a state, as wellactive duty activated by the governor of a state, as well as active duty authorized byas active duty authorized by the President or the Secretary of the President or the Secretary of
Defense. Defense.
~~146~~161 34 C.F.R. §685.204(i); U.S. Department of Education, Office of Federal Student Aid, “Military Service and 34 C.F.R. §685.204(i); U.S. Department of Education, Office of Federal Student Aid, “Military Service and ~~Post~~ Post--
Active Duty Student Deferment RequestActive Duty Student Deferment Request ,” OMB,” OMB No. 1845-0080, No. 1845-0080,
https://https://~~studentloans.gov/myDirectLoan/downloadForm.action?searchType=library&shortName=milstdnt&localeCode=~~
~~en-us&_ga=2.220161438.684834368.1556119313-753213604.1539381477.~~
~~147 T he cancer treatment deferment is available for periods of cancer treatment occurring on or after September 28,~~
~~2018.~~
~~148 U.S. Department of Education, Office of Federal Student Aid, “ Deferment for Cancer T reatment for Direct Loan,~~
~~FFEL, and Perkins Loan Program Borrowers,” August 22, 2019, https://fsapartners.ed.gov/knowledge-~~
~~center/library/electronic-announcements/2019-08-22/deferment-cancer-treatment-direct -loan-ffel-and-perkins-loan-~~
~~program-borrowers; and U.S. Department of Education, Office of Federal Student Aid, “ Cancer T reatment Deferment~~
~~Request,” OMB No. 1845-0154, https://studentaid.gov/sites/default/files/CancerT reatmentDeferment.pdf.~~
~~149 T he cancer treatment deferment does not appear to be available for loans that were made prior to September 28,~~
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studentaid.gov/sites/default/files/MilitaryServiceandPostActiveDutyStudentDeferment.pdf. Congressional Research Service 62 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program deferment and the post-active duty student deferment, the 180-day post-demobilization period and the 13-month post-active duty service period apply concurrently. During a post-active duty student deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. Cancer Treatment Deferment A borrower may receive a cancer treatment deferment on eligible loans during periods while they are receiving treatment for cancer and for the six months thereafter.162 To qualify for the deferment, the borrower must submit an application on which a physician who is a Doctor of Medicine (M.D.) or a Doctor of Osteopathy (D.O.) certifies that the borrower is receiving treatment for cancer under the physician’s care.163 During periods while a borrower receives a cancer treatment deferment, no interest accrues on the qualifying loans. Qualifying loans include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans that were either made on or after September 28, 2018, or had entered repayment status on or before September 28, 2018.164 Loans made prior to September 28, 2018, but had not yet entered repayment as of that date due to the borrower to September 28, 2018, but had not yet entered repayment as of that date due to the borrower
being enrolled in school on at least a half-time basis or being in the grace period, are not eligible being enrolled in school on at least a half-time basis or being in the grace period, are not eligible
for this deferment. However, as Direct Consolidation Loans made on or after September 28, for this deferment. However, as Direct Consolidation Loans made on or after September 28,
2018, are eligible2018, are eligible for the deferment, borrowers of ineligible loans may consider including them in for the deferment, borrowers of ineligible loans may consider including them in
a Direct Consolidation Loan for purposes of qualifying for the deferment. a Direct Consolidation Loan for purposes of qualifying for the deferment.
Forbearance
Forbearance constitutes permission for a borrower to temporarily cease making monthly student constitutes permission for a borrower to temporarily cease making monthly student
loan payments, to make payments in reduced amounts, or to make payments over an extended loan payments, to make payments in reduced amounts, or to make payments over an extended
period of time. With limited exceptions, during periods of forbearance, no interest subsidies are period of time. With limited exceptions, during periods of forbearance, no interest subsidies are
provided and borrowers ultimately remain responsible for paying provided and borrowers ultimately remain responsible for paying al all of the interest that accrues of the interest that accrues
on their loans. Borrowers have the option of either paying the interest as it accrues during on their loans. Borrowers have the option of either paying the interest as it accrues during
forbearance or letting it be capitalized into the principal balance at the end of the forbearance forbearance or letting it be capitalized into the principal balance at the end of the forbearance
period.period.~~150~~165 (Effective July 1, 2023, ED regulations eliminate interest capitalization that are not specified in the HEA, such as following periods of forbearance.166) In most instances, borrowers must apply for forbearance; and for certain types of it, In most instances, borrowers must apply for forbearance; and for certain types of it,
borrowers must provide supporting documentation to their loan servicer. Forbearance may be borrowers must provide supporting documentation to their loan servicer. Forbearance may be
granted for an initialgranted for an initial period of up to 12 months, and may be renewed upon the borrower’s period of up to 12 months, and may be renewed upon the borrower’s
request. Certain types of forbearance are limited to a maximum of 36 months. request. Certain types of forbearance are limited to a maximum of 36 months.
Forbearance may be granted for a number of reasons. General or Forbearance may be granted for a number of reasons. General or discretionary forbearance, may , may
be granted at the discretion of the loan servicer to borrowers who are temporarily unable to make be granted at the discretion of the loan servicer to borrowers who are temporarily unable to make
162 The cancer treatment deferment is available for periods of cancer treatment occurring on or after September 28, 2018. 163 U.S. Department of Education, Office of Federal Student Aid, “Deferment for Cancer Treatment for Direct Loan, FFEL, and Perkins Loan Program Borrowers,” August 22, 2019, https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2019-08-22/deferment-cancer-treatment-direct-loan-ffel-and-perkins-loan-program-borrowers; and U.S. Department of Education, Office of Federal Student Aid, “Cancer Treatment Deferment Request,” OMB No. 1845-0154, https://studentaid.gov/sites/default/files/CancerTreatmentDeferment.pdf. 164 The cancer treatment deferment does not appear to be available for loans that were made prior to September 28, 2019, but had not yet entered repayment prior to that date. 165 In some limited circumstances, as described below, interest is not capitalized at the end of forbearance. 166 ED, Final Rule, November 1, 2022. Congressional Research Service 63 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program scheduled loan payments. scheduled loan payments. Administrative forbearance is granted by the Secretary to borrowers is granted by the Secretary to borrowers
during periods necessary to determine a borrower’s eligibility for a number of borrower benefits during periods necessary to determine a borrower’s eligibility for a number of borrower benefits
and for certain other reasons. Certain types of forbearance, referred to as and for certain other reasons. Certain types of forbearance, referred to as mandatory forbearance, ,
are required to be granted to borrowers who satisfy applicable eligibilityare required to be granted to borrowers who satisfy applicable eligibility ~~criteria.~~
criteria. In response to the COVID-19 pandemic, monthly payments due on all types of Direct Loan program loans have been suspended temporarily (i.e., the COVID-19 payment pause). In practice, this is a type of administration forbearance. During this time, borrowers are not required to make payments due on their loans. For additional information, see Appendix D. General (Discretionary) Forbearance
A borrower may request a general forbearance on the basis of experiencing a temporary hardship A borrower may request a general forbearance on the basis of experiencing a temporary hardship
due to financial difficulties, a change in employment, medical expensesdue to financial difficulties, a change in employment, medical expenses, upon submission of a Public Service Loan Forgiveness application, or other reasons., or other reasons.~~151~~167 A A
general forbearance may be granted at the discretion of a borrower’s loan servicer for an initial general forbearance may be granted at the discretion of a borrower’s loan servicer for an initial
period of up to 12 months and may be extended in increments of 12 months. A borrower’s loan period of up to 12 months and may be extended in increments of 12 months. A borrower’s loan
servicer may limit the maximum duration of forbearance; however, there is no statutory or servicer may limit the maximum duration of forbearance; however, there is no statutory or
regulatory limit.regulatory limit.~~152~~168
Administrative Forbearance
Administrative forbearance may be granted during periods necessary to process requests by a Administrative forbearance may be granted during periods necessary to process requests by a
borrower for certain benefits or to determine borrower for certain benefits or to determine ~~his or her~~their eligibility. eligibility.~~153~~ 169 It may be granted for up to It may be granted for up to
60 days for the processing of requests for deferment, forbearance, change of repayment plan, and 60 days for the processing of requests for deferment, forbearance, change of repayment plan, and
loan consolidation. (Interest that accrues during administrative forbearance for these purposes is loan consolidation. (Interest that accrues during administrative forbearance for these purposes is
not capitalized.) Administrative forbearance is also granted during periods necessary to determine not capitalized.) Administrative forbearance is also granted during periods necessary to determine

~~2019, but had not yet entered repayment prior to that date.~~
~~150 In some limited circumstances, as described below, interest is not capitalized at the end of forbearance.~~
~~151 34 C.F.R. §685.205(a)(1); U.S. Department of Education, “ General Forbearance Request ,” OMB No. 1845-0031,~~
~~https://studentaid.gov/sites/default/files/GeneralForbearance.pdf; U.S. Department of Education, “ Federal Employees:~~
~~How to manage your student loans during the government shutdown ,” January 11, 2019,~~
~~https://blog.ed.gov/2019/01/federal-employees-manage-student -loans-government -shutdown/.~~
~~152 See, U.S. Department of Education, “General Forbearance Request,” OMB No. 1845 -0031,~~
~~https://studentaid.gov/sites/default/files/GeneralForbearance.pdf.~~
~~153 34 C.F.R. §685.205(b).~~
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a borrower’s eligibility for a student loan discharge (e.g., death or total and permanent disability, a borrower’s eligibility for a student loan discharge (e.g., death or total and permanent disability,
closed school, false certification, unauthorized payment, unpaid refund, bankruptcy, borrower closed school, false certification, unauthorized payment, unpaid refund, bankruptcy, borrower
defense to repayment) or for loan forgiveness through the Teacher Loan Forgiveness program. defense to repayment) or for loan forgiveness through the Teacher Loan Forgiveness program.
Administrative forbearance is provided to a borrower for up to three years if changes to variable Administrative forbearance is provided to a borrower for up to three years if changes to variable
interest rates preclude the borrower’s ability to repay interest rates preclude the borrower’s ability to repay ~~his or her~~their loans in 10 years under the loans in 10 years under the
standard or graduated repayment plans. It may also be granted for short periods, such as when standard or graduated repayment plans. It may also be granted for short periods, such as when
payments are overdue at the beginning of an authorized period of deferment or forbearance. payments are overdue at the beginning of an authorized period of deferment or forbearance.
The Secretary may also authorize administrative forbearance in response to a national military The Secretary may also authorize administrative forbearance in response to a national military
~~mobilization~~ mobilization or a local or national emergency.or a local or national emergency.170 167 34 C.F.R. §685.205(a)(1); CRS email communication with staff of U.S. Department of Education, Office of Legislation and Congressional Affairs, March 31, 2023; U.S. Department of Education, “General Forbearance Request,” OMB No. 1845-0031, https://studentaid.gov/sites/default/files/GeneralForbearance.pdf; U.S. Department of Education, “Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application, OMB No. 1845-0110, https://studentaid.gov/sites/default/files/public-service-application-for-forgiveness.pdf. 168 See, U.S. Department of Education, “General Forbearance Request,” OMB No. 1845-0031, https://studentaid.gov/sites/default/files/GeneralForbearance.pdf. 169 34 C.F.R. §685.205(b). 170 In response to the COVID-19 pandemic, for March 13, 2020, through October 1, 2023, monthly payments on all types of Direct Loan program loans are suspended. ED will suspend monthly payments on all types of Direct Loan program loans. (In practice, ED is placing all loans in administrative forbearance.) During this time, borrowers will not be required to make payments due on their loans. For additional information, see Appendix D. Congressional Research Service 64 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program
~~COVID-19 Loan Payment Suspension~~
~~In response to the COVID-19 pandemic, for March 13, 2020, through at least September 30,~~
~~2021, ED wil suspend monthly payments on al types of Direct Loan program loans. (In practice,~~
~~ED is placing al loans in administrative forbearance.)154 During this time, borrowers wil not be~~
~~required to make payments due on their loans. Borrowers who are eligible for this benefit need~~
~~not apply for it; ED wil automatical y suspend payments.~~
~~Whereas interest typical y accrues on loans during periods of forbearance, the COVID-19 interest~~
~~suspension (see section on “No Accrual of Interest During COVID-19”) ensures that interest does~~
~~not accrue on loans during the COVID-19 payment suspension period. In addition, suspended~~
~~payments wil count toward the 20- and 25-year repayment periods under the IDR plans, loan~~
~~rehabilitation for defaulted loans (see section on “Loan Rehabilitation”), and the 120 required~~
~~monthly payments under the Public Service Loan Forgiveness program (see section on “Public~~
~~Service Loan Forgiveness (PSLF) program”).155~~
Medical or Dental Internship or Residency Forbearance
A borrower who is a medical or dental intern or resident and does not or no longer qualifies for a A borrower who is a medical or dental intern or resident and does not or no longer qualifies for a
deferment may receive mandatory forbearance. To qualify, the borrower must have been accepted deferment may receive mandatory forbearance. To qualify, the borrower must have been accepted
into a medical or dental internship or residency program that either leads to a degree or certificate into a medical or dental internship or residency program that either leads to a degree or certificate
that is awarded by an IHE, a hospital, or a health care facility that offers postgraduate training, or that is awarded by an IHE, a hospital, or a health care facility that offers postgraduate training, or
that must be completed before the borrower may begin professional practice or service.that must be completed before the borrower may begin professional practice or service.~~156~~171 This This
type of forbearance may be granted for an initial period of up to 12 months and may be extended type of forbearance may be granted for an initial period of up to 12 months and may be extended
~~in increments of up to 12 months for the duration of the borrower’s internship or residency.~~

~~154 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students,~~
~~Borrowers, and Parents,” https://studentaid.gov/announcements-events/coronavirus#forbearance-questions, accessed~~
~~May 21, 2021.~~
~~155 For additional information, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19.~~
~~156 34 C.F.R. §685.205(a)(3); U.S. Department of Education, Mandatory Forbearance Request, “ Medical or Dental~~
~~Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance~~
~~William D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program ,” OMB~~
~~No. 1845-0018,~~
~~https://studentaid.gov/sites/default/files/MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepa~~
~~yment.pdf.~~
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in increments of up to 12 months for the duration of the borrower’s internship or residency. AmeriCorps National Service Forbearance
A borrower who is serving in a national service position for which A borrower who is serving in a national service position for which ~~he or she receives~~they receive a Segal a Segal
AmeriCorps Education Award may receive mandatory forbearance.AmeriCorps Education Award may receive mandatory forbearance.~~157~~172 It may be granted for an It may be granted for an
initialinitial period of up to 12 months and may be extended in increments of up to 12 months for the period of up to 12 months and may be extended in increments of up to 12 months for the
duration of the borrower’s national service. duration of the borrower’s national service.
Whereas borrowers are Whereas borrowers are ~~normal y~~normally responsible for paying the interest that accrues during responsible for paying the interest that accrues during
forbearance, the National Service Trust forbearance, the National Service Trust ~~wil pay al~~ will pay all or a portion of the interest that accrues during or a portion of the interest that accrues during
forbearance for a borrower who has earned a Segal AmeriCorps Education Award.forbearance for a borrower who has earned a Segal AmeriCorps Education Award.~~158~~173
Teacher Loan Forgiveness Program Forbearance
A borrower who is serving in a position that would qualify A borrower who is serving in a position that would qualify ~~him or her~~them for loan forgiveness under for loan forgiveness under
the Teacher Loan Forgiveness Program (described below) may receive mandatory forbearance. To the Teacher Loan Forgiveness Program (described below) may receive mandatory forbearance. To
be eligible,be eligible, the borrower must be serving as a full-time teacher at an elementary school, the borrower must be serving as a full-time teacher at an elementary school,
secondary school, or educational service agency that serves low-income families. The borrower’s secondary school, or educational service agency that serves low-income families. The borrower’s
outstanding loan balance is also considered in determining eligibility.outstanding loan balance is also considered in determining eligibility. This forbearance may be This forbearance may be
granted “only if the Secretary believes, at the time of the borrower’s annual request, that the granted “only if the Secretary believes, at the time of the borrower’s annual request, that the
expected forgiveness amount [i.e., up to $5,000 or up to $17,500, as applicable] expected forgiveness amount [i.e., up to $5,000 or up to $17,500, as applicable] ~~wil~~ will satisfy the satisfy the
anticipated remaining outstanding balance on the borrower’s loan at the time of the expected anticipated remaining outstanding balance on the borrower’s loan at the time of the expected
forgiveness.”forgiveness.”~~159~~174 It may be granted for an initial period of up to 12 months and may be extended in It may be granted for an initial period of up to 12 months and may be extended in
increments of up to 12 months for the duration of the five consecutive years of teaching service increments of up to 12 months for the duration of the five consecutive years of teaching service
~~required to qualify for loan forgiveness.~~
~~Student Loan Debt Burden Forbearance~~
~~A borrower may receive mandatory forbearance on the basis of having a federal student loan debt~~
~~burden that equals or exceeds 20% of his or her monthly total income.160 To qualify, a borrower~~
~~must demonstrate that his or her required monthly payments on federal student loans made under~~
~~Title IV of the HEA (e.g., loans made under the Direct Loan program, the FFEL program, or the~~
~~Perkins Loan program) equal or exceed 20% of his or her total monthly taxable income.161 This~~
~~type of forbearance may be granted for an initial period of 12 months and may be extended in~~
~~increments of 12 months for a maximum duration of 36 months.~~

~~157~~required to qualify for loan forgiveness. 171 34 C.F.R. §685.205(a)(3); U.S. Department of Education, Mandatory Forbearance Request, “Medical or Dental Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance William D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program,” OMB No. 1845-0018, https://studentaid.gov/sites/default/files/MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepayment.pdf. 172 34 C.F.R. §685.205(4). For additional information on AmeriCorps, see CRS 34 C.F.R. §685.205(4). For additional information on AmeriCorps, see CRS Report RL33931, Report RL33931, The Corporation for
National and ~~Com m unity~~Community Service: Overview of ~~Program s~~Programs and Funding . .
~~158~~173 Corporation for National and Community Service, AmeriCorps, “Members & Corporation for National and Community Service, AmeriCorps, “Members & Volunteers: Your benefits,” Volunteers: Your benefits,”
https://americorps.gov/members-volunteers/your-benefits, accessed https://americorps.gov/members-volunteers/your-benefits, accessed ~~May 21, 2021. . T his~~March 14, 2023. This benefit should benefit should not be not be
confused with subsidizedconfused with subsidized interest. During periods whileinterest. During periods while a borrower receives an AmeriCorps National Service a borrower receives an AmeriCorps National Service
Forbearance, Forbearance, ~~he or she continues~~they continue to be charged interest. to be charged interest. ~~T he~~The interest may be paid on the borrower’s behalf by interest may be paid on the borrower’s behalf by the the
National Service National Service ~~T rust.~~
~~159~~Trust. 174 34 C.F.R. §685.205(a)(5); U.S. Department of Education, “Teacher Loan Forgiveness Forbearance Request 34 C.F.R. §685.205(a)(5); U.S. Department of Education, “Teacher Loan Forgiveness Forbearance Request ,” ,” OMB OMB
No. 1845-0059, https://studentaid.gov/sites/default/files/No. 1845-0059, https://studentaid.gov/sites/default/files/~~T eacherForbearance.pdf. T his~~TeacherForbearance.pdf. This type of forbearance is offered to type of forbearance is offered to
allowallow a borrower with a lowa borrower with a low loan balance the opportunity to avoid losing the loan balance the opportunity to avoid losing the ~~oppor tunity~~opportunity to receive the maximum loan to receive the maximum loan
forgiveness benefit available to the borrower dueforgiveness benefit available to the borrower due to paying downto paying down the borrower’s loan balance prior to satisfying the the borrower’s loan balance prior to satisfying the
program eligibility criteria. program eligibility criteria.
~~160 34 C.F.R. §685.205(a)(6).~~
~~161 U.S. Department of Education, Mandatory Forbearance Request, “ Student Loan Debt Burden,” OMB No. 1845-~~
~~0018, https://studentaid.gov/sites/default/files/StudentLoanDebtBurdenForbearance.pdf .~~
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64

~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~
Congressional Research Service 65 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Student Loan Debt Burden Forbearance A borrower may receive mandatory forbearance on the basis of having a federal student loan debt burden that equals or exceeds 20% of their monthly total income.175 To qualify, a borrower must demonstrate that their required monthly payments on federal student loans made under Title IV of the HEA (e.g., loans made under the Direct Loan program, the FFEL program, or the Perkins Loan program) equal or exceed 20% of their total monthly taxable income.176 This type of forbearance may be granted for an initial period of 12 months and may be extended in increments of 12 months for a maximum duration of 36 months.
National Guard Duty Forbearance
Mandatory forbearance is available to a borrower who is a member of the National Guard and Mandatory forbearance is available to a borrower who is a member of the National Guard and
qualifies for a Post-Active Duty Student Deferment but does not qualify for a Military Service qualifies for a Post-Active Duty Student Deferment but does not qualify for a Military Service
Deferment or other deferment, and is engaged in active state duty service for 30 or more Deferment or other deferment, and is engaged in active state duty service for 30 or more
consecutive days.consecutive days.~~162~~177 This type of forbearance may be granted for an initial period of up to 12 This type of forbearance may be granted for an initial period of up to 12
months and may be extended in increments of up to 12 months for the duration of the borrower’s months and may be extended in increments of up to 12 months for the duration of the borrower’s
qualifying National Guard service. qualifying National Guard service.
Department of Defense Student Loan Repayment Program Forbearance
Mandatory forbearance is available during periods while a borrower is performing service that Mandatory forbearance is available during periods while a borrower is performing service that
qualifies qualifies ~~him or her~~them for partial repayment under a U.S. Department of Defense student loan for partial repayment under a U.S. Department of Defense student loan
repayment program.repayment program.~~163~~178 Interest that accrues during this forbearance is not capitalized at the end of Interest that accrues during this forbearance is not capitalized at the end of
the forbearance period. It may be granted for an initial period of up to 12 months and may be the forbearance period. It may be granted for an initial period of up to 12 months and may be
extended in increments of up to 12 months for the duration of the borrower’s qualifying service.extended in increments of up to 12 months for the duration of the borrower’s qualifying service.
Loan Discharge and Loan Forgiveness
An important benefit to borrowers of federal student loans made through the Direct Loan program An important benefit to borrowers of federal student loans made through the Direct Loan program
is that their obligation to repay these loans may be discharged or forgiven in a variety of is that their obligation to repay these loans may be discharged or forgiven in a variety of
circumstances. Several types of loan discharge and loan forgiveness benefits are available. These circumstances. Several types of loan discharge and loan forgiveness benefits are available. These
may be grouped into three broad categories: loan discharge for borrower hardship, loan may be grouped into three broad categories: loan discharge for borrower hardship, loan
forgiveness following IDR plan repayment, and loan forgiveness for public service. forgiveness following IDR plan repayment, and loan forgiveness for public service.
~~Loan Discharge for Borrower Hardship~~
~~A borrower who experiences certain types of hardship may have his or her loan discharged. Types~~
~~of hardship discharges available to borrowers of loans made through the Direct Loan program are~~
~~described below. Administrative forbearance (see above) is granted during the period necessary to~~
~~determine a borrower’s eligibility for these types of discharge.~~

~~162~~ 175 34 C.F.R. §685.205(a)(6). 176 U.S. Department of Education, Mandatory Forbearance Request, “Student Loan Debt Burden,” OMB No. 1845-0018, https://studentaid.gov/sites/default/files/StudentLoanDebtBurdenForbearance-en-us.pdf. 177 34 C.F.R. §685.205(a)(7); U.S. Department of Education, Mandatory Forbearance Request, “ 34 C.F.R. §685.205(a)(7); U.S. Department of Education, Mandatory Forbearance Request, “ Medical or Dental Medical or Dental
Internship/Residency, National GuardInternship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance Duty, or Department of Defense Student Loan Repayment Program Forbearance
William D. Ford FederalWilliam D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) ProgramDirect Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program ,” OMB ,” OMB
No. 1845-0018, No. 1845-0018,
https://studentaid.gov/sites/default/files/https://studentaid.gov/sites/default/files/~~MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepa~~
~~yment.pdf.~~
~~163~~MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepayment.pdf. 178 34 C.F.R. §685.205(a)(9); U.S. Department of Education, Mandatory Forbearance Request, “ 34 C.F.R. §685.205(a)(9); U.S. Department of Education, Mandatory Forbearance Request, “ Medical or Dental Medical or Dental
Internship/Residency, National GuardInternship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance Duty, or Department of Defense Student Loan Repayment Program Forbearance
William D. Ford FederalWilliam D. Ford Federal Direct Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) ProgramDirect Loan (Direct Loan Program) / Federal Family Education Loan (FFEL) Program ,” OMB ,” OMB
No. 1845-0018, No. 1845-0018,
https://studentaid.gov/sites/default/files/https://studentaid.gov/sites/default/files/~~MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepa~~
~~yment~~MedicalorDentalInternshipResidencyNationalGuardandDoDStudentLoanRepayment.pdf. P.L. 116-159 amended this provision to make active duty members of the National Oceanic and .pdf. P.L. 116-159 amended this provision to make active duty members of the National Oceanic and
Atmospheric Administration’s Commissioned Officer Corps eligibleAtmospheric Administration’s Commissioned Officer Corps eligible for forbearance. for forbearance.
For additional information on U.S. Department of Defense student loan repayment programs, see CRS For additional information on U.S. Department of Defense student loan repayment programs, see CRS Report R43571, Report R43571,
Federal Student Loan Forgiveness and Loan ~~Repaym ent Program s~~Repayment Programs. .
Congressional Research Service Congressional Research Service

6566

Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program In addition, in response to the COVID-19 pandemic, ED has announced a one-time student loan debt relief policy under which qualifying borrowers may have up to $20,000 of their federal student loan debt (including Direct Loan program loans) cancelled. To date, the policy has not been implemented due to lawsuits challenging ED’s legal authority to effectuate the policy. For additional information, see Appendix D. Loan Discharge for Borrower Hardship A borrower who experiences certain types of hardship may have their loan discharged. Types of hardship discharges available to borrowers of loans made through the Direct Loan program are described below. Administrative forbearance (see above) is granted during the period necessary to determine a borrower’s eligibility for these types of discharge. ~~the William D. Ford Federal Direct Loan Program~~

Discharge Due to Death
A borrower’s obligation to repay a loan is discharged if A borrower’s obligation to repay a loan is discharged if ~~he or she dies~~they die; and in the case of a Direct ; and in the case of a Direct
PLUS Loan made to a parent borrower, the obligation to repay is discharged if the student on PLUS Loan made to a parent borrower, the obligation to repay is discharged if the student on
whose behalf the loan was made dies.whose behalf the loan was made dies.~~164~~179 In the case of a Direct Consolidation Loan that repaid In the case of a Direct Consolidation Loan that repaid
either a Direct PLUS Loan or a FFEL PLUS Loan that was borrowed by a parent on behalf of a either a Direct PLUS Loan or a FFEL PLUS Loan that was borrowed by a parent on behalf of a
student, if the student dies a proportionate share of the Direct Consolidation Loan attributable to student, if the student dies a proportionate share of the Direct Consolidation Loan attributable to
~~the applicable~~ the applicable Direct PLUS Loan or FFEL PLUS Loan is discharged.Direct PLUS Loan or FFEL PLUS Loan is discharged.~~165~~180 In the case of a Joint In the case of a Joint
Direct Consolidation Loan borrowed by two married individuals, upon the death of one spouse a Direct Consolidation Loan borrowed by two married individuals, upon the death of one spouse a
proportionate share of the loan attributable to the individualproportionate share of the loan attributable to the individual who died is discharged.who died is discharged.~~166~~
181 Total and Permanent Disability Discharge
A borrower’s liability to repay a loan is discharged upon the individual being determined to have A borrower’s liability to repay a loan is discharged upon the individual being determined to have
a total and permanent disability (TPD).a total and permanent disability (TPD).~~167~~182 A borrower may be determined to be have a total and A borrower may be determined to be have a total and
permanent disability based on any of the following three criteria:permanent disability based on any of the following three criteria:~~168~~183
1. 1. Physician’s Certification. Certification by a physician (M.D. or D.O.) licensed Certification by a physician (M.D. or D.O.) licensed
to practice in the United States that the borrower is unable to engage in any to practice in the United States that the borrower is unable to engage in any
substantial gainful activity due to a physical or mental impairment that substantial gainful activity due to a physical or mental impairment that (a) can be can be
expected to result in death, expected to result in death, (b) has lasted continuously for at least 60 months, or has lasted continuously for at least 60 months, or (c) can can
be expected to last continuously for at least 60 months. be expected to last continuously for at least 60 months.
2. 2. SSA Disability Determination. Documentation from the Social Security . Documentation from the Social Security
Administration (SSA) that the borrower Administration (SSA) that the borrower ~~is receiving~~qualifies for Social Security Disability 179 HEA, §§437 and ~~Social Security Disability~~
~~Insurance (SSDI) or Supplemental Security Income (SSI) benefits and that his or~~
~~her next scheduled disability review wil be within five to seven years from the~~
~~date of the individual’s most recent SSA disability determination.169~~
~~3. VA Service Connected Disability or Unemployability. Documentation from the~~
~~Department of Veterans Affairs (VA) that the borrower has a service connected~~
~~disability (or disabilities) that is 100% disabling or that he or she is total y~~
~~disabled based on an individual unemployability rating.~~

~~164 HEA, §§437 and~~ 455(a)(1). In addition, in the case of a borrower who is the spouse of an individual455(a)(1). In addition, in the case of a borrower who is the spouse of an individual who waswho was an an
eligibleeligible public servant (i.e., a police officer, public servant (i.e., a police officer, ~~firefight er~~firefighter, other safety or rescue personnel, or a member of the Armed , other safety or rescue personnel, or a member of the Armed
Forces) at the time of the September 11, 2001, terrorist attacks and remained so until the eligibleForces) at the time of the September 11, 2001, terrorist attacks and remained so until the eligible ~~public~~ public servant’s death servant’s death
duedue to injuries sufferedto injuries suffered in the attacks, the borrower’s obligation to repay a loan made through the Direct Loan program in the attacks, the borrower’s obligation to repay a loan made through the Direct Loan program
is dischargedis discharged upon the death of the borrower’s spouse. 34 C.F.R.upon the death of the borrower’s spouse. 34 C.F.R. §685.218. §685.218.
~~165~~180 34 C.F.R. §685.212(a). 34 C.F.R. §685.212(a).
~~166~~181 34 C.F.R. §685.220(l). 34 C.F.R. §685.220(l).
~~167~~182 HEA, §§437 and HEA, §§437 and 455(a)(1). In addition, in the case of a borrower who is the spouse of an individual455(a)(1). In addition, in the case of a borrower who is the spouse of an individual (or with respect (or with respect
to a Direct PLUSto a Direct PLUS Loan borrowed on behalf of student, in the case of a borrower who isLoan borrowed on behalf of student, in the case of a borrower who is the parent of such an the parent of such an
individual)individual) who waswho was an eligiblean eligible ~~public~~ public servant (i.e., a police officer, firefighter, other safety or rescue personnel, or a servant (i.e., a police officer, firefighter, other safety or rescue personnel, or a
member of the Armed Forces) at the time of the September 11, 2001, terrorist attacks who became permanently and member of the Armed Forces) at the time of the September 11, 2001, terrorist attacks who became permanently and
totally disabledtotally disabled ~~due~~ due to injuries sufferedto injuries suffered in suchin such attacks, and who wasattacks, and who was treated within 72 hours of suchtreated within 72 hours of such attacks, the attacks, the
borrower’s obligation to repay a loan made through the Direct Loan program is discharged.borrower’s obligation to repay a loan made through the Direct Loan program is discharged. 34 C.F.R.34 C.F.R. §685.218. §685.218.
~~168~~183 34 C.F.R. §§685.102(b), 685.213, and 685.218 34 C.F.R. §§685.102(b), 685.213, and 685.218~~; U.S. Department of Education, Office of Federal Student Aid, T otal~~
~~and Permanent Disability (T PD) Discharge, “ T PD 101,” https://disabilitydischarge.com/tpd-101, accessed May 21,~~
~~2021.~~
~~169 T his occurs when SSA assigns an individual a Medical Improvement Not Expected (MINE) continuing disability~~
~~review diary. For additional information, see Appendix B in CRS Report R44948,~~ ~~Social Security Disability Insurance~~
~~(SSDI) and Supplem ental Security Incom e (SSI): Eligibility, Benefits, and Financing~~ .
~~Congressional Research Service~~

66

~~link to page 47~~ ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~On a periodic basis, ED obtains information from SSA and VA on borrowers who might qualify~~
~~for a TPD discharge on the basis of the second and third criteria~~. Congressional Research Service 67 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Insurance (SSDI) or Supplemental Security Income (SSI) benefits and that their next scheduled disability review will be within five to seven years from the date of the individual’s most recent SSA disability determination.184 Acceptable documentation includes an SSA notice of award for SSDI or SSI benefits and an SSA Benefits Planning Query185 (BPQY).186 3. VA Service Connected Disability or Unemployability. Documentation from the Department of Veterans Affairs (VA) that the borrower has a service connected disability (or disabilities) that is 100% disabling or that they are totally disabled based on an individual unemployability rating. Effective July 1, 2023, ED regulations187 would specify that, in addition to the criteria above, a borrower may also be determined to have a total and permanent disability based on • certification by a state-licensed nurse practitioner (NP) or physician assistant (PA), or a certified psychologist at the independent practice level who is licensed to practice in the United States; and • SSA documentation that a borrower (1) qualifies for SSDI or SSI benefits with a next scheduled disability review of three years; (2) has a disability onset date for SSDI or SSI of, or has been receiving SSDI or SSI benefits based on a disability for, at least five years prior to the application for a TPD discharge; (3) qualifies for SSDI or SSI benefits based on a compassionate allowance;188 or (4) is currently receiving SSA retirement benefits and met any of the other SSA documentation requirements prior to qualifying for SSA retirement benefits.189 On a periodic basis, ED obtains information from SSA and VA on borrowers who might qualify for a TPD discharge on the basis of an SSA disability determination or VA service-connected disability of unemployability determination, respectively, and contacts them , respectively, and contacts them
to inform them of their potentialto inform them of their potential eligibility.eligibility.~~170~~ 190 A borrower, or A borrower, or ~~his or her~~their authorized representative, authorized representative,
may apply for a TPD discharge by submitting an application along with any required may apply for a TPD discharge by submitting an application along with any required
documentation of the borrower’s documentation of the borrower’s ~~disability.171~~ 184 This occurs when SSA assigns an individual a Medical Improvement Not Expected (MINE) continuing disability review diary. For additional information, see Appendix B in CRS Report R44948, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI): Eligibility, Benefits, and Financing. 185 The Benefit Planning Query provides SSDI beneficiaries and SSI recipients about the status of their disability cash benefits, scheduled medical reviews, health insurance, and work history. Social Security Administration, Benefits Planning Query Handbook (BPQY), March 2021, p. 3, https://www.ssa.gov/disabilityresearch/documents/BPQY_Handbook.pdf. 186 U.S. Department of Education, Office of Federal Student Aid, Total and Permanent Disability (TPD) Discharge, “TPD 101,” https://disabilitydischarge.com/tpd-101, accessed March 15, 2023. 187 ED, Final Rule, November 1, 2022. 188 SSA’s Compassionate Allowances “are a way to quickly identify diseases and other medical conditions that, by definition, meet Social Security’s standards for disability benefits.” U.S. Social Security Administration, “Compassionate Allowances,” https://www.ssa.gov/compassionateallowances/, accessed April 4, 2023. 189 The updated ED regulations also codify the pre-July 1, 2023, ED practice that considered an SSA BPQY as acceptable documentation. 190 U.S. Department of Education, Office of Management, Privacy Safeguards Division, “Computer Matching Agreement Between the Social Security Administration (SSA) and the U.S. Department of Education (ED) Federal Student Aid (FSA),” https://www2.ed.gov/about/offices/list/om/docs/pirms/ssa-mine-cma.pdf; and “Computer Matching Agreement Between U.S. Department of Veterans Affairs (VA) and the U.S. Department of Education (ED) Federal Student Aid (FSA),” https://www2.ed.gov/about/offices/list/om/docs/pirms/computer-matching-agreement-btwn-ed-and-va.pdf. Congressional Research Service 68 link to page 48 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program disability.191 A borrower who has been identified as a veteran A borrower who has been identified as a veteran
with a VAwith a VA service-connected disability or unemployabilityservice-connected disability or unemployability determination determination ~~wil~~ will be granted a TPD be granted a TPD
discharge without needing to submit an application unless discharge without needing to submit an application unless ~~he or she decides~~they decide to opt out of the to opt out of the
process within 60 days of being notified by ED.process within 60 days of being notified by ED.~~172~~192
If a borrower’s TPD discharge application is approved, If a borrower’s TPD discharge application is approved, ~~he or she wil~~ they will be considered be considered ~~total y~~totally and and
permanently disabled as of the date of the physician’s certification, the date that ED received permanently disabled as of the date of the physician’s certification, the date that ED received an
~~SSA notice of award for SSDI or SSI benefits or Benefits Planning Query (BPQY),~~SSA documentation or the or the
effective date of effective date of ~~a VA~~ the VA’s service-connected disability or unemployability determination, as service-connected disability or unemployability determination, as
applicable.applicable.~~173~~193 Upon the determination of a borrower being Upon the determination of a borrower being ~~total y~~totally and permanently disabled, and permanently disabled, ~~his~~
~~or her~~their obligation to make any further payments on the loans obligation to make any further payments on the loans ~~wil~~ will be discharged and any loan be discharged and any loan
payments that were made after the aforementioned dates payments that were made after the aforementioned dates ~~wil~~ will be returned. be returned.
A TPD discharge approved on the basis of a physician’s certification or an SSA disability A TPD discharge approved on the basis of a physician’s certification or an SSA disability
determination is granted on a conditional basis for a three-year period that begins on the date of determination is granted on a conditional basis for a three-year period that begins on the date of
discharge. During the three-year period, a borrower who has been granted a TPD discharge discharge. During the three-year period, a borrower who has been granted a TPD discharge
according to either of these two criteria is subject to having according to either of these two criteria is subject to having ~~his or her~~their loans reinstated if the loans reinstated if the
borrower (1) has annual earnings from employment in excess of 100% of the federal poverty borrower (1) has annual earnings from employment in excess of 100% of the federal poverty
~~guideline~~ guideline for a family of two (for a family of two (seesee Table 7), (2) obtains a new Direct Loan program loan or a , (2) obtains a new Direct Loan program loan or a
TEACH Grant, (3) fails to return any Direct Loan or TEACH Grant disbursements made between TEACH Grant, (3) fails to return any Direct Loan or TEACH Grant disbursements made between
the TPD discharge application date and the discharge date, or (4) receives a notice from SSA that the TPD discharge application date and the discharge date, or (4) receives a notice from SSA that
~~he or she is~~they are no longer disabled or that no longer disabled or that ~~his or her~~their next scheduled disability review next scheduled disability review ~~wil~~ will be sooner be sooner
than five to seven years from the date of the borrower’s most recent SSA disability than five to seven years from the date of the borrower’s most recent SSA disability
determination.determination.~~174~~194 To show compliance with To show compliance with the annual earnings requirement, borrowers must annually submit to ED documentation195 of their annual earnings from employment; failure to submit this documentation results in the reinstatement of a borrower’s loan.196 After the three-year period, the TPD discharge becomes permanent. A TPD discharge granted on the basis of a VA service-connected disability or 191 U.S. Department of Education, Office of Federal Student Aid, Total and Permanent Disability (TPD) Discharge, “Forms,” https://disabilitydischarge.com/Forms, accessed March 15, 2023. 192 Presidential Memorandum of August 21, 2019, “Discharging the Federal Student Loan Debt of Totally and Permanently Disabled Veterans,” 84 Federal Register 44677-44678, August 26, 2019; and U.S. Department of Education, “Trump Administration to Automatically Forgive Federal Student Loan Debt for Totally and Permanently Disabled Veterans,” August 21, 2019. A borrower might consider opting out of a TPD discharge if the borrower is concerned about the potential for the discharged indebtedness to be included as part of the borrower’s taxable income under state tax law or if the borrower intends to subsequently obtain an additional loan through the Direct Loan program. (For such a borrower to subsequently obtain another loan, the borrower must (1) obtain certification from a physician that the borrower is able to engage in substantial gainful activity, and (2) sign a statement acknowledging that the new loan may not be discharged on the basis of any impairment present at the time it is made, unless the impairment becomes substantially worse. 34 C.F.R. §685.200.) 193 34 C.F.R. § 685.213(b)(4)(i) and (c)(2)(i). 194 If a borrower’s loan is reinstated, the borrower is not responsible for paying any interest that would have accrued on the loan during the three-year monitoring period. This may be considered as another of the various forms of subsidized interest available on loans made through the Direct Loan program. 195 U.S. Department of Education, Office of Federal Student Aid, “Total and Permanent Disability Discharge: Meet the Monitoring Requirements~~the annual earnings requirement, borrowers must~~

~~170 U.S. Department of Education, Office of Management, Privacy Safeguards Division, “ Computer Matching~~
~~Agreement Between the Social Security Administration (SSA) and the U.S. Department of Education (ED) Federal~~
~~Student Aid (FSA),” https://www2.ed.gov/about/offices/list/om/docs/pirms/ssa-mine-cma.pdf; and “ Computer~~
~~Matching Agreement Between U.S. Department of Veterans Affairs (VA) and the U.S. Department of Education (ED)~~
~~Federal Student Aid (FSA),” https://www2.ed.gov/about/offices/list/om/docs/pirms/computer-matching-agreement -~~
~~btwn-ed-and-va.pdf.~~
~~171 U.S. Department of Education, Office of Federal Student Aid, T otal and Permanent Disability (T PD) Discharge,~~
~~“Forms,” https://disabilitydischarge.com/Forms, accessed May 21, 2021.~~
~~172 Presidential Memorandum of August 21, 2019, “Discharging th e Federal Student Loan Debt of T otally and~~
~~Permanently Disabled Veterans,” 84 Federal Register 44677-44678, August 26, 2019; and U.S. Department of~~
~~Education, “ T rump Administration to Automatically Forgive Federal Student Loan Debt for T otally and Permanen tly~~
~~Disabled Veterans,” August 21, 2019. A borrower might consider opting out of a T PD discharge if the borrower is~~
~~concerned about the potential for the discharged indebtedness to be included as part of the borrower’s taxable income~~
~~under state tax law or if the borrower intends to subsequently obtain an additional loan through the Direct Loan~~
~~program. (For such a borrower to subsequently obtain another loan, the borrower must (1) obtain certification from a~~
~~physician that the borrower is able to engage in substantial gainful activity, and (2) sign a statement acknowledging that~~
~~the new loan may not be discharged on the basis of any impairment present at the time it is made, unless the~~
~~impairment becomes substantially worse. 34 C.F.R. §685.200.)~~
~~173 U.S. Department of Education, Office of Federal Student Aid, “ T otal and Permanent Disability Discharge: What~~
~~happens if my T PD discharge request is approved?~~”, https://studentaid.gov/manage-loans/forgiveness-”, https://studentaid.gov/manage-loans/forgiveness-
cancellation/disability-cancellation/disability-discharge#postdischarge, accessed March 15, 2023. 196 In response to the COVID-19 pandemic, ED suspended the annual earnings certification requirement through the earlier of 60 days after litigation relating to the Administration’s one-time student loan debt relief policy is resolved or 60 days after June 30, 2023. Borrowers whose loans were reinstated on or after March 13, 2020, due to not meeting the annual earnings certification requirement will have their loans automatically returned to discharge status. U.S. Department of Education, Office of Federal Student Aid, “COVID-19 Relief: Total and Permanent Disability Discharge,” https://studentaid.gov/announcements-events/covid-19/disability-discharge, accessed March 15, 2023. Congressional Research Service 69 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program unemployability is permanent upon being granted and is not subject to a post-discharge monitoring period. Effective July 1, 2023, borrowers with a TPD discharge approved on the basis of a physician’s, (or NP’s, PA’s, or certified psychologist’s) certification or an SSA disability determination will no longer have their loans reinstated if (1) their annual earnings from employment are in excess of 100% of the federal poverty guideline for a family of two,197 (2) they receive a notice from SSA that they are no longer disabled or that their next scheduled disability review will be sooner than five to seven years from the date of the borrower’s most recent SSA disability determination during~~discharge#how-do-i-show-that -i-qualify-for-a-tpd-discharge.~~
~~174 If a borrower’s loan is reinstated, the borrower is not responsible for paying any interest that would have accrued on~~
~~the loan during the three-year monitoring period. T his may be considered as another of the various forms of subsidized~~
~~interest available on loans made through the Direct Loan program.~~
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~~annual y submit to ED documentation175 of their annual earnings from employment;176 failure to~~
~~submit this documentation results in the reinstatement of a borrower’s loan.177 After~~ the three- the three-
~~year period, the TPD discharge becomes permanent. A TPD discharge granted on the basis of a~~
~~VA service connected disability or unemployability is permanent upon being granted and is not~~
~~subject to a post-discharge monitoring period.~~year monitoring period, or (3) they do not return any Direct Loan or TEACH Grant disbursements made during the three-year monitoring period.198 Such borrowers would, however, continue to have their loans reinstated if they obtain a new Direct Loan program loan or a TEACH Grant during the three-year monitoring period.199
Closed School Discharge
A borrower’s liability to repay a loan is discharged if the borrower (or the student on whose A borrower’s liability to repay a loan is discharged if the borrower (or the student on whose
behalf a Direct PLUS Loan is made to a parent borrower) does not complete the program of study behalf a Direct PLUS Loan is made to a parent borrower) does not complete the program of study
for which the loan was made because the school for which the loan was made because the school ~~he or she~~(institution) they attended has closed. attended has closed.~~178~~200 In the case of a In the case of a
Direct Consolidation Loan, the portion of the loan attributable to loans borrowed to finance the Direct Consolidation Loan, the portion of the loan attributable to loans borrowed to finance the
program of study at the closed school is discharged. program of study at the closed school is discharged.
For loans made before July 1, 2020, to qualify for a closed school discharge, a borrower For loans made before July 1, 2020, to qualify for a closed school discharge, a borrower ~~general y~~generally
must submit an application and certify that must submit an application and certify that (1) the school the school they attended closed either while the student attended closed either while the student
was enrolled or within 120 days of the student withdrawing,was enrolled or within 120 days of the student withdrawing,201 and and (2) the student the student ~~must~~did not not ~~have~~
~~completed~~complete the program of study for which the loan was obtained through a the program of study for which the loan was obtained through a teach-out
agreement~~179~~ 202 at another school or by transferring credits earned at the closed school to another at another school or by transferring credits earned at the closed school to another
~~school to enroll in a comparable program.180 However, if based on information available to the~~
~~Secretary, a borrower qualifies for a closed school discharge with respect to a school that closed~~
~~on or after November 1, 2013, and before July 1, 2020, and the borrower did not subsequently re-~~
~~enroll in any Title IV-eligible IHE within three years of the school having closed, the Secretary is~~
~~to discharge the borrower’s loan without the borrower needing to submit an application for a~~
~~discharge.~~

~~175 U.S. Department of Education, Office of Federal Student Aid, “T otal and Permanent Disability Discharge: What~~
~~requirements do I have to meet during the three-year postdischarge monitoring period?”,~~
~~https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge#what -requirements-do-i-have-to-~~
~~meet -during-the-three-year-postdischarge-monitoring-period, accessed May 21, 2021.~~
~~176 T he FUT URE~~school to enroll 197 The FUTURE Act (P.L. 116-91), among other provisions, authorizes the Internal Revenue Service (with borrower Act (P.L. 116-91), among other provisions, authorizes the Internal Revenue Service (with borrower
approval) to disclose relevant tax return information to ED for the purpose of monitoring a borrower’s earnings and, if approval) to disclose relevant tax return information to ED for the purpose of monitoring a borrower’s earnings and, if
necessary, reinstating their loans that were dischargednecessary, reinstating their loans that were discharged ~~based on T PD~~ based on TPD. Authorized disclosures. Authorized disclosures ~~include~~ include (1) taxpayer (1) taxpayer
identity information, (2) filing status, (3) the fact that no return was filedidentity information, (2) filing status, (3) the fact that no return was filed (if applicable), and (4) the amount of net (if applicable), and (4) the amount of net
earnings from self-employment, wages, and taxable income from a farming business.earnings from self-employment, wages, and taxable income from a farming business. As of the publication date of this As of the publication date of this
report, it appears these procedures have not yet been operationalized. report, it appears these procedures have not yet been operationalized.
~~177 On March 29, 2021, in response to the COVID-19 pandemic, ED suspended the annual earnings certification~~
~~requirement through at least September 30, 2021. Borrowers whose loans were reinstated on or after March 13, 2 020,~~
~~due to not meeting the annual earnings certification requirement will have their loans automatically returned to~~
~~discharge status. U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for~~
~~Students, Borrowers, and Parents: T otal and Permanent Disability Discharge,” https://studentaid.gov/announcements-~~
~~events/coronavirus#total-and-permanent-disability, accessed May 21, 2021.~~
~~178 HEA, §437(c); 34 C.F.R. §§685.212 and 685.214.~~
~~179~~Regardless of this authority, ED decided to eliminate the annual earnings requirement during the three-year monitoring period, noting that the FUTURE Act authority “would not fully absolve borrowers of the burden” associated with earnings monitoring, as the TPD earnings monitoring process looked at the earnings of an individual borrower, and “IRS data are not able to provide individual [earnings] information from married filing jointly tax return.” ED “would thus not have enough information to determine if a married borrower filing jointly who received a TPD discharge had earnings that exceeded the thresholds.” ED, Final Rule, November 1, 2022, p. 65961. 198 Consistent with current regulations, ED would suspend the processing of a borrower’s TPD discharge application until the borrower returns to ED the full amount of any disbursement made after the physician’s (or NP’s, PA’s, or certified psychologist’s) certification date or the date ED received SSA disability documentation on a loan made prior to those dates, as applicable. 199 ED, Final Rule, November 1, 2022. 200 HEA, §437(c); 34 C.F.R. §§685.212 and 685.214. 201 ED may extend the 120-day look-back period if it determines that exceptional circumstances related to a school’s closing justify an extension. Exceptional circumstances may include, for example, the school’s loss of accreditation, discontinuation of the majority of its academic programs, action by a state to revoke the school’s license to operate or award academic credentials, or a finding by a federal or state government agency that the school violated federal or state law. 202 A A teach-out agreement is “a written agreement between institutions that provides for the equitable treatment of is “a written agreement between institutions that provides for the equitable treatment of
students and a reasonable opportunity for students to complete their program of study if an institution, or an students and a reasonable opportunity for students to complete their program of study if an institution, or an
institutional location that provides one hundred percent of at least one program offered, ceases to operate before all institutional location that provides one hundred percent of at least one program offered, ceases to operate before all
enrolled students have completed their program of studyenrolled students have completed their program of study ~~.” 34 C.F.R. §602.3.~~
~~180 For additional information on comparable programs, see U.S. Department of Education, Office of Federal Student~~
~~Aid, “Has Your School Closed? Here’s What to Do: How does ED define a “comparable program of study” when~~
~~considering eligibility for a closed school loan discharge? ,” studentaid.gov/announcements-events/closed-school,~~
~~accessed May 21, 2021.~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~
.” 34 C.F.R. §602.3. Congressional Research Service 70 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program in a comparable program.203 However, if based on information available to the Secretary, a borrower qualifies for a closed school discharge with respect to a school that closed on or after November 1, 2013, and before July 1, 2020, and the borrower did not subsequently re-enroll in any Title IV-eligible IHE within three years of the school’s closure, the Secretary is to discharge the borrower’s loan without the borrower needing to submit an application for a discharge.
For loans made on or after July 1, 2020, to qualify for a closed school discharge, a borrower must For loans made on or after July 1, 2020, to qualify for a closed school discharge, a borrower must
submit an application and submit an application and ~~must~~ certify that certify that (1) the school attended closed either while the student the school attended closed either while the student
was enrolled or within 180 days of the student withdrawing,was enrolled or within 180 days of the student withdrawing, ~~that he or she has not completed the~~
204 (2) that the student did not complete the program of study for which the loan was obtained through a teach-out agreement at another program of study for which the loan was obtained through a teach-out agreement at another
school or by transferring credits earned at the closed school to another school, and school or by transferring credits earned at the closed school to another school, and ~~that he or she~~
(3) that the student has not accepted the opportunity to complete the program of study or a comparable program at has not accepted the opportunity to complete the program of study or a comparable program at
another school through either a another school through either a teach-out plan performed by the closing school or a teach-out performed by the closing school or a teach-out
agreement at another school.agreement at another school.~~181~~
205 In either case, upon being granted a closed school discharge, a borrower is reimbursed for any In either case, upon being granted a closed school discharge, a borrower is reimbursed for any
amounts amounts ~~he or she~~they had already repaid on the loan. If the borrower had previously defaulted on the had already repaid on the loan. If the borrower had previously defaulted on the
loan, upon being granted a closed school discharge loan, upon being granted a closed school discharge ~~his or her~~their eligibility eligibility to receive additionalto receive additional Title Title
IV federal student aid IV federal student aid ~~wil~~ will be restored and consumer reporting agencies be restored and consumer reporting agencies ~~wil~~ will be instructed to be instructed to
delete any adverse credit history related to the loan.delete any adverse credit history related to the loan. ~~Any discharged loans do not count against~~
~~the borrower’s annual and aggregate loan limits, nor against his or her Subsidized Usage Period~~
~~applicable under the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time~~
~~Borrowers.~~
~~False Certification and Unauthorized Payment Discharges~~
~~A borrower’s liability to repay a loan is discharged if the eligibility of the borrower (or of the~~
~~student in the case of a Direct PLUS Loan made to a parent borrower) to receive the proceeds of~~
~~the loan was falsely certified by the IHE attended, or if the loan proceeds were disbursed without~~
~~his or her authorization (e.g., unauthorized signature, identity theft).182~~ Effective July 1, 2023, ED regulations make uniform the closed school discharge standards and procedures across Direct Loans, regardless of when a loan was first disbursed. Specifically, to qualify for a closed school discharge, a borrower will be required to submit an application and certify that (1) the school attended closed206 either while the student was enrolled or within 180 days of the student withdrawing,207 and (2) that the student did not complete the program of study for which a loan was obtained at another branch or location of the school or through a teach-out agreement at another school. If based on information available to the Secretary, a borrower qualifies for a closed school discharge and the student did not complete their program of study at 203 For additional information on comparable programs, see U.S. Department of Education, Office of Federal Student Aid, “Has Your School Closed? Here’s What to Do: How does ED define a “comparable program of study” when considering eligibility for a closed school loan discharge?,” https://studentaid.gov/announcements-events/closed-school, accessed May 21, 2021. 204 ED may extend the 180-day look-back period if it determines that exceptional circumstances related to a school’s closing justify an extension. Exceptional circumstances may include, for example, the revocation or withdrawal of a school’s institutional accreditation, the revocation or withdrawal of a school’s state authorization to operate or award academic credentials, the termination by ED of a school’s participation in an HEA, Title IV program, the teach-out of a school’s educational program exceeding the 180-day look-back period, or a failure by the school responsible for the teach-out of the student’s educational program to perform the material terms of the teach-out plan or agreement. 205 HEA, §437(c); 34 C.F.R. §§685.212 and 685.214(c)(2). The 180-day window may be extended in exceptional circumstances. A teach-out plan is “a written plan developed by an institution that provides for the equitable treatment of students if an institution, or an institutional location that provides one hundred percent of at least one program, ceases to operate before all students have completed their program of study, and may include, if required by the institution’s accrediting agency, a teach-out agreement between institutions.” 34 C.F.R. §602.3. 206 The amended regulations would also update the instances in which a school is considered to be closed. ED would consider a school to be closed on the earlier of (1) the date the school stopped providing educational instruction in programs in which most of its students were enrolled, or (2) a date determined by ED that reflects when the school stopped providing educational instruction to all of its students. 207 The amended regulations would also update the exceptional circumstances under which ED may extend the 180-day look-back period. Under the updated regulations, exceptional circumstances may include, for example, all of the exceptional circumstances currently applicable to loans made on or after July 1, 2020 (see footnote 204) as well as the school having discontinued a significant share of its academic programs, the school permanently closing all or most of its in-person locations while maintaining online programs, or ED placing the school on the heightened cash monitoring payment method applicable to the HEA Title IV student financial aid programs. Congressional Research Service 71 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program another branch campus or location of the closed school or through a teach-out agreement at another school within one year of the school’s closure, the Secretary is to discharge the borrower’s loan without the borrower needing to submit an application for a discharge. Also, if a student accepts but did not complete a continuation of their program of study at another branch or location of the school or a teach-out agreement at another school, the Secretary is to discharge the borrower’s loan one year after the student’s last date of attendance, as applicable.208 False Certification and Unauthorized Payment Discharges A borrower’s liability to repay a loan is discharged if the eligibility of the borrower (or of the student in the case of a Direct PLUS Loan made to a parent borrower) to receive the proceeds of the loan was falsely certified by the IHE attended,209 or if the loan proceeds were disbursed without their authorization (e.g., unauthorized signature).210 In the case of a Direct In the case of a Direct
Consolidation Loan, a borrower’s liability to repay the portion of the loan that is attributable to Consolidation Loan, a borrower’s liability to repay the portion of the loan that is attributable to
loans that were falsely certified by the IHE attended, or that were disbursed without loans that were falsely certified by the IHE attended, or that were disbursed without ~~his or her~~
their authorization, is authorization, is discharged. A borrower must submit an application to ED that provides certifications and evidence relating to their eligibility for discharge. ~~discharged.~~ Upon being granted a false certification or unauthorized payment Upon being granted a false certification or unauthorized payment
discharge, the borrower is reimbursed for any amounts discharge, the borrower is reimbursed for any amounts ~~he or she~~they had already repaid on the loan. If had already repaid on the loan. If
the borrower had previously defaulted on the loan, upon being granted a false certification or the borrower had previously defaulted on the loan, upon being granted a false certification or
unauthorized payment discharge unauthorized payment discharge ~~his or her~~their eligibility eligibility to receive additionalto receive additional Title IV federal student Title IV federal student
~~aid wil~~ aid will be restored and consumer reporting agencies be restored and consumer reporting agencies ~~wil~~ will be instructed to delete any adverse be instructed to delete any adverse
credit history related to the loan.credit history related to the loan.211
Unpaid Refund Discharge
If a borrower is owed a refund by an IHE that has not been paid, If a borrower is owed a refund by an IHE that has not been paid, ~~his or her liability~~ their liability to repay an to repay an
amount equal to the unpaid refund and any associated accrued interest and other charges is amount equal to the unpaid refund and any associated accrued interest and other charges is
discharged.discharged.~~183~~ 212 An unpaid refund discharge is only availableAn unpaid refund discharge is only available in instances where a borrower is owed in instances where a borrower is owed
a refund by a school that has closed, or by an open IHE that the borrower (or the student on a refund by a school that has closed, or by an open IHE that the borrower (or the student on
whose behalf a whose behalf a Direct PLUS Loan is made to a parent borrower) is no longer attending. Borrower Defense to Repayment Discharge A borrower’s liability to repay a loan is discharged in whole or in part, and previous loan payments are refunded, if the borrower (or the student on whose behalf a Direct PLUS Loan was made to a parent borrower) successfully asserts a defense to repayment of the loan. A borrower may assert certain acts or omissions by the IHE for which the loan was borrowed that relates to the making of the loan as a defense to repayment.213 208 ED, Final Rule, November 1, 2022. 209 Instances of false certification include, for example, if an IHE certified the Title IV eligibility of a student who reported not having a high school diploma or who did not satisfy ability to benefit (ATB) requirements for Title IV eligibility. For additional information on ATB requirements, see FSA Handbook, vol. 1, pp. 12-14. 210 HEA, §437(c); 34 C.F.R. §§685.212 and 685.215. 211 Effective July 1, 2023, ED regulations make slight adjustments to some of the eligibility criteria for discharge and some of the documentation required in a borrower’s discharge application. In addition, the amended regulations establish that a State Attorney General or nonprofit legal services representative may submit an application to ED on behalf of a group of borrowers. ED, Final Rule, November 1, 2022. 212 HEA, §437(c); 34 C.F.R. §§685.212 and 685.216. 213 HEA, §437(c); 34 C.F.R. §§685.206(c), 685.206(e), 685.212(k), and 685.222. Refunds are limited to the amount of (continued...) Congressional Research Service 72 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program ~~Direct PLUS Loan is made to a parent borrower) is no longer attending.~~

~~181 HEA, §437(c); 34 C.F.R. §§685.212 and 685.214(c)(2). The 180 -day window may be extended in exceptional~~
~~circumstances. A teach-out plan is “ a written plan developed by an inst itution that provides for the equitable treatment~~
~~of students if an institution, or an institutional location that provides one hundred percent of at least one program,~~
~~ceases to operate before all students have completed their program of study, and may in clude, if required by the~~
~~institution's accrediting agency, a teach-out agreement between institutions.” 34 C.F.R. §602.3.~~
~~182 HEA, §437(c); 34 C.F.R. §§685.212 and 685.215.~~
~~183 HEA, §437(c); 34 C.F.R. §§685.212, 685.216, and Appendix A to Subpart B of Part 68 5—Examples of Borrower~~
~~Relief.~~
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~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~Borrower Defense to Repayment Discharge~~
~~A borrower’s liability to repay a loan is discharged in whole or in part, and previous loan~~
~~payments are refunded, if the borrower (or the student on whose behalf a Direct PLUS Loan was~~
~~made to a parent borrower) successfully asserts a defense to repayment of the loan. A borrower~~
~~may assert certain acts or omissions by the IHE for which the loan was borrowed that relates to~~
~~the making of the loan as a defense to repayment.184~~
A borrower may assert a defense to repayment according to procedures specified in regulations A borrower may assert a defense to repayment according to procedures specified in regulations
that are specific to the period during which that are specific to the period during which ~~his or her~~their loans were made. There are three distinct loans were made. There are three distinct
~~periods applicable~~ periods applicable to borrower defense claims. In the case of a Direct Consolidation Loan, the to borrower defense claims. In the case of a Direct Consolidation Loan, the
procedures to be used for adjudicating a defense to repayment claim depend on the types of loans procedures to be used for adjudicating a defense to repayment claim depend on the types of loans
that were repaid by it (e.g., loans made through the Direct Loan program, other types of eligible that were repaid by it (e.g., loans made through the Direct Loan program, other types of eligible
loans) and when it was made. loans) and when it was made.
For loans disbursed prior to July 1, 2017, a borrower defense to repayment “refers to any act or For loans disbursed prior to July 1, 2017, a borrower defense to repayment “refers to any act or
omission of the school attended ... that would give rise to a cause of action against the school omission of the school attended ... that would give rise to a cause of action against the school
under applicableunder applicable State law.”State law.”~~185~~214 For loans disbursed on or after July 1, 2017, and before July 1, For loans disbursed on or after July 1, 2017, and before July 1,
2020, a borrower 2020, a borrower may assert a defense to repayment defense to repayment ~~refers to~~on the basis of a nondefault, contested judgment against the a nondefault, contested judgment against the
school; a breach of contract by the school; or a substantial misrepresentation by the school to the school; a breach of contract by the school; or a substantial misrepresentation by the school to the
borrower that the borrower had relied on to borrower that the borrower had relied on to ~~his or her detriment when he or she~~ their detriment when they decided to attend decided to attend
or continue attending the school, or decided to borrow a loan.or continue attending the school, or decided to borrow a loan.~~186~~
215 For loans disbursed on or after July 1, 2020, a borrower For loans disbursed on or after July 1, 2020, a borrower ~~defense to repayment refers to a~~
may assert a defense to repayment on the basis of a misrepresentation of material fact made by the borrower’s school about enrollment or the misrepresentation of material fact made by the borrower’s school about enrollment or the
provision of educational services that the borrower relied upon in deciding to borrow a loan and provision of educational services that the borrower relied upon in deciding to borrow a loan and
from which from which ~~he or she~~they suffered financial harm. suffered financial harm.~~187~~216 For loans disbursed on or after July 1, 2020, a For loans disbursed on or after July 1, 2020, a
borrower must assert a defense to repayment within three years of ceasing to be enrolled at the borrower must assert a defense to repayment within three years of ceasing to be enrolled at the
IHE. IHE.
In the instance that a borrower had previously defaulted on a loan, upon being granted a defense In the instance that a borrower had previously defaulted on a loan, upon being granted a defense
to repayment discharge the borrower’s eligibility to receive additional Title IV federal student aid to repayment discharge the borrower’s eligibility to receive additional Title IV federal student aid
~~wil~~ will be restored and consumer reporting agencies be restored and consumer reporting agencies ~~wil~~ will be instructed to delete any adverse credit be instructed to delete any adverse credit
history related to the loan. history related to the loan.

~~184 HEA, §437(c); 34 C.F.R. §§685.206(c), 685.206(e), 685.212(k), and 685.222. Refunds are limited to the amount of~~
Effective July 1, 2023, ED regulations specify that for borrower defense applications received on or after July 1, 2023, and for applications pending with ED on July 1, 2023 (regardless of the date an applicable loan was disbursed), a borrower may assert a defense to repayment on the basis of: • a substantial misrepresentation217 by the school that misled the borrower; • an omission of fact by the school;218 payments made by the borrower “that exceed the amount owed on that portion of the loan not discharged.” For payments made by the borrower “that exceed the amount owed on that portion of the loan not discharged.” For
additional information, see CRSadditional information, see CRS Report R44737, Report R44737, The Closure of Institutions of Higher Education: Student Options,
Borrower Relief, and Other ~~Im plications~~.
~~185~~Implications. 214 34 C.F.R. §685.206(c). 34 C.F.R. §685.206(c).
~~186~~215 34 C.F.R. §685.222 and Part 668, Subpart F. A 34 C.F.R. §685.222 and Part 668, Subpart F. A misrepresentation means “Any false, erroneous or misleading means “Any false, erroneous or misleading
statement an eligible institution, one of its representatives, or any ineligible institution, organization, or person with statement an eligible institution, one of its representatives, or any ineligible institution, organization, or person with
whom the eligiblewhom the eligible ~~institut ion~~ institution has an agreement to provide educational programs, or to provide marketing, advertising, has an agreement to provide educational programs, or to provide marketing, advertising,
recruiting or admissionsrecruiting or admissions services makes directly or indirectly to a student, prospective student or any member of the services makes directly or indirectly to a student, prospective student or any member of the
public,public, or to an accrediting agency, to a or to an accrediting agency, to a ~~Stat e~~State agency, or to the Secretary.” 34 C.F.R. §668.71(c). agency, or to the Secretary.” 34 C.F.R. §668.71(c).
~~187~~216 34 C.F.R. §685.206(e). A 34 C.F.R. §685.206(e). A misrepresentation means “a statement, act, or omission by an eligible means “a statement, act, or omission by an eligible school to a school to a
borrower that is false, misleading,borrower that is false, misleading, or deceptive; that was made with knowledgeor deceptive; that was made with knowledge of its false, misleading,of its false, misleading, or deceptive or deceptive
nature or with a reckless disregardnature or with a reckless disregard for the truth; and that directly and clearly relates to (1) enrollment or continuing for the truth; and that directly and clearly relates to (1) enrollment or continuing
enrollment at the institution, or (2) the provision of educational services for which the loan wasenrollment at the institution, or (2) the provision of educational services for which the loan was made.made. ” ” Financial harm
means “the amount of monetary loss that a borrower incurs as a consequencemeans “the amount of monetary loss that a borrower incurs as a consequence of a misrepresentation” and excludes of a misrepresentation” and excludes
nonmonetary losses. nonmonetary losses.
217 Under the amended regulations, the definition of misrepresentation would largely mirror the definition used for borrower defense to repayment claims for loans disbursed on or after July 1, 2017, and before July 1, 2020, but would also include an omission of fact. 218 An omission of fact means a misrepresentation “if a reasonable person would have considered the omitted (continued...) Congressional Research Service 73~~Congressional Research Service~~

70

Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • a failure of the school to perform its obligations under a contract with the student; • engagement in aggressive and deceptive recruitment conduct by the school;219 • ED actions against the school including fines, limitations, suspension actions, denial of the school’s application for recertification to participate in the HEA Title IV programs, and the revocation of a school’s provisional program participation agreement for the HEA Title IV aid programs,220 all of which must be based on the school’s acts or omissions that could give rise to a borrower defense to repayment claim under the above-listed circumstances; or • the borrower (as an individual or as a member of a class) or a governmental agency having obtained against the school a favorable judgment under federal or state law based on the school’s acts or omissions relating to the making of a loan, or the provision of educational services for which the loan was provided. In addition, only for loans disbursed prior to July 1, 2017, and in limited circumstances, a borrower may assert a defense to repayment on the basis of any act or omission of the school relating to the making of the loan for enrollment at the school or the provision of educational services for which the loan was provided that would give rise to a cause of action against the school under applicable state law.221 Under the amended regulations, upon successfully asserting a borrower defense to repayment, a borrower would receive a discharge of the full amount of their applicable loan and would be entitled to have the full amount of payments made on their applicable loans refunded. As under current standards, for a borrower who had previously defaulted on an applicable loan and who is granted a defense to repayment discharge is to have their eligibility to receive additional Title IV federal student aid restored, and consumer reporting agencies are to be instructed to delete any adverse credit history related to the loan. ~~the William D. Ford Federal Direct Loan Program~~

Bankruptcy Discharge
Section 523(a)(8) of the Bankruptcy Code provides that student loans (e.g., loans made through Section 523(a)(8) of the Bankruptcy Code provides that student loans (e.g., loans made through
the Direct Loan program) are presumed to be not dischargeable in bankruptcy proceedings, unless the Direct Loan program) are presumed to be not dischargeable in bankruptcy proceedings, unless
the debtor is able to demonstrate to the court that “excepting such debt from discharge ..the debtor is able to demonstrate to the court that “excepting such debt from discharge .. . would would
impose an undue hardship on the debtor and the debtor’s dependents.”impose an undue hardship on the debtor and the debtor’s dependents.”~~188~~222 In general, to discharge In general, to discharge
student loan debt in bankruptcy, the debtor must file a separate lawsuit against the holder of the student loan debt in bankruptcy, the debtor must file a separate lawsuit against the holder of the
debt and must prove by a preponderance of the evidence that repayment of the debt would impose debt and must prove by a preponderance of the evidence that repayment of the debt would impose
an undue hardship.an undue hardship.~~189~~223 If a borrower’s liability to repay a loan made through the Direct Loan information in making a decision to enroll or continue attendance at the institution.” ED, Final Rule, November 1, 2022, p. 66041. 219 This, as well as the three previously delineated bases, generally must have occurred in connection with the borrower’s decision to attend or continue attending the school, or the borrower’s decision to borrow a loan. 220 For additional information on program participation agreements, see CRS Report R43159, Institutional Eligibility for Participation in Title IV Student Financial Aid Programs. 221 This option would only be available to borrowers during any reconsideration process of a borrower defense to repayment claim denied under any of the other standards. 222 11 U.S.C. §§523(a)(8) and 1328. 223 See CRS Report R45113, Bankruptcy and Student Loans. In November 2022, the Department of Justice (DOJ), in coordination with ED, developed new guidance to help “enhance consistent treatment of the discharge of federal student loans [in bankruptcy], reduce the burden on borrowers of pursuing such proceedings and make it easier to identify cases where discharge is appropriate.” U.S. Department of Justice, “Justice Department and Department of Education Announce a Fairer and More Accessible Bankruptcy Discharge Process for Student Loan Borrowers,” press (continued...) Congressional Research Service 74 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program ~~If a borrower’s liability to repay a loan made through the Direct Loan~~
program is discharged in bankruptcy, the Secretary program is discharged in bankruptcy, the Secretary ~~wil~~ will cease to require the borrower to make cease to require the borrower to make
payments on the loan.payments on the loan.~~190~~
224 Loan Forgiveness Following IDR Plan Repayment
A borrower who has repaid a loan made through the Direct Loan program according to one or A borrower who has repaid a loan made through the Direct Loan program according to one or
more of the Income-Driven Repayment (IDR) plans for the duration of the applicable maximum more of the Income-Driven Repayment (IDR) plans for the duration of the applicable maximum
repayment period (including periods of repayment according to certain other eligible plans, repayment period (including periods of repayment according to certain other eligible plans,
periods while in receipt of an economic hardship deferment, and periods while payments are periods while in receipt of an economic hardship deferment, and periods while payments are
suspended suspended ~~due to COVID-19~~under the COVID-19 payment pause (see Appendix D) is relieved of the obligation) is relieved of the obligation to repay any balance of principal and to repay any balance of principal and
interest that remains outstanding. The applicable maximum repayment period varies by IDR interest that remains outstanding. The applicable maximum repayment period varies by IDR
repayment plan as follows: repayment plan as follows:
• Income-Contingent Repayment Plan: 25 years; Income-Contingent Repayment Plan: 25 years;
• Original IBR Plan: 25 years; Original IBR Plan: 25 years;
• IBR Plan for Post-July 1, 2014, New Borrowers: 20 years; IBR Plan for Post-July 1, 2014, New Borrowers: 20 years;
• PAYE Repayment Plan: 20 years; PAYE Repayment Plan: 20 years;
• REPAYE Repayment Plan for borrowers with debt only for undergraduate REPAYE Repayment Plan for borrowers with debt only for undergraduate
education: 20 years; and education: 20 years; and
• REPAYE Repayment Plan for borrowers with any debt for graduate education: 25 REPAYE Repayment Plan for borrowers with any debt for graduate education: 25
years. years.
For detailed information on the requirements for a borrower to qualify for loan forgiveness For detailed information on the requirements for a borrower to qualify for loan forgiveness
following IDR plan repayment, see the descriptions of the maximum repayment period and loan following IDR plan repayment, see the descriptions of the maximum repayment period and loan
forgiveness in the prior sections on each of the various IDR plans. forgiveness in the prior sections on each of the various IDR plans.
Loan Forgiveness for Public Service
The Direct Loan program makes loan forgiveness benefits available to borrowers who have The Direct Loan program makes loan forgiveness benefits available to borrowers who have
engaged in certain types of public service for a specified period of time and meet program-engaged in certain types of public service for a specified period of time and meet program-
specific requirements, as described below.specific requirements, as described below.~~191~~

~~188 11 U.S.C. §§523(a)(8) and 1328.~~
~~189 See CRS Report R45113, Bankruptcy and Student Loans.~~
~~190 34 C.F.R. §685.212(c).~~
~~191 Borrowers of loans made through the Direct Loan program may also be able to qualify~~ 225 Teacher Loan Forgiveness Program A borrower who has completed five consecutive complete academic years of teaching service in a low-income school or educational service agency (ESA) may be relieved of the obligation to repay up to $5,000 for service as a highly qualified teacher, or up to $17,500 for service as a highly qualified special education teacher or secondary school teacher of mathematics or science.226 Teacher Loan Forgiveness benefits are only available to borrowers who had no release, November 17, 2022, https://www.justice.gov/opa/pr/justice-department-and-department-education-announce-fairer-and-more-accessible-bankruptcy. 224 34 C.F.R. §685.212(c). 225 Borrowers of loans made through the Direct Loan program may also be able to qualify to receive loan repayment to receive loan repayment
benefits through a number of federal programs. For information on such programs, seebenefits through a number of federal programs. For information on such programs, see ~~CRS~~ CRS Report R43571, Federal Student Loan Forgiveness and Loan Repayment Programs. 226 HEA, §460; 34 C.F.R. §§685.212(h) and 685.217. Breaks in service are authorized for borrowers who return to school on at least a half-time basis to pursue additional postsecondary education related to the qualifying teaching service, who have a condition covered under the Family and Medical Leave Act of 1993 (FMLA), or who are called or ordered to active duty for more than 30 days in a reserve component of the Armed Forces. An eligible school or ESA is (continued...) Congressional Research Service 75 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program ~~Report R43571,~~ ~~Federal~~
~~Student Loan Forgiveness and Loan Repaym ent Program s~~.
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~~Teacher Loan Forgiveness Program~~
~~A borrower who has completed five consecutive complete academic years of teaching service in a~~
~~low-income school or educational service agency (ESA) may be relieved of the obligation to~~
~~repay up to $5,000 for service as a highly qualified teacher, or up to $17,500 for service as a~~
~~highly qualified special education teacher or secondary school teacher of mathematics or~~
~~science.192 Teacher Loan Forgiveness benefits are only available to borrowers who had no~~
outstanding balance on any federal student loan made through the Direct Loan program (or the outstanding balance on any federal student loan made through the Direct Loan program (or the
FFEL program) as of the date the borrower first obtained such a loan FFEL program) as of the date the borrower first obtained such a loan on or after October 1, 1998.after October 1, 1998.
Student loan debt attributable to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Student loan debt attributable to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct
Consolidation Loans (to the extent that the Direct Consolidation Loan repaid a Direct Subsidized Consolidation Loans (to the extent that the Direct Consolidation Loan repaid a Direct Subsidized
Loan, a Direct Unsubsidized Loan, a FFEL Subsidized Stafford Loan, or a FFEL Unsubsidized Loan, a Direct Unsubsidized Loan, a FFEL Subsidized Stafford Loan, or a FFEL Unsubsidized
Stafford Loan) may be forgiven. Loans must have been obtained prior to the end of a borrower’s Stafford Loan) may be forgiven. Loans must have been obtained prior to the end of a borrower’s
fifth year of qualifyingfifth year of qualifying service and may not be in default, unless satisfactory repayment service and may not be in default, unless satisfactory repayment
arrangements have been made. A borrower may receive Teacher Loan Forgiveness Program arrangements have been made. A borrower may receive Teacher Loan Forgiveness Program
Forbearance during the five years of teaching service required to qualify for benefits.Forbearance during the five years of teaching service required to qualify for benefits.
A borrower becomes eligible for loan forgiveness benefits upon completion of the fifth year of A borrower becomes eligible for loan forgiveness benefits upon completion of the fifth year of
qualifying service. If a borrower’s student loan debt exceeds the amount to be forgiven, unless qualifying service. If a borrower’s student loan debt exceeds the amount to be forgiven, unless
otherwise requested by the borrower, loan forgiveness benefits are applied first to Direct otherwise requested by the borrower, loan forgiveness benefits are applied first to Direct
Unsubsidized Loans, then to Direct Subsidized Loans, then to the unsubsidized component of Unsubsidized Loans, then to Direct Subsidized Loans, then to the unsubsidized component of
Direct Consolidation Loans, and Direct Consolidation Loans, and ~~final y~~finally to the subsidized component of Direct Consolidation to the subsidized component of Direct Consolidation
Loans. Loan forgiveness benefits may not be provided for the same service used to qualify for Loans. Loan forgiveness benefits may not be provided for the same service used to qualify for
benefits under the Public Service Loan Forgiveness (PSLF) program, the Loan Forgiveness for benefits under the Public Service Loan Forgiveness (PSLF) program, the Loan Forgiveness for
Service in Areas of National Need Program, or a Segal AmeriCorps Education Award.Service in Areas of National Need Program, or a Segal AmeriCorps Education Award.~~193~~227
Public Service Loan Forgiveness (PSLF) Program
A borrower may be relieved of the obligation to repay the balance of principal and interest that A borrower may be relieved of the obligation to repay the balance of principal and interest that
remains outstanding on eligibleremains outstanding on eligible loans upon having made 120 qualifyingloans upon having made 120 qualifying monthly payments on or monthly payments on or
after October 1, 2007, concurrent with the borrower being employed full-time by one or more after October 1, 2007, concurrent with the borrower being employed full-time by one or more
public service organizations or serving full-time in an AmeriCorps or Peace Corps position.public service organizations or serving full-time in an AmeriCorps or Peace Corps position.~~194~~228 To To
qualify, a borrower must make 120 separate, full, on-time scheduled monthly payments on loans qualify, a borrower must make 120 separate, full, on-time scheduled monthly payments on loans
that are not in default. In general, qualifying payments are those made within 15 days of the due that are not in default. In general, qualifying payments are those made within 15 days of the due
date according to certain repayment plans. Borrowers may make lump sum payments for up to the date according to certain repayment plans. Borrowers may make lump sum payments for up to the

~~192 HEA, §460; 34 C.F.R. §§685.212(h) and 685.217. Breaks in service are authorized for borrowers who return to~~
~~school on at least a half-time basis to pursue additional postsecondary education related to the qualifying teaching~~
~~service, who have a condition covered under the Family and Medical Leave Act of 1993 (FMLA), or who are called or~~
~~ordered to active duty for more than 30 days in a reserve component of the Armed Forces. An eligible school or ESA is~~
~~an entity (1) that qualifies for funds under T itle~~lesser of 12 months or when their next IDR annual certification is due.229 Regulations also specify that borrowers using Segal AmeriCorps Education Award benefits, Peace Corps transition payments, or certain Department of Defense student loan repayment benefits may make lump sum payments.230 Qualifying payments include those made according to one or more of the following repayment plans: an entity (1) that qualifies for funds under Title I of the Elementary and Secondary Education Act of 1965 (ESEA), (2) I of the Elementary and Secondary Education Act of 1965 (ESEA), (2)
at which more than 30% of students qualify for at which more than 30% of students qualify for ~~T itle~~Title I services, and (3) that is listed in the I services, and (3) that is listed in the Annual Directory of
Designated Low-~~Incom e~~Income Schools for Teacher Cancellation Benefits (Teacher Cancellation Low-~~Incom e~~Income (TCLI)
Directory), https://studentloans.gov/myDirectLoan/tcli.action?_ga=2.177690848., https://studentloans.gov/myDirectLoan/tcli.action?_ga=2.177690848.~~49 3686772~~493686772.1564697813-.1564697813-
1244777594.1562359674. Bureau of Indian Education (BIE) schools are considered eligible1244777594.1562359674. Bureau of Indian Education (BIE) schools are considered eligible schools. Qualifying schools. Qualifying
service may be completed at one or more eligibleservice may be completed at one or more eligible schools or ESAs. schools or ESAs.
~~193~~227 A parallel A parallel ~~T eacher~~Teacher Loan Forgiveness program is Loan Forgiveness program is available for borrowers of FFEL program loans. If a borrower also available for borrowers of FFEL program loans. If a borrower also
has eligiblehas eligible loans made through the FFEL program, combined loans made through the FFEL program, combined ~~T eacher~~Teacher Loan Forgiveness program benefits received Loan Forgiveness program benefits received
through the Direct Loan program and the FFEL program may not exceed $5,000 or $17,500, as through the Direct Loan program and the FFEL program may not exceed $5,000 or $17,500, as ~~appl icable.~~
~~194~~applicable. 228 HEA, §455(m); 34 C.F.R. §§685.212(i) and 685.219. For a detailed description of the PSLF program, see HEA, §455(m); 34 C.F.R. §§685.212(i) and 685.219. For a detailed description of the PSLF program, see CRS CRS
Report R45389, Report R45389, The Public Service Loan Forgiveness Program ~~: Selected Issues~~.
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~~lesser of 12 months or when their next IDR annual certification is due.195 Regulations also specify~~
~~that borrowers using Segal AmeriCorps Education Award benefits, Peace Corps transition~~
~~payments, or certain Department of Defense student loan repayment benefits may make lump~~
~~sum payments.196 Qualifying payments include those made according to one or more of the~~
~~following repayment plans:~~
~~ Income-Contingent Repayment (ICR) plan;~~
~~ Income-Based Repayment (IBR) plans;~~
~~ Pay As You Earn (PAYE) repayment plan;~~
~~ Revised Pay As You Earn (REPAYE) repayment plan;~~
~~ Standard Repayment Plan with a Maximum 10-Year Term; and~~
: Selected Issues, archived (available to congressional clients upon request). 229 U.S. Department of Education, Office of Federal Student Aid, Electronic Announcement, “Changes to the Public Service Loan Forgiveness (PSLF) Program and New, Single PSLF Form, October 28, 2020, https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2020-10-28/changes-public-service-loan-forgiveness-pslf-program-and-new-single-pslf-form. 230 34 C.F.R.§685.219(c)(2). Congressional Research Service 76 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • Income-Contingent Repayment (ICR) plan; • Income-Based Repayment (IBR) plans; • Pay As You Earn (PAYE) repayment plan; • Revised Pay As You Earn (REPAYE) repayment plan; • Standard Repayment Plan with a Maximum 10-Year Term; and • any other of the loan repayment plans (except for the alternative repayment plans any other of the loan repayment plans (except for the alternative repayment plans
[discussed above]) if the monthly payment amount is not less than what would be [discussed above]) if the monthly payment amount is not less than what would be
paid under the Standard Repayment Plan with a Maximum 10-Year Term. paid under the Standard Repayment Plan with a Maximum 10-Year Term.
In addition, In addition, ~~monthly~~payment credits received under the IDR account adjustment (see Appendix D) for months that coincide with months during which a borrower was employed in PSLF qualifying employment count toward the 120 qualifying monthly payments. Monthly payments suspended under the COVID-19 payment payments suspended under the COVID-19 payment ~~suspension count toward~~
~~the 120 qualifying monthly payments~~pause (see Appendix D) count toward the 120 qualifying monthly payments. Payments made on loans prior to consolidation into a Direct Consolidation Loan, however, do not count toward the 120 qualifying monthly payments on the new Direct Consolidation Loan. .
A borrower must be employed by or serving full A borrower must be employed by or serving full -time with a public service organization at the time with a public service organization at the
time time ~~he or she makes~~they make each of the required 120 payments, each of the required 120 payments, ~~applies~~apply for loan forgiveness benefits, for loan forgiveness benefits,
~~and has~~ and have forgiveness granted.forgiveness granted.~~197~~231 Public service organizations are federal, state, local, or tribal Public service organizations are federal, state, local, or tribal
government agencies, organizations, or entities; tribal colleges and universities; public child or government agencies, organizations, or entities; tribal colleges and universities; public child or
family service agencies; nonprofit entities organized under Section 501(c)(3) of the Internal family service agencies; nonprofit entities organized under Section 501(c)(3) of the Internal
Revenue Code (IRC) that are tax-exempt under Revenue Code (IRC) that are tax-exempt under ~~IRS~~IRC Section 501(a); and certain other private Section 501(a); and certain other private
nonprofit entities that are providers of public services. Public service organizations exclude labor nonprofit entities that are providers of public services. Public service organizations exclude labor
unions and unions and partisan political organizations. Religious organizations~~partisan political organizations. Currently, religious organizations are also excluded~~
~~from the definition of public service organization, except to the extent that activities do not relate~~
~~to religious instruction, worship services, or proselytizing. Effective July 1, 2021, religious~~
~~organizations are to~~ qualify as public service organizations, regardless of whether activities relate qualify as public service organizations, regardless of whether activities relate
to religious instruction, worship services, or proselytizing.to religious instruction, worship services, or proselytizing.~~198~~232 Eligible Eligible private nonprofit entities private nonprofit entities
include providers of any of the following public services: emergency management, military include providers of any of the following public services: emergency management, military
service, public safety, law enforcement, public interest law services, early childhood education, service, public safety, law enforcement, public interest law services, early childhood education,
public service for individuals with disabilitiespublic service for individuals with disabilities and the elderly, public health, public education, and the elderly, public health, public education,
public library services, and school library or other school-based services. Loan forgiveness public library services, and school library or other school-based services. Loan forgiveness
benefits may not be provided for the same service used benefits may not be provided for the same service used to qualify for benefits under the Teacher Loan Forgiveness Program, the Civil Legal Assistance Attorney Loan Repayment Program, or the Loan Forgiveness for Service in Areas of National Need Program.233 Effective July 1, 2023, ED regulations make a number of changes to PSLF program rules.234 Under the new regulations, borrowers would still be required to make 120 qualifying monthly 231~~to qualify for benefits under the Teacher~~

~~195 U.S. Department of Education, Office of Federal Student Aid, Electronic Announcement, “Changes to the Public~~
~~Service Loan Forgiveness (PSLF) Program and New, Single PSLF Form, October 28, 2020,~~
~~https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2020-10-28/changes-public-service-~~
~~loan-forgiveness-pslf-program-and-new-single-pslf-form.~~
~~196 34 C.F.R.§685.219(c)(2).~~
~~197~~ Full-time employment means the greater of an average of 30 hours per week Full-time employment means the greater of an average of 30 hours per week or the number of hours the employer or the number of hours the employer
considers fullconsiders full time. Employer-provided leave or vacation and FMLA leave are not considered when determining the time. Employer-provided leave or vacation and FMLA leave are not considered when determining the
average number of hours worked. Lump sumaverage number of hours worked. Lump sum payments may be applied to the lesser of either the number that results payments may be applied to the lesser of either the number that results
from dividingfrom dividing the amount of the lump sum payment by the borrower’s monthly payment amount as calculated the amount of the lump sum payment by the borrower’s monthly payment amount as calculated
according to one of the authorized repayment plans, or 12 months. 34 C.F.R. §685.219.according to one of the authorized repayment plans, or 12 months. 34 C.F.R. §685.219.
~~198~~ 232 U.S. Department of Education, Department of Education, "“Federal Perkins Loan Program, Federal WorkFederal Perkins Loan Program, Federal Work -Study Programs, Federal Supplemental -Study Programs, Federal Supplemental
Educational Opportunity Grant, Federal Family Education Loan Program, William D. Ford FederalEducational Opportunity Grant, Federal Family Education Loan Program, William D. Ford Federal Direct Loan Direct Loan
Program, National Direct Student Loan Program, Program, National Direct Student Loan Program, ~~T eacher~~Teacher Education Assistance for College and Higher Education Assistance for College and Higher ~~Education~~
Education Grant Program, Federal Pell Grant Program, Leveraging Educational Assistance Partnership Program, and Gaining Grant Program, Federal Pell Grant Program, Leveraging Educational Assistance Partnership Program, and Gaining
Early AwarenessEarly Awareness and Readinessand Readiness for Undergraduate Programs,for Undergraduate Programs,"” 85 85 Federal Register 49805-07, 49821, August 49805-07, 49821, August 14, 2020. 233 For additional information on the latter two programs, see CRS Report R43571, Federal Student Loan Forgiveness and Loan Repayment Programs. 234 ED, Final Rule, November 1, 2022~~14, 2020~~. .
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~~Loan Forgiveness Program, the Civil Legal Assistance Attorney Loan Repayment Program, or the~~
~~Loan Forgiveness for Service in Areas of National Need Program.199~~
~~Temporary Expanded Public Service Loan Forgiveness (TEPSLF) Program~~
~~The TEPSLF program was established in response to concerns that some borrowers were~~
~~experiencing difficulty in deciphering and complying with the requirements for establishing~~
~~eligibility for loan forgiveness through the PSLF program.200 A borrower who would qualify for~~
~~loan forgiveness under the PSLF program except for the fact that, under certain circumstances,~~
~~some or al of the required 120 monthly payments were nonqualifying may be relieved of the~~
~~obligation to repay the balance of principal and interest that remains outstanding upon the~~
~~borrower otherwise satisfying the requirements of the PSLF program as wel as the following~~
~~criteria:~~
~~ Al of the borrower’s nonqualifying monthly payments must have been made~~
~~according to any of the Extended Repayment Plans or the Graduated Repayment~~
~~Plans, but in an amount that was less than what would have been paid under the~~
~~Standard Repayment Plan with a Maximum 10-Year Term.~~
~~ The amount of both the borrower’s most recent monthly payment and the~~
~~monthly payment made 12 months prior to application for relief through the~~
~~TEPLSF program must equal or exceed the monthly payment amount that would~~
~~have been calculated under one of the IDR plans for which the borrower would~~
~~have otherwise qualified. (An exception to this criterion is provided to a~~
~~borrower who would otherwise qualify for TEPSLF benefits but over the past~~
~~five years demonstrates an “unusual fluctuation of income.”201)~~
~~Benefits are available on a first-come, first-served basis and are subject to the availability of~~
~~funds.202~~
~~Tax Treatment of Discharged and Forgiven Debt~~
~~The IRC provides that, in general, student loan debt (as wel as other types of debt) that is~~
~~discharged, forgiven, or repaid on a borrower’s behalf is included as part of the individual’s gross~~
~~income for the purposes of federal income taxation.203 In certain instances, however, discharged~~
~~or forgiven student loan debt may be excluded from an individual’s gross income and, therefore,~~
~~exempted from consideration in determining federal income tax liability. If loan discharge or loan~~
~~forgiveness benefits are not specifical y excluded from an individual’s gross income, he or she~~
~~may be responsible for paying any income tax liability associated with the benefits received. In~~

~~199 For additional information on the latter two programs, see CRS Report R43571,~~ ~~Federal Student Loan Forgiveness~~
~~and Loan Repaym ent Program s~~.
~~200 For background, see U.S. Government Accountability Office,~~ ~~Public Service Loan Forgiveness: Education Needs to~~
~~Provide Better Inform ation~~payments on or after October 1, 2007, while employed full-time235 in public service. However, qualifying payments are to newly include those not paid on time (i.e., not within 15 days of the scheduled due date) and those paid in multiple installments that equal the full scheduled amount due. Borrowers in IDR plans may make lump sum payments for a period of months not to exceed the period from ED’s receipt of the payment until the borrower’s next annual IDR recertification date, and borrowers in a standard repayment plan with a 10-year repayment term may make lump sum payments for up to the lesser of 12 months or the date on which ED receives the borrower’s next PSLF application.236 The new regulations do not change the types of repayment plans under which qualifying payments must be made. They do, however, permit borrowers to newly count the following periods of deferment and forbearance as qualifying monthly payments for the purpose of satisfying the required 120 monthly payments: • cancer treatment deferment, • economic hardship deferment, • military service deferment, • post-active duty student deferment, • AmeriCorps national service forbearance, • National Guard duty forbearance, • Department of Defense Student Loan Repayment Program forbearance, • administrative forbearance authorized by ED due to a national military mobilization or other local or national emergency (including the COVID-19 payment pause), and • administrative forbearance for a period necessary for ED to collect and process documentation supporting a borrower’s request for a deferment, forbearance, change in repayment plan, or Consolidation Loan. For months of deferment or forbearance not listed above, the borrower may obtain credit toward the 120 qualifying monthly payments for those months if they make additional payments equal to or greater than the amount they would have paid under a qualifying repayment during such months or otherwise qualify for a $0 payment under an IDR plan. The new regulations also establish a mechanism through which borrowers who consolidated any type of Direct Loan into a Direct Consolidation Loan may receive credit toward the 120 required payments on the new Consolidation Loan for payments made prior to consolidation. Specifically, if a borrower consolidates one or more Direct Loans into a Consolidation Loan, the number of qualifying payments on the new Consolidation Loan is to equal the weighted average of the 235 The amended regulations update the definition of full-time to mean (1) a minimum average of 30 hours per week; (2) a minimum of 30 hours per week through a contractual or employment period of at least 8 months in a 12-month period; or (3) for non-tenure track employment at an institution of higher education, the equivalent of 30 hours per week as determined by multiplying each credit or contract hour taught per week by 3.35. ED has stated it intends to designate this new definition of full-time as eligible for implementation before July 1, 2023. ED, Final Rule, November 1, 2022, p. 65906. 236 While the regulatory language explicitly authorizing borrowers using Segal AmeriCorps Education Award benefits, Peace Corps transition payments, or certain Department of Defense student loan repayment benefits to make lump sum payments, such individuals would still be able to do so under the new rules relating to lump sum payments applicable to all borrowers. Congressional Research Service 78 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program number of otherwise qualifying payments (e.g., made under PSLF qualifying repayment plans) they made on the Direct Loan prior to consolidation.237 Under the new regulation, the types of PSLF qualifying employers largely remain the same.238 Employment as a contracted employee for a PSLF qualifying employer in a position that, under applicable state law, cannot be filled by a direct employee would newly be considered PSLF qualifying employment.239 Finally, the updated regulations eliminate the criterion that a borrower be employed by a PSLF qualifying employer at the time that forgiveness is granted. In response to the COVID-19 pandemic, for October 6, 2021-October 31, 2022, ED authorized a set of limited-time waivers of numerous PSLF program rules to enable borrowers to receive credit for past periods of repayment that would not otherwise qualify for PSLF. For additional information, see Appendix D. Temporary Expanded Public Service Loan Forgiveness (TEPSLF) Program The TEPSLF program was established in response to concerns that some borrowers were experiencing difficulty in deciphering and complying with the requirements for establishing eligibility for loan forgiveness through the PSLF program.240 A borrower who would qualify for loan forgiveness under the PSLF program except for the fact that, under certain circumstances, some or all of the required 120 monthly payments were nonqualifying may be relieved of the obligation to repay the balance of principal and interest that remains outstanding upon the borrower otherwise satisfying the requirements of the PSLF program as well as the following criteria: • All of the borrower’s nonqualifying monthly payments must have been made according to any of the Extended Repayment Plans or the Graduated Repayment Plans, but in an amount that was less than what would have been paid under the Standard Repayment Plan with a Maximum 10-Year Term. • The amount of both the borrower’s most recent monthly payment and the monthly payment made 12 months prior to application for relief through the TEPLSF program must equal or exceed the monthly payment amount that would have been calculated under one of the IDR plans for which the borrower would have otherwise qualified. (An exception to this criterion is provided to a 237 It appears that ED intends to calculate the weighted average of number of otherwise qualifying payments made on the Direct Loans prior to consolidation based on the balance of each loan at the time the loans are consolidated. For an example of how this would be calculated, see ED, Final Rule, November 1, 2022, p. 65974. 238 The updated regulations would make clarifications to the definitions of the types of qualifying employers. For example, the updated regulations clarify that nonprofit entities not organized under IRC Section 501(c)(3) and not tax-exempt under IRC Section 501(a) must show that they devote the majority of their full-time equivalent employees to work in at least one of the previously enumerated public services (e.g., public safety, early childhood education). 239 The regulatory language does not specifically define “direct employee” nor “contracted worker.” However, it does define an employee as an individual (1) “to whom an organization issues an IRS Form W-2”; (2) “who receives and IRS form W-2 from an organization that has contracted with a qualifying employer to provide payroll or similar servicers for the qualifying employer, and provides the Form W-2 under that contract”; and (3) “who works as a contracted employee for a qualifying employer in a position or providing services which, under applicable state law, cannot be filled or provided by a direct employee of the qualifying employer.” ED, Final Rule, November 1, 2022, p. 66064. 240 For background, see U.S. Government Accountability Office, Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers, GAO-18-547, 2918, , GAO-18-547, 2918,
https://www.gao.gov/assets/700/https://www.gao.gov/assets/700/694304.pdf. Congressional Research Service 79 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program borrower who would otherwise qualify for TEPSLF benefits but over the past five years demonstrates an “unusual fluctuation of income.”241) Benefits are available on a first-come, first-served basis and are subject to the availability of funds.242 Tax Treatment of Discharged and Forgiven Debt The IRC provides that, in general, student loan debt (as well as other types of debt) that is discharged, forgiven, or repaid on a borrower’s behalf is included as part of the individual’s gross income for the purposes of federal income taxation.243 In certain instances, however, discharged or forgiven student loan debt may be excluded from an individual’s gross income and, therefore, exempted from consideration in determining federal income tax liability. If loan discharge or loan forgiveness benefits are not specifically excluded from an individual’s gross income, the individual may be responsible for paying any income tax liability associated with the benefits received. In ~~694304.pdf.~~
~~201 P.L. 115-141.~~
~~202 Up to $500 million in loan forgiveness benefits was made available by P.L. 115-141, an additional $500 million was~~
~~made available by P.L. 115-245, an additional $75 million was made available by P.L. 116 -94, and an additional $75~~
~~million was made available by P.L. 116-260.~~
~~203 IRC §61(a)(12).~~
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the circumstances described below, discharged or forgiven student loan debt may be excluded the circumstances described below, discharged or forgiven student loan debt may be excluded
from an individual’s gross income: from an individual’s gross income:
• Loan Discharge in General. Student loan debt that is discharged for almost any Student loan debt that is discharged for almost any
reason, if the discharge occurs after December 31, 2020, and before January 1, reason, if the discharge occurs after December 31, 2020, and before January 1,
2026. This could include, discharge due to death of the borrower (or due to the 2026. This could include, discharge due to death of the borrower (or due to the
death of the student on whose behalf a Direct PLUS Loan was made to a parent death of the student on whose behalf a Direct PLUS Loan was made to a parent
borrower)borrower) ~~and~~, discharge due to the total and permanent disability of the discharge due to the total and permanent disability of the
~~borrower.204~~
borrower, and loan forgiveness following IDR plan repayment.244 • Closed School Discharge. Student loan debt that is discharged on the basis of Student loan debt that is discharged on the basis of
the school attended having closed while the student was enrolled or within 120 the school attended having closed while the student was enrolled or within 120
days (for loans made prior to July 1, 2020) or 180 days (for loans made on or days (for loans made prior to July 1, 2020) or 180 days (for loans made on or
after July 1, 2020)after July 1, 2020)245 of the student withdrawing and the student also having not of the student withdrawing and the student also having not
completed the program of study for which the loan was obtained.completed the program of study for which the loan was obtained.~~205~~
246 • False Certification and Unauthorized Payment Discharges. Student loan debt Student loan debt
that is discharged on the basis of the proceeds of the loan having been falsely that is discharged on the basis of the proceeds of the loan having been falsely
certified by the IHE the borrower attended or having been disbursed without certified by the IHE the borrower attended or having been disbursed without ~~his~~
~~or her~~ their authorization.authorization.~~206~~
247 • Unpaid Refund Discharge. Student loan debt that is discharged on the basis of a Student loan debt that is discharged on the basis of a
school that has closed or that a borrower no longer attends having not refunded school that has closed or that a borrower no longer attends having not refunded
amounts owed to the borrower.amounts owed to the borrower.~~207~~
~~ Bankruptcy Discharge. Student loan debt that is discharged in bankruptcy~~
~~proceedings.208~~
~~ Insolvency. Student loan debt that is discharged while an individual is~~
~~insolvent.209 Depending on an individual’s unique circumstances, it may be~~
~~possible for a borrower who receives Loan Forgiveness Following IDR Plan~~
~~Repayment to be considered insolvent at the time of discharge.~~
~~ Loan Forgiveness for Public Service. Discharged or forgiven student loan debt~~
~~may be excluded if a loan was made by certain types of lenders (e.g., the federal~~
~~government), was borrowed to assist an individual in attending a qualified~~
~~educational institution, and contains terms providing that some or al of the~~
~~balance wil be cancel ed for work for a specified amount of time in certain~~
~~professions or occupations and for any of a broad class of employers (e.g., public~~
~~service organizations).210 Student loan debt that is discharged through the Teacher~~

~~204 P.L. 117-7.~~
~~205 HEA §§437(c) and 465(a)(5).~~
~~206 HEA §§437(c) and 465(a)(5).~~
~~207 HEA §§437(c) and 465(a)(5).~~
~~208 IRC §108(a)(1)(A).~~
~~209 IRC §108(a)(1)(B). “For purposes of [IRC §108], the term ‘insolvent’ means the excess of liabilities over the fair~~
~~market value of assets. With respect to any discharge, whether or not the taxpayer is insolvent, and the amount by~~
~~which the taxpayer is insolvent, shall be determined on the basis of the taxpayer’s assets and liabilities immediately~~
~~before the discharge.” IRC §108(d)(3).~~
~~210 IRC §108(f). For additional information on this provision, see “Exclusion of Income Attributable to the Discharge~~
~~of Certain Student Loan Debt and NHSC and Certain State Educational Loan Repayments,” in CRS Committee Print~~
~~CP10004,~~ ~~Tax Expenditures: Com pendium of Background Material on Individual Provisions — A Com m ittee Print~~
~~Prepared for the Senate Com m ittee on the Budget, 2020~~ ~~, by Jane G. Gravelle et al.~~
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~~Loan Forgiveness program, the PSLF program, and the TEPSLF program may be~~
~~excluded.~~248 241 P.L. 115-141. 242 Up to $500 million in loan forgiveness benefits was made available by P.L. 115-141, an additional $500 million was made available by P.L. 115-245, an additional $75 million was made available by P.L. 116-94, an additional $75 million was made available by P.L. 116-260, and an addition $75 million was made available by P.L. 117-103. 243 IRC §61(a)(12). 244 P.L. 117-7. 245 Effective July 1, 2023, regulations make uniform the look-back period to 180 days, regardless of when a loan was first disbursed. ED, Final Rule, November 1, 2022. 246 HEA §§437(c) and 465(a)(5). 247 HEA §§437(c) and 465(a)(5). 248 HEA §§437(c) and 465(a)(5). Congressional Research Service 80 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program • Bankruptcy Discharge. Student loan debt that is discharged in bankruptcy proceedings.249 • Insolvency. Student loan debt that is discharged while an individual is insolvent.250 Depending on an individual’s unique circumstances, it may be possible for a borrower who receives loan forgiveness following IDR plan repayment to be considered insolvent at the time of discharge. • Loan Forgiveness for Public Service. Discharged or forgiven student loan debt may be excluded if a loan was made by certain types of lenders (e.g., the federal government), was borrowed to assist an individual in attending a qualified educational institution, and contains terms providing that some or all of the balance will be cancelled for work for a specified amount of time in certain professions or occupations and for any of a broad class of employers (e.g., public service organizations). Student loan debt that is discharged through the Teacher Loan Forgiveness program, the PSLF program, and the TEPSLF program may be excluded.251
Loan Default, Its Consequences, and Resolution
A loan made through the Direct Loan program is considered to be in default once the borrower A loan made through the Direct Loan program is considered to be in default once the borrower
has failed to make payments when due or has otherwise not adhered to the terms of the has failed to make payments when due or has otherwise not adhered to the terms of the
promissory note for 270 days.promissory note for 270 days.~~211~~252 Defaulting on a federal student loan can result in a number of Defaulting on a federal student loan can result in a number of
adverse consequences for the borrower. Upon default, the borrower’s obligation to repay the loan adverse consequences for the borrower. Upon default, the borrower’s obligation to repay the loan
isis accelerated (i.e., the entire unpaid balance of principal and accrued interest becomes due in (i.e., the entire unpaid balance of principal and accrued interest becomes due in
full).full).~~212~~253 In addition, upon defaulting a borrower loses eligibility In addition, upon defaulting a borrower loses eligibility for certain borrower benefits for certain borrower benefits
(e.g., deferment, forbearance, loan forgiveness), as (e.g., deferment, forbearance, loan forgiveness), as ~~wel~~ well as eligibilityas eligibility to receive additionalto receive additional Title IV Title IV
federal student aid. federal student aid.
Defaulting may also result in other adverse effects for the borrower and may present a major Defaulting may also result in other adverse effects for the borrower and may present a major
obstacle to the borrower’s future economic obstacle to the borrower’s future economic ~~wel~~ well-being. The Secretary will report defaulted loans -being. The Secretary will report defaulted loans
to consumer reporting agencies and to consumer reporting agencies and ~~wil~~ will take action to collect on them through one or more take action to collect on them through one or more
means. The borrower of a defaulted loan may be assessed a variety of charges for the costs of means. The borrower of a defaulted loan may be assessed a variety of charges for the costs of
collecting on it. collecting on it.
Several options are available Several options are available to borrowers to bring defaulted loans back into good standing. A to borrowers to bring defaulted loans back into good standing. A
borrower may remove a loan from default status by rehabilitating the loan, consolidating the loan borrower may remove a loan from default status by rehabilitating the loan, consolidating the loan
~~into a new Direct Consolidation Loan, or paying off the defaulted loan balance.~~
~~Consequences of Default for Borrowers~~
~~A borrower who defaults on a loan made through the Direct Loan program becomes subject to~~
~~many consequences, which are briefly described below:~~
~~ Ineligibility for Federal Student Aid. The borrower becomes ineligible to~~
~~receive federal student aid made under Title IV of the HEA.213 A defaulted~~
~~borrower may regain eligibility by voluntarily making six consecutive, on-time,~~
~~full monthly payments. A borrower may restore eligibility for Title IV aid though~~
~~this method only once.~~
into a new Direct Consolidation Loan, or paying off the defaulted loan balance. In response to the COVID-19 pandemic, involuntary collection practices (described below), which include administrative wage garnishment; offset of federal income tax returns, Social 249 IRC §108(a)(1)(A). 250 IRC §108(a)(1)(B). “For purposes of [IRC §108], the term ‘insolvent’ means the excess of liabilities over the fair market value of assets. With respect to any discharge, whether or not the taxpayer is insolvent, and the amount by which the taxpayer is insolvent, shall be determined on the basis of the taxpayer’s assets and liabilities immediately before the discharge.” IRC §108(d)(3). 251 IRC §108(f), For additional information on this provision, see “Exclusion of Income Attributable to the Discharge of Certain Student Loan Debt and HSC and Certain State Educational Loan Repayments,” in CRS Committee Print CP10005, Tax Expenditures: Compendium of Background Material on Individual Provisions—A Committee Print Prepared for the Senate Committee on the Budget, 2022, by Jane G. Gravelle et al. 252 34 C.F.R. §685.102. 253 34 C.F.R. §685.211(d). Congressional Research Service 81 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Security benefits, and certain other federal benefits; and civil litigation, have been temporarily suspended. In addition, in April 2022, ED announced a new policy “to eliminate the negative effects of default for borrowers who defaulted on their student loan prior to the [COVID-19] pandemic payment pause,”254 known as the “Fresh Start” initiative. For information on both of these flexibilities, see Appendix D. Consequences of Default for Borrowers A borrower who defaults on a loan made through the Direct Loan program becomes subject to many consequences, which are briefly described below: • Ineligibility for Federal Student Aid. The borrower becomes ineligible to receive federal student aid made under Title IV of the HEA.255 A defaulted borrower may regain eligibility by voluntarily making six consecutive, on-time, full monthly payments. A borrower may restore eligibility for Title IV aid though this method only once. • Capitalization of Interest. Any unpaid interest that has accrued (e.g., during Any unpaid interest that has accrued (e.g., during
periods of negative amortization, during delinquency) may be capitalized into the periods of negative amortization, during delinquency) may be capitalized into the
principal balance of the loan. principal balance of the loan.
Effective July 1, 2023, ED regulations eliminate capitalization of unpaid accrued interest upon borrower default.256 •  Acceleration. The entire unpaid balance owed on the borrower’s loan becomes The entire unpaid balance owed on the borrower’s loan becomes
due in full. due in full.
 Transfer to Private Collection Agencies. ~~Upon~~• Debt Collection. Prior to November 8, 2021, upon default, student loan accounts default, student loan accounts
~~are initial y~~ were initially transferred from the borrower’s student loan servicer to the Office of transferred from the borrower’s student loan servicer to the Office of
Federal Student Aid’s Federal Student Aid’s (FSA’s) Default Management and Collection System (DMCS), Default Management and Collection System (DMCS),
~~which may then~~FSA’s management system for defaulted loans. FSA’s Default Resolution Group (DRG) served as the contact center for DMCS. Following transfer from a loan servicer, the DMCS typically would transfer defaulted loans to private collection agencies (PCAs) transfer defaulted loans to private collection agencies (PCAs)
that that ~~are~~were under contract with FSA for collections. under contract with FSA for collections. ~~A PCA wil~~ 257 The PCA would first contact the first contact the
borrower before pursuing efforts to collect on the debt. The PCA borrower before pursuing efforts to collect on the debt. The PCA ~~may~~could offer the borrower the opportunity to rehabilitate the loan or to enter into a voluntary repayment agreement.258 If the borrower accepted neither offer, or did not honor a voluntary repayment agreement, the PCA could seek to collect on the defaulted loans by means of administrative wage garnishment (AWG). The PCA could also refer defaulted loans to the Treasury Offset Program (TOP) for collection, or could recommend litigation. 254 ED, Office of Postsecondary Education, Dear Colleague Letter GEN-22-13, “Federal Student Aid Eligibility for Borrowers with Defaulted Loans,” August 17, 2022, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2022-08-17/federal-student-aid-eligibility-borrowers-defaulted-loans. 255 Ineligibility for Title IV aid ~~offer the~~

~~211 34 C.F.R. §685.102.~~
~~212 34 C.F.R. §685.211(d).~~
~~213 Ineligibility for T itle IV aid also results from defaulting on a FFEL program loan or a Perkins Loan.~~
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~~borrower the opportunity to rehabilitate the loan or to enter into a voluntary~~
~~repayment agreement.214 If the borrower accepts neither offer, or does not honor a~~
~~voluntary repayment agreement, the PCA may seek to collect on the defaulted~~
~~loans by means of administrative wage garnishment (AWG). The PCA may also~~
~~refer defaulted loans to the Treasury Offset Program (TOP) for col ection, or may~~
~~recommend litigation.~~
also results from defaulting on a FFEL program loan or a Perkins Loan. 256 ED, Final Rule, November 1, 2022. 257 Beginning March 20, 2020, it was not possible for Direct Loan borrowers to default on their loans due to the COVID-19 payment pause. Thus, from that time to November 8, 2021, no new borrower accounts were assigned to PCAs; although PCAs were still responsible for assisting borrowers who sought to begin or continue default resolution arrangements. 258 For additional information on PCAs, see CRS Report R44845, Administration of the William D. Ford Federal Direct Loan Program. Congressional Research Service 82 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program On November 8, 2021, ED cancelled its contracts with PCAs and recalled all borrower accounts. FSA’s DRG, using the DMCS, is currently responsible for assisting borrowers with their defaulted loans. Thus, those borrowers who are currently in default on their Direct Loans may reach out to ED’s DRG to begin or to continue default resolution arrangements (described below).259 The DRG does not perform the full scope of default collection (i.e., involuntary collection practices) due to the temporary suspension on collection activities in light of the COVID-19 pandemic (see Appendix D). When student loan repayments resume following the end of the COVID-19 student loan payment pause, ED intends that debt collection work will function in much of the same way it did before the pandemic: with defaulted loans being assigned to a contracted entity to perform collection work, including offering borrowers the opportunity to rehabilitate their loan or to enter into a voluntary repayment agreement and collecting debt via other means such as AWG, TOP, or recommendation for litigation.260 • Assessment of Collection Charges. The borrower may be charged for the costs The borrower may be charged for the costs
of collecting on the loan, including loan collection fees, TOP processing fees, of collecting on the loan, including loan collection fees, TOP processing fees,
court costs, and attorney’s fees.court costs, and attorney’s fees.~~215~~
261 • Administrative Wage Garnishment (AWG). Up to 15% of the borrower’s Up to 15% of the borrower’s
disposable pay may be garnished to repay the defaulted student loan. may be garnished to repay the defaulted student loan.~~216~~262
Disposable pay is defined as that part of a borrower’s compensation that remains Disposable pay is defined as that part of a borrower’s compensation that remains
after deducting amounts required by law to be withheld. Defaulters must be given after deducting amounts required by law to be withheld. Defaulters must be given
written notice of the intent to garnish wages; and they have rights to examine the written notice of the intent to garnish wages; and they have rights to examine the
debt record, have a hearing concerning the existence and amount of the debt or debt record, have a hearing concerning the existence and amount of the debt or
repayment terms, and establish a repayment schedule before garnishment begins. repayment terms, and establish a repayment schedule before garnishment begins.
• Federal Salary Offset. Similar to AWG, up to 15% of the disposable pay Similar to AWG, up to 15% of the disposable pay
(including retirement pay) of a borrower who is a current or former federal (including retirement pay) of a borrower who is a current or former federal
employee may be offset to repay a defaulted student loan.employee may be offset to repay a defaulted student loan.~~217~~
263 • Treasury Offset Program. Defaulters become subject to having their federal Defaulters become subject to having their federal
income tax returns, Social Security benefits, and certain other federal benefits income tax returns, Social Security benefits, and certain other federal benefits
offset through the offset through the ~~Treasury Offset Program (TOP)218~~TOP264 as payment on their student as payment on their student
loans. Up to 100% of federal tax refunds may be offset. Social Security benefits loans. Up to 100% of federal tax refunds may be offset. Social Security benefits
may be offset in an amount up to the lesser of 15% of the borrower’s monthly may be offset in an amount up to the lesser of 15% of the borrower’s monthly
benefit amount, or the amount that benefit amount, or the amount that ~~his or her~~their monthly benefit exceeds $750. monthly benefit exceeds $750.~~219~~
265 Special rules apply with regard to the offset of Social Security Disability Special rules apply with regard to the offset of Social Security Disability
Insurance (SSDI) benefits. If a recipient has a disability rating of medical Insurance (SSDI) benefits. If a recipient has a disability rating of medical
~~improvement not expected (MINE), the offset of SSDI benefits wil be~~
~~suspended. However, if a recipient’s disability benefits are converted to~~
~~retirement benefits, the offset of Social Security benefits may resume.220~~
~~ Civil Lawsuit. Litigation is employed as a last resort to collect on a defaulted~~
~~loan. If this option is pursued, the U.S. Department of Justice may sue the~~
~~defaulter, on behalf of the Office of Federal Student Aid, to compel repayment.~~
~~ Reporting to Consumer Reporting Agencies. Information on student loans,~~
~~including amounts borrowed, amounts owed, and repayment status, is regularly~~

~~214 For additional information on PCAs, see CRS Report R44845,~~ ~~Administration of the William D. Ford Federal~~
~~Direct Loan Program~~ .
~~215 34 C.F.R. §§30.60, 685.202(e), and 685.211(d).~~
~~216 HEA, §488A; 34 C.F.R. Part 30.~~
~~217 30 C.F.R. Part 31 and Part 32.~~
~~218 U.S. Department of the T reasury, Bureau of the Fiscal Service, “ T reasury Offset Program: What is the T reasury~~
~~Offset Program?”, https://fiscal.treasury.gov/top/how-top-works.html, accessed May 24, 2021.~~
~~219 31 U.S.C. §3716(c)(3)(A); 31 C.F.R. §285.4(e).~~
~~220 U.S. Department of Education, Office of Federal Student Aid, “Understanding Delinquency and Default:~~
~~Collections: Withholding Money From Your T ax Refund or Other Federal Payments (T reasury Offset) ,”~~
~~https://studentaid.ed.gov/sa/repay-loans/default/collections#treasury-offset, accessed May 24. 2021.~~
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~~exchanged with consumer reporting agencies. Upon default, information about it~~
~~wil also be shared. Consumer reporting agencies may report information on the~~
~~status of a borrower’s defaulted student loan for seven years from the date of the~~
~~default.221~~
~~COVID-19 Collection Suspension~~
~~In response to the COVID-19 pandemic, for March 13, 2020, through at least September 30,~~
~~2021, ED has halted involuntary collection practices, which include AWG; offset of federal~~
~~income tax returns, Social Security benefits, and certain other federal benefits; and civil litigation.~~
~~In addition, ED has directed PCAs not to engage in proactive collection activities (e.g., they may~~
~~not make collection cal s or send letters or bil ing statements to defaulted borrowers. However,~~
~~borrowers may contact PCAs to begin or continue default resolution arrangements (described~~
~~below).222~~improvement not expected (MINE), 259 U.S. Department of Education, Office of Federal Student Aid, “COVID-19 Relief: loans in Default,” https://studentaid.gov/announcements-events/covid-19/default, accessed March 24, 2023. For additional information on the cessation of debt collection activities due to COVID-19, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19. 260 CRS communication with U.S. Department of Education, Office of Legislation and Congressional Affairs, March 24, 2023 261 34 C.F.R. §§30.60, 685.202(e), and 685.211(d). 262 HEA, §488A; 34 C.F.R. Part 30. 263 30 C.F.R. Part 31 and Part 32. 264 U.S. Department of the Treasury, Bureau of the Fiscal Service, “Treasury Offset Program: What is the Treasury Offset Program?”, https://fiscal.treasury.gov/top/how-top-works.html, accessed March 24, 2023. 265 31 U.S.C. §3716(c)(3)(A); 31 C.F.R. §285.4(e). Congressional Research Service 83 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program the offset of SSDI benefits will be suspended. However, if a recipient’s disability benefits are converted to retirement benefits, the offset of Social Security benefits may resume.266 • Civil Lawsuit. Litigation is employed as a last resort to collect on a defaulted loan. If this option is pursued, the U.S. Department of Justice may sue the defaulter, on behalf of the Office of Federal Student Aid, to compel repayment. • Reporting to the Credit Alert Verification Reporting System (CAIVRS). CAIVRS is a shared database of individuals who have defaulted on their federal debts that is used to prescreen and verify applicant eligibility for various federal direct and guaranteed loans.267 ED may report information about a borrower’s default to CAIVRS. • Reporting to Consumer Reporting Agencies. Information on student loans, including amounts borrowed, amounts owed, and repayment status, is regularly exchanged with consumer reporting agencies. Upon default, information about it will also be shared. Consumer reporting agencies may report information on the status of a borrower’s defaulted student loan for seven years from the date of the default.268
Resolution of Default
A number of options are available to borrowers to get out of default. As noted above, a borrower A number of options are available to borrowers to get out of default. As noted above, a borrower
may rehabilitate the defaulted loan, obtain a Direct Consolidation Loan and use the proceeds to may rehabilitate the defaulted loan, obtain a Direct Consolidation Loan and use the proceeds to
pay off the defaulted loan, pay the amount owed on the defaulted loan in full, or, in limited pay off the defaulted loan, pay the amount owed on the defaulted loan in full, or, in limited
circumstances, enter into a compromise agreement. circumstances, enter into a compromise agreement.
Repaying a defaulted loan in full may be beyond the means of many borrowers. However, options Repaying a defaulted loan in full may be beyond the means of many borrowers. However, options
to do so may include obtaining financing from outside the Direct Loan program to pay off the to do so may include obtaining financing from outside the Direct Loan program to pay off the
defaulted debt. A compromise agreement or debt settlement may permit a borrower to satisfy the defaulted debt. A compromise agreement or debt settlement may permit a borrower to satisfy the
debt by making a lump sum payment in an amount that is less than the full balance due.debt by making a lump sum payment in an amount that is less than the full balance due.~~223~~269
Compromise agreements and settlements are offered only after other repayment options have Compromise agreements and settlements are offered only after other repayment options have
been exhausted.been exhausted.~~224~~270
Loan rehabilitation and loan consolidation are more widely available Loan rehabilitation and loan consolidation are more widely available to and used by borrowersto and used by borrowers.
~~Each is described below.~~
~~Loan Rehabilitation~~
~~Loan rehabilitation offers borrowers who have defaulted on a student loan an opportunity to have~~
~~their loan(s) reinstated as active and to have their borrower benefits and privileges restored. A~~
~~defaulter must work with the PCA to whom the debt has been transferred to enter into a written~~
~~loan rehabilitation agreement.225 If during a period of 10 consecutive months a borrower~~

~~221 HEA, §430A. If the borrower reenters repayment after having defaulted and then subsequently defaults, information~~
~~may be reported for seven years from the date of the subsequent default .~~
~~222 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students,~~
~~Borrowers, and Parents” Loans in Default, https://studentaid.gov/announcements-events/coronavirus#defaulted-loan-~~
~~questions, accessed May 24, 2021. For additional information on the cessation of debt collection activities due to~~
~~COVID-19, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19.~~
~~223 34 C.F.R. §30.70.~~
~~224 U.S. Department of Education, Office of Federal Student Aid, “Loan Servicing and Collection Frequently Ask~~
~~Questions,” SET C~~ than compromise agreements and settlements. Loan rehabilitation and consolidation are described below. 266 U.S. Department of Education, Office of Federal Student Aid, “Understanding Delinquency and Default: Collections: Withholding Money From Your Tax Refund or Other Federal Payments (Treasury Offset),” https://studentaid.ed.gov/sa/repay-loans/default/collections#treasury-offset, accessed March 24, 2023. 267 U.S. Department of Housing and Urban Development, “CAIVRS-Credit Alert Verification Reporting System,” https://www.hud.gov/program_offices/housing/sfh/caivrs, accessed March 27, 2023. 268 HEA, §430A. If the borrower reenters repayment after having defaulted and then subsequently defaults, information may be reported for seven years from the date of the subsequent default. 269 34 C.F.R. §30.70. 270 U.S. Department of Education, Office of Federal Student Aid, “Loan Servicing and Collection Frequently Ask Questions,” SETC-Q1, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently--Q1, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-
asked-questions, accessedasked-questions, accessed ~~May 24, 2021.~~
~~225 34 C.F.R. §685.211(f)(1)(iv)~~ March 27, 2023. .
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link to page link to page ~~47 link to page 47~~48 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Loan Rehabilitation Loan rehabilitation offers borrowers who have defaulted on a student loan an opportunity to have their loan(s) reinstated as active and to have their borrower benefits and privileges restored. A defaulter must work with the party responsible for debt collections to enter into a written loan rehabilitation agreement.271 If during a period of 10 consecutive months a borrower ~~the William D. Ford Federal Direct Loan Program~~

voluntarily makes nine reasonable and affordable monthly payments on a defaulted loan within voluntarily makes nine reasonable and affordable monthly payments on a defaulted loan within
20 days of the due date, the defaulted loan is rehabilitated.20 days of the due date, the defaulted loan is rehabilitated.~~226~~272
One of two methods may be used to determine what constitutes a reasonable and affordable One of two methods may be used to determine what constitutes a reasonable and affordable
payment amount for purposes of rehabilitating a defaulted loan. payment amount for purposes of rehabilitating a defaulted loan. ~~It is initial y~~ A reasonable and affordable payment is initially determined as being determined as being
an amount equal to the greater of either one-twelfth of 15% of any portion of the borrower’s AGI an amount equal to the greater of either one-twelfth of 15% of any portion of the borrower’s AGI
that is in excess of 150% of the poverty line applicable to the borrower’s family size (that is in excess of 150% of the poverty line applicable to the borrower’s family size (seesee Table
7), or $5. However, a borrower is permitted to object to the initial, or $5. However, a borrower is permitted to object to the initial determination and may instead determination and may instead
elect to have the amount calculated according to an alternative formula that is based on an elect to have the amount calculated according to an alternative formula that is based on an
itemized accounting of itemized accounting of ~~his or her~~their monthly income and expenses. monthly income and expenses.~~227~~273 In either case, the borrower is In either case, the borrower is
required to provide documentation of income and, as applicable, expenses for purposes of required to provide documentation of income and, as applicable, expenses for purposes of
determining a reasonable and affordable payment amount. determining a reasonable and affordable payment amount.
Only payments that are voluntarily made by a borrower may be counted as among the nine Only payments that are voluntarily made by a borrower may be counted as among the nine
reasonable and affordable payments required for loan rehabilitation. Involuntary payments may reasonable and affordable payments required for loan rehabilitation. Involuntary payments may
continue to be collected (e.g., through administrative wage garnishment or the TOP) while a continue to be collected (e.g., through administrative wage garnishment or the TOP) while a
borrower pursues loan rehabilitation.borrower pursues loan rehabilitation.~~228~~274 Monthly payments suspended under the COVID-19 Monthly payments suspended under the COVID-19
payment payment ~~suspension~~pause (see Appendix D) count toward the nine monthly payments required for loan rehabilitation, but count toward the nine monthly payments required for loan rehabilitation, but
only to the extent that such suspended payments occurred while a loan only to the extent that such suspended payments occurred while a loan ~~rehabilitation agreement~~
rehabilitation agreement was in place.was in place.~~229~~275
Upon a loan being rehabilitated, the borrower again becomes eligible for full borrower privileges, Upon a loan being rehabilitated, the borrower again becomes eligible for full borrower privileges,
such as deferments and loan forgivenesssuch as deferments and loan forgiveness~~, and~~; other means of collecting on the loan while it was in other means of collecting on the loan while it was in
default default ~~wil~~ will cease. The borrower’s loan cease. The borrower’s loan ~~wil~~ will then be transferred then be transferred ~~by DMCS~~ to a nondefault loan to a nondefault loan
servicer and servicer and ~~he or she wil~~ they will be placed in one of the alternative repayment plans (discussed above) be placed in one of the alternative repayment plans (discussed above)
for a period of 90 days. The borrower may then apply for another repayment plan for which for a period of 90 days. The borrower may then apply for another repayment plan for which ~~he or~~
~~she is~~they are eligible; eligible; if the borrower does not apply for a repayment plan, if the borrower does not apply for a repayment plan, ~~he or she wil~~ they will be placed in a be placed in a
standard repayment plan.standard repayment plan.~~230~~276 Consumer reporting agencies Consumer reporting agencies ~~wil~~ will also be instructed to remove any also be instructed to remove any
record of the default from the borrower’s credit history; however, records of late or missed record of the default from the borrower’s credit history; however, records of late or missed
payments that led to the loan defaulting payments that led to the loan defaulting ~~wil~~ will not be removed.277 271 34 C.F.R. §685.211(f)(1)(iv). 272~~not be removed.231~~
~~A defaulted loan may be rehabilitated only once. Defaulted loans upon which a court judgement~~
~~has been obtained through a civil lawsuit are not eligible to be rehabilitated.~~

~~226~~ 34 C.F.R. §685.211(f); U.S. Department of Education, Federal Student Aid, “ 34 C.F.R. §685.211(f); U.S. Department of Education, Federal Student Aid, “ Getting Out of Default: Loan Getting Out of Default: Loan
Rehabilitation,” https://studentaid.Rehabilitation,” https://studentaid.~~ed.gov/sa/repay~~gov/manage-loans/default/get-loans/default/get -out#loan-rehab, accessed -out#loan-rehab, accessed ~~May 24, 2021.~~
~~227~~March 27, 2023. 273 34 C.F.R. §685.211(f); U.S. Department of Education, “ 34 C.F.R. §685.211(f); U.S. Department of Education, “ Loan Rehabilitation: Income and Expense Information,” Loan Rehabilitation: Income and Expense Information,”
OMB No. 1845-0120,OMB No. 1845-0120, https://fsapartners.ed.gov/sites/default/files/attachments/2020https://fsapartners.ed.gov/sites/default/files/attachments/2020 -
-07/LoanRehabIncomeExpenseInfoFormOMB1845-0120.pdf. 07/LoanRehabIncomeExpenseInfoFormOMB1845-0120.pdf.
~~228~~274 Upon a borrower making five voluntary payments on Upon a borrower making five voluntary payments on a defaulted loan coincidental with collections through a defaulted loan coincidental with collections through
administrative wageadministrative wage garnishment, the Secretary may suspend AWG.garnishment, the Secretary may suspend AWG. 34 C.F.R. §685.211(f)(11).34 C.F.R. §685.211(f)(11).
~~229~~ 275 U.S. U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, ~~“Coronavirus and Forbearance Info For Students,~~
~~Borrowers, and Parents,” Loans in Default: If I’m trying to rehabilitate my defaulted student loan, will my suspended~~
~~payments county toward my rehabilitation?, https://studentaid.gov/announcements-events/coronavirus#defaulted-loan-~~
~~questions, accessed May 24, 2021.~~
~~230 U.S.~~ “COVID-19 Relief: Loans in Default,” https://studentaid.gov/announcements-events/covid-19/default, accessed March 27, 2023. 276 U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, “Loan Servicing and Collection Frequently Ask “Loan Servicing and Collection Frequently Ask
Questions” LRQ-12, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-asked-Questions” LRQ-12, https://fsapartners.ed.gov/knowledge-center/faqs/loan-servicing-and-collection-frequently-asked-
questions, accessedquestions, accessed ~~May 24, 2021.~~
~~231~~ March 27, 2023. 277 Late payments remain in a borrower’s credit report for seven years. Late payments remain in a borrower’s credit report for seven years.
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A defaulted loan may be rehabilitated only once. Defaulted loans upon which a court judgement has been obtained through a civil lawsuit are not eligible to be rehabilitated. Loan Consolidation
A borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more A borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more
defaulted loans. To become eligible to do so, a borrower must make what are considered defaulted loans. To become eligible to do so, a borrower must make what are considered
satisfactory repayment arrangements.satisfactory repayment arrangements.~~232~~
278 One approach is for the borrower, prior to consolidation, to make three voluntary, consecutive, One approach is for the borrower, prior to consolidation, to make three voluntary, consecutive,
on-time, full monthly payments that are considered reasonable and affordable, based on the on-time, full monthly payments that are considered reasonable and affordable, based on the
borrower’s total financial circumstances. These payments must be made within 20 days of the due borrower’s total financial circumstances. These payments must be made within 20 days of the due
date and may not be involuntary payments (e.g., payments collected through administrative wage date and may not be involuntary payments (e.g., payments collected through administrative wage
garnishment or the TOP). A borrower who chooses this approach may repay the new Direct garnishment or the TOP). A borrower who chooses this approach may repay the new Direct
Consolidation Loan according to any available repayment plan. Consolidation Loan according to any available repayment plan.
Another approach is for the borrower to agree to repay the new Direct Consolidation Loan Another approach is for the borrower to agree to repay the new Direct Consolidation Loan
according to one of the IDR plans for which the borrower is eligible.according to one of the IDR plans for which the borrower is eligible.~~233~~279 If the borrower obtains a If the borrower obtains a
Direct Consolidation Loan for purposes of repaying a Direct PLUS Loan or a FFEL PLUS Loan Direct Consolidation Loan for purposes of repaying a Direct PLUS Loan or a FFEL PLUS Loan
made to a parent borrower, made to a parent borrower, ~~he or she~~they must repay the new loan according to the Income- must repay the new loan according to the Income-
Contingent Repayment plan, which is the only IDR plan availableContingent Repayment plan, which is the only IDR plan available to borrowers of parent loans. to borrowers of parent loans.
Several restrictions limit the availability Several restrictions limit the availability of loan consolidation as an option for borrowers to bring of loan consolidation as an option for borrowers to bring
defaulted loans into good standing. If the borrower’s loan was subject to AWG, this must first be defaulted loans into good standing. If the borrower’s loan was subject to AWG, this must first be
lifted for the loan to be eligiblelifted for the loan to be eligible for consolidation. A loan on which a court judgment has been for consolidation. A loan on which a court judgment has been
secured through litigation is not eligiblesecured through litigation is not eligible for loan consolidation.for loan consolidation.~~234~~280 If the borrower’s defaulted loan If the borrower’s defaulted loan
is a Direct Consolidation Loan, the borrower must include at least one other eligibleis a Direct Consolidation Loan, the borrower must include at least one other eligible loan in the loan in the
new Direct Consolidation Loan. If the borrower’s defaulted loan is a FFEL Consolidation Loan, new Direct Consolidation Loan. If the borrower’s defaulted loan is a FFEL Consolidation Loan,
the borrower may include the loan in a new Direct Consolidation Loan without including any the borrower may include the loan in a new Direct Consolidation Loan without including any
other loans; however, the borrower must repay according to one of the IDR plans. other loans; however, the borrower must repay according to one of the IDR plans.
If a borrower consolidates a loan out of default, collection fees If a borrower consolidates a loan out of default, collection fees ~~wil~~ will be assessed on the be assessed on the
outstanding principal and interest of the defaulted loan, and these fees outstanding principal and interest of the defaulted loan, and these fees ~~wil~~ will be included as part of be included as part of
the original principal balance of the new Direct Consolidation Loan. Upon a defaulted loan being the original principal balance of the new Direct Consolidation Loan. Upon a defaulted loan being
repaid by a Direct Consolidation Loan, the borrower regains eligibilityrepaid by a Direct Consolidation Loan, the borrower regains eligibility for full borrower for full borrower
privileges, such as deferments and loan forgiveness, as privileges, such as deferments and loan forgiveness, as ~~wel~~ well as eligibilityas eligibility for additional federal for additional federal
student aid. However, in contrast to loan rehabilitation, repaying a defaulted loan with a Direct student aid. However, in contrast to loan rehabilitation, repaying a defaulted loan with a Direct
Consolidation Loan Consolidation Loan ~~wil~~ will not remove the record of default from the borrower’s credit history.not remove the record of default from the borrower’s credit history.~~235~~281
Loan Counseling and Disclosures
This report seeks to provide a comprehensive overview of the terms and conditions of federal This report seeks to provide a comprehensive overview of the terms and conditions of federal
student loans made through the Direct Loan program. These loan terms and conditions are student loans made through the Direct Loan program. These loan terms and conditions are
~~voluminous and complex. For many individuals, the process of borrowing a federal student loan~~
~~may be among their first experiences with making a major financial transaction; thus, it is~~

~~232~~ 278 34 C.F.R. §685.102(b). 34 C.F.R. §685.102(b).
~~233~~279 34 C.F.R. §685.220(d)(3). 34 C.F.R. §685.220(d)(3).
~~234~~280 If the judgment is vacated, a defaulted If the judgment is vacated, a defaulted loan may beloan may be consolidated; however, the federal government generally does consolidated; however, the federal government generally does
not vacate judgments on defaultednot vacate judgments on defaulted loans. U.S. Department of Education, Office of Federal Student Aid,loans. U.S. Department of Education, Office of Federal Student Aid, “ “Loan Loan
ServicingServicing and Collection: Frequently Askedand Collection: Frequently Asked Questions, JPJ-Q2, https://fsapartners.ed.gov/knowledge-center/faqs/loan-Questions, JPJ-Q2, https://fsapartners.ed.gov/knowledge-center/faqs/loan-
servicing-and-collection-frequently-asked-questions, accessed servicing-and-collection-frequently-asked-questions, accessed ~~May 24, 2021.~~
~~235 U.S.~~ March 27, 2023. 281 U.S. Department of Education, Federal Student Aid, “Department of Education, Federal Student Aid, “ Getting Out of Default: Loan Consolidation,” Getting Out of Default: Loan Consolidation,”
https://studentaid.https://studentaid.~~ed.gov/sa/repay~~gov/manage-loans/default/get-loans/default/get -out#loan-consolidation, accessed -out#loan-consolidation, accessed ~~May 24, 2021~~March 27, 2023. .
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voluminous and complex. For many individuals, the process of borrowing a federal student loan may be among their first experiences with making a major financial transaction; thus, it is imperative for borrowers to understand the terms and conditions of the loans they obtain and their imperative for borrowers to understand the terms and conditions of the loans they obtain and their
associated rights and responsibilities as borrowers.associated rights and responsibilities as borrowers.
As part of the process of obtaining a federal student loan, borrowers are required to undergo As part of the process of obtaining a federal student loan, borrowers are required to undergo
financial counseling that provides them with information about their loans and the obligations financial counseling that provides them with information about their loans and the obligations
they assume as borrowers. First-time borrowers must be provided with entrance counseling, they assume as borrowers. First-time borrowers must be provided with entrance counseling,
which provides them with comprehensive information on the loans they are about to obtain. which provides them with comprehensive information on the loans they are about to obtain.
Borrowers who have received an adverse credit determination but have been able to establish Borrowers who have received an adverse credit determination but have been able to establish
eligibilityeligibility to borrow Direct PLUS Loans must receive PLUS Loan credit counseling. At the time to borrow Direct PLUS Loans must receive PLUS Loan credit counseling. At the time
of obtaining a loan, borrowers are required to sign a promissory note, which is a contract that of obtaining a loan, borrowers are required to sign a promissory note, which is a contract that
establishes the borrower’s legal obligation to repay. The promissory note is accompanied by a establishes the borrower’s legal obligation to repay. The promissory note is accompanied by a
rights and responsibilities statement that uses plain language to disclose the terms and conditions rights and responsibilities statement that uses plain language to disclose the terms and conditions
of the loan. Prior to a borrower ceasing to be enrolled on at least a half-time basis, of the loan. Prior to a borrower ceasing to be enrolled on at least a half-time basis, ~~he or she~~they must must
be provided with exit counseling. be provided with exit counseling.
Entrance Counseling
The institution attended by a first-time borrower of a Direct Subsidized Loan or a Direct The institution attended by a first-time borrower of a Direct Subsidized Loan or a Direct
Unsubsidized Loan,Unsubsidized Loan,~~236~~282 or by a first-time graduate or professional student borrower of a Direct or by a first-time graduate or professional student borrower of a Direct
PLUS PLUS ~~Loan237~~Loan283 is required to ensure that is required to ensure that ~~he or she receives~~they receive entrance counseling prior to the first entrance counseling prior to the first
~~instal ment~~installment of the loan being disbursed. Entrance counseling may be provided through an in- of the loan being disbursed. Entrance counseling may be provided through an in-
person counseling session, a written document provided to the borrower, or an online interactive person counseling session, a written document provided to the borrower, or an online interactive
medium.medium.~~238~~284 Irrespective of the means through which entrance counseling is provided, the Irrespective of the means through which entrance counseling is provided, the
institution must ensure that an individualinstitution must ensure that an individual who has expertise in federal student aid is available who has expertise in federal student aid is available
shortly after the session to respond to any questions a borrower might have. shortly after the session to respond to any questions a borrower might have.
Entrance counseling is designed to provide a borrower with comprehensive information on both Entrance counseling is designed to provide a borrower with comprehensive information on both
the terms and conditions of the loan and the borrower’s rights and responsibilities with regard to the terms and conditions of the loan and the borrower’s rights and responsibilities with regard to
the loan.the loan.~~239~~285 Entrance counseling must satisfy the following requirements: Entrance counseling must satisfy the following requirements:~~240~~
286 • explain the master promissory note; explain the master promissory note;
• emphasize to the borrower the seriousness and importance of the obligation to emphasize to the borrower the seriousness and importance of the obligation to
repay the loan; repay the loan;
• describe the likely consequences of default, which include adverse credit reports, describe the likely consequences of default, which include adverse credit reports,
the collection of delinquent debt, and litigation; the collection of delinquent debt, and litigation;
~~ emphasize that the borrower is required to repay the loan in full, irrespective of~~
~~whether he or she completes the program of study on time or at all, is unable to~~
~~obtain employment, or is dissatisfied with the program;~~

~~236~~ 282 A first-time borrower is an individual A first-time borrower is an individual who has not previously borrowed a Direct Subsidizedwho has not previously borrowed a Direct Subsidized Loan, Direct Loan, Direct
UnsubsidizedUnsubsidized Loan, FFEL program SubsidizedLoan, FFEL program Subsidized or Unsubsidizedor Unsubsidized Loan, of a Federal SLSLoan, of a Federal SLS Loan. 34 C.F.R. Loan. 34 C.F.R.
§685.304(a)(1). §685.304(a)(1).
~~237~~283 A first-time graduate or professional student borrower is A first-time graduate or professional student borrower is an individualan individual ~~who~~ who has not previously borrowedhas not previously borrowed a Direct a Direct
PLUS Loan of FFELPLUS Loan of FFEL PLUS Loan for graduate or professional education. 34 C.F.R. §685.304(a)(2).PLUS Loan for graduate or professional education. 34 C.F.R. §685.304(a)(2).
~~238~~ 284 For example, see U.S. For example, see U.S. Department of Education, Office of Federal Student Aid, “Complete Your StudentDepartment of Education, Office of Federal Student Aid, “Complete Your Student Loan Loan
Entrance Counseling Requirement,” Entrance Counseling Requirement,”
https://studentloans.gov/myDirectLoan/demoEntranceCounseling.https://studentloans.gov/myDirectLoan/demoEntranceCounseling.~~act ion~~action#!/ecDemo/1, accessed #!/ecDemo/1, accessed ~~May 25, 2021.~~
~~239~~March 28, 2023. 285 For detailed For detailed information on entrance counseling, see U.S.information on entrance counseling, see U.S. Department of Education, Office of Federal Student Aid, Department of Education, Office of Federal Student Aid,
“Direct Loan Entrance Counseling Guide,”“Direct Loan Entrance Counseling Guide,” ~~2018~~ Updated September 2021, https://studentaid., https://studentaid.~~ed.gov/sa~~gov/sites/default/files/loan-entrance-/sites/default/files/loan-entrance-
counseling-color.pdf.counseling-color.pdf.
~~240~~ 286 HEA §485(l); 34 C.F.R. §685.304(a). HEA §485(l); 34 C.F.R. §685.304(a).
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• emphasize that the borrower is required to repay the loan in full, irrespective of whether they complete the program of study on time or at all, are unable to obtain employment, or are dissatisfied with the program; • provide the borrower with sample monthly payment amounts based on either a provide the borrower with sample monthly payment amounts based on either a
range of amounts that might be borrowed or the average cumulative amount range of amounts that might be borrowed or the average cumulative amount
borrowed by other students in the same program at the same school; borrowed by other students in the same program at the same school;
• explain potential implications explain potential implications that accepting the loan might have on the that accepting the loan might have on the
borrower’s eligibility borrower’s eligibility to receive other forms of student aid; to receive other forms of student aid;
• provide information on interest accrual and capitalization; provide information on interest accrual and capitalization;
• inform the borrower of the option to pay the interest that accrues on Direct inform the borrower of the option to pay the interest that accrues on Direct
Unsubsidized Loans and Direct PLUS Loans while Unsubsidized Loans and Direct PLUS Loans while ~~he or she is~~they are enrolled in enrolled in
school; school;
• explain the meaning of half-time enrollment and the consequences of not explain the meaning of half-time enrollment and the consequences of not
maintaining half-time enrollment; maintaining half-time enrollment;
• explain the importance of informing the school if the borrower chooses to explain the importance of informing the school if the borrower chooses to
withdraw so that exit counseling can be provided; withdraw so that exit counseling can be provided;
• provide information about, and how the borrower can access, the National provide information about, and how the borrower can access, the National
Student Loan Data System (NSLDS); Student Loan Data System (NSLDS);
• provide the name of and contact information for an individual the borrower may provide the name of and contact information for an individual the borrower may
contact if the borrower has any questions about the terms and conditions of the contact if the borrower has any questions about the terms and conditions of the
loan and the borrower’s rights and responsibilities with regard to the loan; loan and the borrower’s rights and responsibilities with regard to the loan;
 • through June 30, 2023, for loans first disbursed on or after July 1, 2020, and if for loans first disbursed on or after July 1, 2020, and if the school requires as a the school requires as a
condition of enrollment that the borrower enter into a pre-dispute arbitration condition of enrollment that the borrower enter into a pre-dispute arbitration
agreement, a written description of the school’s dispute resolution process that agreement, a written description of the school’s dispute resolution process that
the borrower has agreed to pursue, how and when the agreement applies, how the the borrower has agreed to pursue, how and when the agreement applies, how the
borrower enters into the arbitration process, and who to contact if the borrower borrower enters into the arbitration process, and who to contact if the borrower
~~has any questions;~~
~~ explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan~~
~~Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct~~
~~Subsidized Loans and its implications;241 and~~
has any questions287; and • explain to first-time graduate student borrowers of a Direct PLUS Loan who have explain to first-time graduate student borrowers of a Direct PLUS Loan who have
previously borrowed a Direct Subsidized Loan or a Direct Unsubsidized Loan the previously borrowed a Direct Subsidized Loan or a Direct Unsubsidized Loan the
differences between these loan types with regard to interest rates, the accrual of differences between these loan types with regard to interest rates, the accrual of
interest, and the start of the repayment period. interest, and the start of the repayment period.
PLUS Loan Credit Counseling For Borrowers with Adverse Credit
Any parent borrower or graduate or professional student borrower with an adverse credit Any parent borrower or graduate or professional student borrower with an adverse credit
determination who becomes eligible to borrow a Direct PLUS Loan, either by obtaining an determination who becomes eligible to borrow a Direct PLUS Loan, either by obtaining an
endorser or by providing documentation of extenuating circumstances, must receive special endorser or by providing documentation of extenuating circumstances, must receive special
PLUS Loan credit counseling.PLUS Loan credit counseling.~~242~~288 The counseling is also available The counseling is also available on a voluntary basis to Direct 287 ED, Final Rule, November 1, 2022. Effective July 1, 2023, as a condition of participation in the HEA Title IV programs, IHEs are prohibited from requiring borrowers to agree to mandatory pre-dispute arbitration agreements or the waiver of class action lawsuits. 288~~on a voluntary basis to Direct~~

~~241 Effective August 13, 2021, this will not be a required element of entrance counseling, as the Direct Subsidized Loan~~
~~Limitations for Post -July 1, 2013, First -Time Borrowers are repealed as of that date. U.S. Department of Education,~~
~~"Repeal of the William D. Ford Federal Direct Loan Progr am Subsidized Usage Limit Restriction," 86~~ ~~Federal~~
~~Register~~ ~~31432-31438, June 14, 2021.~~
~~242~~ 34 C.F.R. §685.200(b)(5) and (c)(2). See, for example, U.S. Department of Education, Office of Federal Student 34 C.F.R. §685.200(b)(5) and (c)(2). See, for example, U.S. Department of Education, Office of Federal Student
Aid,Aid, “PLUS Credit Counseling“PLUS Credit Counseling Demo,” https://studentaid.gov/app/demoPlusCounseling.action, accessed Demo,” https://studentaid.gov/app/demoPlusCounseling.action, accessed ~~May 25, 2021~~March 28, 2023. .
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PLUS Loan borrowers who have not received an adverse credit determination. PLUS Loan borrowers who have not received an adverse credit determination.~~243~~289 This counseling This counseling
includes information similar to what is currently provided in PLUS Loan entrance counseling.includes information similar to what is currently provided in PLUS Loan entrance counseling.~~244~~
290 Master Promissory Note and Plain Language Disclosure
The terms and conditions of federal student loans made through the Direct Loan program are The terms and conditions of federal student loans made through the Direct Loan program are
specified in a promissory note,specified in a promissory note,291 which is a contract that establishes the borrower’s obligation to which is a contract that establishes the borrower’s obligation to
repay the loan. A master promissory note (MPN) is a type of promissory note under which loans repay the loan. A master promissory note (MPN) is a type of promissory note under which loans
may be made to a borrower for a single academic year or for multiple academic years. One type may be made to a borrower for a single academic year or for multiple academic years. One type
of MPN is used for making Direct Subsidized Loans and Direct Unsubsidized of MPN is used for making Direct Subsidized Loans and Direct Unsubsidized ~~Loans245~~Loans292 and and
another type of MPN is used for making Direct PLUS Loans.another type of MPN is used for making Direct PLUS Loans.~~246~~293 A different type of promissory A different type of promissory
note is used for making Direct Consolidation Loans.note is used for making Direct Consolidation Loans.~~247~~
294 The MPN must be read and signed by a student or parent borrower before loan funds may be The MPN must be read and signed by a student or parent borrower before loan funds may be
disbursed. The IHE a student attends may choose to use a MPN with either a single-year or a disbursed. The IHE a student attends may choose to use a MPN with either a single-year or a
multiyear feature. IHEs that use a single-year MPN may only make loans under the MPN for one multiyear feature. IHEs that use a single-year MPN may only make loans under the MPN for one
academic year. IHEs that use the multiyear feature may make one or more loans under the same academic year. IHEs that use the multiyear feature may make one or more loans under the same
MPN for up to 10 academic years. MPN for up to 10 academic years.
IHEs that use a multiyear MPN must confirm a borrower’s acceptance of a new loan for each IHEs that use a multiyear MPN must confirm a borrower’s acceptance of a new loan for each
subsequent year by either obtaining a borrower’s written confirmation of acceptance (affirmative subsequent year by either obtaining a borrower’s written confirmation of acceptance (affirmative
confirmation) or by not receiving a borrower’s notification that confirmation) or by not receiving a borrower’s notification that ~~he or she is specifical y~~they are specifically declining declining
the loan in whole or in part (passive confirmation).the loan in whole or in part (passive confirmation).~~248~~295 Under current regulations, IHEs are Under current regulations, IHEs are
encouraged, but not required, to obtain affirmative confirmation from the student that encouraged, but not required, to obtain affirmative confirmation from the student that ~~he or she~~
~~accepts~~ they accept the loan before disbursing loan funds.the loan before disbursing loan funds.~~249~~296
Attached to the MPN is a Plain Language Disclosure (PLD) form that explains loan terms and Attached to the MPN is a Plain Language Disclosure (PLD) form that explains loan terms and
conditions and the borrower’s rights and responsibilities in simplified terms. The PLD is provided conditions and the borrower’s rights and responsibilities in simplified terms. The PLD is provided
to borrowers prior to each disbursement of a loan made through the Direct Loan program, to borrowers prior to each disbursement of a loan made through the Direct Loan program,
regardless of whether an IHE uses a single-year or multiyear MPN.regardless of whether an IHE uses a single-year or multiyear MPN.~~250~~

~~243 U.S.~~ 297 289 U.S. Department of Education, Office of Postsecondary Education, “Department of Education, Office of Postsecondary Education, “ William D. Ford FederalWilliam D. Ford Federal Direct Loan Program: Direct Loan Program:
Final Regulations,” 79Final Regulations,” 79 Federal Register 63322, October 23, 2014. 63322, October 23, 2014.
~~244~~290 OMB No. 1845-0129, “ OMB No. 1845-0129, “ ~~PLUS Credit Counseling for Graduate/Professional Students & PLUS Credit Counseling for~~
~~Parents~~PLUS Adverse Credit Reconsideration Loan Counseling,” https://www.reginfo.gov/public/do/DownloadDocument?objectID=,” https://www.reginfo.gov/public/do/DownloadDocument?objectID=~~74709801 .~~
~~245 U.S.~~ 103302201. 291 The promissory note for Direct Loans also specifies that amendments to the HEA may amend a loan’s terms and conditions and that any such amendments would be applied to a loan in accordance with the effective date of the amendment. 292 U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, “ “Master Promissory Note: Direct SubsidizedMaster Promissory Note: Direct Subsidized Loans Loans
and Direct Unsubsidizedand Direct Unsubsidized Loans, William D. Ford Federal Direct Loan ProgramLoans, William D. Ford Federal Direct Loan Program ,” OMB No. 1845-0007, ,” OMB No. 1845-0007,
https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/SubUnsubMPN.pdf. https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/SubUnsubMPN.pdf.
~~246~~ 293 U.S. U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, “ “Master Promissory Note: Direct PLUS Loans, Master Promissory Note: Direct PLUS Loans,
William D. Ford FederalWilliam D. Ford Federal Direct Loan Program,” OMB No. 1845-0007, Direct Loan Program,” OMB No. 1845-0007,
https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/PLUSMPN.pdf. https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/PLUSMPN.pdf.
~~247~~294 U.S. U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, “ “Direct Consolidation Loan Application and Direct Consolidation Loan Application and
Promissory Note, William D. Ford FederalPromissory Note, William D. Ford Federal Direct Loan Program,” OMB No. 1845-0053, https://studentaid.gov/app-Direct Loan Program,” OMB No. 1845-0053, https://studentaid.gov/app-
static/images/ApplicationAndPromissoryNote.pdf.static/images/ApplicationAndPromissoryNote.pdf..
~~248~~ 295 34 C.F.R. §668.165(a). 34 C.F.R. §668.165(a).
~~249~~296 34 C.F.R. §668.165(a)(2). 34 C.F.R. §668.165(a)(2).
~~250~~297 See, See, for example, U.S. Department of Education, Office of Federal Student Aid, “Plain Languagefor example, U.S. Department of Education, Office of Federal Student Aid, “Plain Language Disclosure for Disclosure for
Direct SubsidizedDirect Subsidized Loans and Direct UnsubsidizedLoans and Direct Unsubsidized Loans William D. Ford FederalLoans William D. Ford Federal Direct Loan Program (Direct Loan Direct Loan Program (Direct Loan
Program),” https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/SubUnsubPLD.pdf. Program),” https://fsapartners.ed.gov/sites/default/files/attachments/2020-04/SubUnsubPLD.pdf.
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Exit Counseling
Prior to a student borrower ceasing to be enrolled on at least a half-time basis, the institution a Prior to a student borrower ceasing to be enrolled on at least a half-time basis, the institution a
borrower attends must provide borrower attends must provide ~~him or her~~them with exit counseling. with exit counseling.~~251~~298 It may be provided through an It may be provided through an
in-person counseling session, an audiovisual presentation, or an online interactive medium.in-person counseling session, an audiovisual presentation, or an online interactive medium.~~252~~299
Irrespective of the means through which exit counseling is provided, the institution must ensure Irrespective of the means through which exit counseling is provided, the institution must ensure
that an individualthat an individual who has expertise in federal student aid is availablewho has expertise in federal student aid is available shortly after the session to shortly after the session to
respond to any questions a borrower might have. respond to any questions a borrower might have.
Exit counseling is designed to provide the borrower with comprehensive information on both the Exit counseling is designed to provide the borrower with comprehensive information on both the
terms and conditions of the loan and the borrower’s rights and responsibilities with regard to the terms and conditions of the loan and the borrower’s rights and responsibilities with regard to the
obligation to repay the loan.obligation to repay the loan.~~253~~300 Exit counseling must satisfy the following requirements: Exit counseling must satisfy the following requirements:~~254~~
301 • inform the borrower of the average anticipated monthly payment amount based inform the borrower of the average anticipated monthly payment amount based
on either the individual’s actual student loan debt or the average cumulative on either the individual’s actual student loan debt or the average cumulative
amount borrowed by other students at the same school or in the same program of amount borrowed by other students at the same school or in the same program of
study at the same school; study at the same school;
• provide a review of the repayment plan options available provide a review of the repayment plan options available to the borrower, along to the borrower, along
with a description of the various features of each plan and sample information with a description of the various features of each plan and sample information
showing average anticipated monthly payment amounts and differences in showing average anticipated monthly payment amounts and differences in
interest and total payments under each plan; interest and total payments under each plan;
• explain options to prepay a loan, to repay according to a shorter schedule, and to explain options to prepay a loan, to repay according to a shorter schedule, and to
change repayment plans; change repayment plans;
• provide information on loan consolidation and how it affects the length of provide information on loan consolidation and how it affects the length of
repayment and total interest paid; how it affects borrower benefits, such as grace repayment and total interest paid; how it affects borrower benefits, such as grace
periods, loan forgiveness, loan periods, loan forgiveness, loan ~~cancel ation~~cancellation, and deferment; and options to prepay , and deferment; and options to prepay
a loan or change repayment plans; a loan or change repayment plans;
• include debt-management strategies designed to facilitate repayment; include debt-management strategies designed to facilitate repayment;
• explain how to contact the borrower’s loan servicer; explain how to contact the borrower’s loan servicer;
• explain the master promissory note; explain the master promissory note;
• emphasize to the borrower the seriousness and importance of the obligation to emphasize to the borrower the seriousness and importance of the obligation to
repay the loan; repay the loan;
• emphasize that the borrower is required to repay the loan in full, irrespective of emphasize that the borrower is required to repay the loan in full, irrespective of
whether whether ~~he or she completes~~they complete the program of study on time or at the program of study on time or at al all, is unable to , is unable to
obtain employment, or is dissatisfied with the program; obtain employment, or is dissatisfied with the program;
• describe the likely consequences of default, which include adverse credit reports, describe the likely consequences of default, which include adverse credit reports,
the collection of delinquent debt, and litigation; the collection of delinquent debt, and litigation;

~~251~~ 298 34 C.F.R. §685.304(b). If a borrower withdraws 34 C.F.R. §685.304(b). If a borrower withdraws without notifying the school or fails to complete exit counseling, without notifying the school or fails to complete exit counseling,
the school must provide exit counseling to him or her either through electronic means or by sendingthe school must provide exit counseling to him or her either through electronic means or by sending exit counseling exit counseling
materials via mail to the last known addressmaterials via mail to the last known address or by email to an addressor by email to an address not associated with the school.not associated with the school.
~~252~~ 299 U.S. U.S. Department of Education, Office of Federal Student Aid,Department of Education, Office of Federal Student Aid, “ “Exit Counseling (Demonstration Module),” Exit Counseling (Demonstration Module),”
https://https://~~studentloans.gov/myDirectLoan/demoDlExit.action#!/dlExitDemo/1 .~~
~~253 For detailed~~ studentaid.gov/exit-counseling/demo/table-of-contents. 300 For detailed information on entrance counseling, see U.S.information on entrance counseling, see U.S. Department of Education, Office of Federal Student Aid, Department of Education, Office of Federal Student Aid,
“Direct Loan Exit Counseling Guide,”“Direct Loan Exit Counseling Guide,” ~~2018~~ Updated July 2021, https://studentaid., https://studentaid.~~ed.gov/sa~~gov/sites/default/files//sites/default/files/~~loan-~~exit-counselingexit-counseling-
~~color~~.pdf. .pdf.
~~254~~301 HEA §485(b); 34 C.F.R. HEA §485(b); 34 C.F.R. §685.304(b). §685.304(b).
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• provide a general description of the terms and conditions under which a borrower provide a general description of the terms and conditions under which a borrower
may receive full or partial discharge or forgiveness of principal and interest, may may receive full or partial discharge or forgiveness of principal and interest, may
defer repayment of principal or interest, or may be granted forbearance;defer repayment of principal or interest, or may be granted forbearance; ~~and~~
• provide descriptions of federal student assistance programs and other information descriptions of federal student assistance programs and other information and ED and ED
publications as required by HEApublications as required by HEA Section 485(d); Section 485(d);
• review information on the availability review information on the availability of the FSA Ombudsman Group; of the FSA Ombudsman Group;
• provide information about, and how the borrower can access, the NSLDS; provide information about, and how the borrower can access, the NSLDS;
~~ explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan~~
~~Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct~~
~~Subsidized Loans and its implications;255~~
• provide a general description of tax benefits that may be available provide a general description of tax benefits that may be available to borrowers; to borrowers;
• require the borrower to provide current and expected future contact information, require the borrower to provide current and expected future contact information,
next of kin, and (if known) expected employer; and next of kin, and (if known) expected employer; and
• explain that the borrower may be contacted by third-party student loan debt relief explain that the borrower may be contacted by third-party student loan debt relief
companies, that the borrower should use caution when interacting with such companies, that the borrower should use caution when interacting with such
companies, and that the services offered by such companies are offered to companies, and that the services offered by such companies are offered to
borrowers free of charge through ED or the borrower’s loan servicer. borrowers free of charge through ED or the borrower’s loan servicer.
Additional Information on Loan Terms and Conditions
The loan counseling and disclosures described above are designed to ensure that borrowers are The loan counseling and disclosures described above are designed to ensure that borrowers are
provided with information about the terms and conditions of their loans, as required by law. provided with information about the terms and conditions of their loans, as required by law.
Appendix A presents a list of additionalpresents a list of additional resources that may be accessed by policymakers and resources that may be accessed by policymakers and
others who may be interested in obtaining more detailed information about borrowers’ rights, others who may be interested in obtaining more detailed information about borrowers’ rights,
responsibilities, and obligations with regard to Direct Loan program loans.responsibilities, and obligations with regard to Direct Loan program loans.

~~255 Effective August 13, 2021, this will not be a required element of exit counseling, as the Direct Subsidized Loan~~
~~Limitations for Post -July 1, 2013, First -Time Borrowers are repealed as of that date. U.S. Department of Education,~~
~~"Repeal of the William D. Ford Federal Direct Loan Program Subsidized Usage Limit Restriction," 86~~ ~~Federal~~
~~Register~~ ~~31432-31438, June 14, 2021.~~
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Appendix A. Directory of Resources
~~Directory of Resources~~
Higher Education Act of 1965 (P.L. 89-329, as amended), Title IV, Part D—Wil iam Higher Education Act of 1965 (P.L. 89-329, as amended), Title IV, Part D—Wil iam D. Ford FederalD. Ford Federal Direct Direct
Program (https://www.govinfo.gov/content/pkg/COMPS-765/pdf/COMPS-765.pdf) Program (https://www.govinfo.gov/content/pkg/COMPS-765/pdf/COMPS-765.pdf)
Title 20 U.S.C. Title 20 U.S.C. Chapter 28, Subchapter IV, Part D—Wil iamChapter 28, Subchapter IV, Part D—Wil iam D. Ford FederalD. Ford Federal ~~Direct~~ Direct Loan Program Loan Program
(https://uscode.house.gov/browse/prelim@title20/chapter28/subchapter4/partD&edition=prelim) (https://uscode.house.gov/browse/prelim@title20/chapter28/subchapter4/partD&edition=prelim)
Title 34 C.F.R. Title 34 C.F.R. Part 685—Wil iamPart 685—Wil iam D. Ford FederalD. Ford Federal Direct Loan ProgramDirect Loan Program (https://www.ecfr.gov/cgi-bin/text-(https://www.ecfr.gov/cgi-bin/text-
idx?SID=e878c5d6ea6116593e8394e25ec1f3c9&mc=true&node=pt34.4.685&rgn=div5idx?SID=e878c5d6ea6116593e8394e25ec1f3c9&mc=true&node=pt34.4.685&rgn=div5 ) )
U.S. Department of Education, Office of Federal Student Aid, U.S. Department of Education, Office of Federal Student Aid, FSA Partners, Loan ServicingFSA Partners, Loan Servicing and Col ection and Col ection
(https://fsapartners.ed.gov/knowledge-center/library/functional-area/Loan%20Servicing%20and%20Col ection) (https://fsapartners.ed.gov/knowledge-center/library/functional-area/Loan%20Servicing%20and%20Col ection)
U.S. Department of Education, Office of Federal Student Aid, U.S. Department of Education, Office of Federal Student Aid, ~~2020-2021~~ 2022-2023 Federal Student Aid Handbook Federal Student Aid Handbook
(https://fsapartners.ed.gov/knowledge-center/fsa-handbook/pdf/(https://fsapartners.ed.gov/knowledge-center/fsa-handbook/pdf/~~2020-2021~~2022-2023) )
U.S. Department of Education, Office of Federal Student Aid, U.S. Department of Education, Office of Federal Student Aid, “Manage Loans” (https://studentaid.gov/h/manage-“Manage Loans” (https://studentaid.gov/h/manage-
loans) loans)
~~National Student Loan Data System (NSLDS) Student Access (https://nsldsfap.ed.gov/nslds_SA/)~~
U.S. Department of Education, FSA Ombudsman Group, P.O. Box 1843, U.S. Department of Education, FSA Ombudsman Group, P.O. Box 1843, ~~Monticel o,~~ Monticello, KY 42633, 1-877-577-2575 KY 42633, 1-877-577-2575
(https://studentaid.gov/feedback-ombudsman/disputes/prepare) (https://studentaid.gov/feedback-ombudsman/disputes/prepare)
CRS Report R44845, CRS Report R44845, Administration of the ~~Wil iam~~ William D. Ford Federal Direct Loan Program ~~D. Ford Federal Direct Loan Program~~.
CRS Report R45389, The Public Service Loan Forgiveness Program: Selected Issues
CRS Report R43571, CRS Report R43571, Federal Student Loan Forgiveness and Loan Repayment Programs
CRS Report R46314, CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19

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Appendix B. Glossary of Terms

Acceleration
Demand for immediateDemand for immediate repayment of the entire outstanding balance of a loan. repayment of the entire outstanding balance of a loan.
Bond ~~equivalent rate~~
~~Also cal ed~~ Also called the bond equivalent yield, the bond equivalent yield, coupon equivalent yield,coupon equivalent yield, or the investment or the investment
yield; a Treasury yield; a Treasury ~~bill~~bil ’s yield’s yield based on based on equivalent rate the purchase price,the purchase price, discount, and a 365- or discount, and a 365- or
366-day year. It can be used to compare the yield on a discount bil to the yield on 366-day year. It can be used to compare the yield on a discount bil to the yield on
a nominal coupon bond that pays semiannual interest.a nominal coupon bond that pays semiannual interest. Bond equivalent yield means Bond equivalent yield means
the annualized yield computed by doubling the semiannual yield. U.S. Department the annualized yield computed by doubling the semiannual yield. U.S. Department
of the Treasury, “of the Treasury, “~~Resource Center:~~ Daily Treasury BilDaily Treasury Bil ~~Rates Data~~ Rates” ”
(https://(https://~~www~~home.treasury.gov/resource-center/data-chart-center/interest-.treasury.gov/resource-center/data-chart-center/interest-
~~rates/Pages/TextView.aspx?data=bil rates).~~
~~Capitalized interest~~
~~Unpaid interest~~ rates/TextView?type=daily_treasury_bil _rates&field_tdr_date_value_month=202303). Capitalized Unpaid interest that has been added to the principal balance of a loan. that has been added to the principal balance of a loan.
interest (Capitalization)
Cost of ~~Attendance (COA)~~
The cost in dol arsThe cost in dol ars of a period of enrol mentof a period of enrol ment (such as an academic year). The COA (such as an academic year). The COA
for a student is an estimatefor a student is an estimate ~~of his or her~~ of their Attendance educational expenses for the period of educational expenses for the period of
enrol ment. enrol ment.
~~Default~~
~~Failure~~ (COA) Default Failure to repay a loan according to the termsto repay a loan according to the terms agreed to in the promissoryagreed to in the promissory note. note.
Default occurs on a loan made through Default occurs on a loan made through the Direct Loan program after 270 days of the Direct Loan program after 270 days of
nonpayment. nonpayment.
Deferment
A period during which a borrowerA period during which a borrower is entitled to have payments of principal and is entitled to have payments of principal and
interest on federal education loans interest on federal education loans postponed if the borrowerpostponed if the borrower ~~meets applicable~~
~~eligibility~~ meets applicable eligibility criteria criteria
Direct Loan ~~program loan~~
A loan made under the Wil iamA loan made under the Wil iam D. Ford FederalD. Ford Federal ~~Direct~~ Direct Loan Program. Loan Program.
~~Disbursement~~
program loan Disbursement Payment of federal student aid funds to the student by the school. Students Payment of federal student aid funds to the student by the school. Students
~~general y receive~~ generally receive their federal student aid in their federal student aid in two or moretwo or more disbursements. disbursements.
Discharge
~~Cancel ation~~ Cancellation of the balance due on a loan of the balance due on a loan on the basis of borrower hardship. (See also . (See also loan forgiveness.) )
Discretionary ~~income~~
The difference between a borrower’sThe difference between a borrower’s annual incomeannual income and a specified percentage of and a specified percentage of
the federal poverty guidelinethe federal poverty guideline for the for the income borrower’sborrower’s family size and state of residence. family size and state of residence.
Disposable pay
The amount that remainsThe amount that remains from an employee'sfrom an employee's pay after deductions. 34 C.F.R. pay after deductions. 34 C.F.R.
§31.2. §31.2.
Economic ~~hardship~~
A period of up to three years during which a borrowerA period of up to three years during which a borrower is receiving payments is receiving payments
~~(deferment)~~
under a federal or state public assistance under a federal or state public assistance hardship program, is working ful -timeprogram, is working ful -time and has a and has a
monthly incomemonthly income that does not exceed 150% of the poverty line, or is serving asthat does not exceed 150% of the poverty line, or is serving as a (deferment) a
volunteer in the Peace Corps. volunteer in the Peace Corps. ~~34 C.F.R. §685.204(g)(2).~~
Endorser
An individual who agrees to repay a DirectAn individual who agrees to repay a Direct PLUS Loan if the borrowerPLUS Loan if the borrower does not does not
~~repay it.~~
~~First-time borrower~~
~~For purposes of limitations on eligibility for Direct Subsidized Loans and borrower~~
~~responsibility for accruing interest, an individual who has no outstanding balance of~~
~~principal or interest on a Direct Loan program or FFEL program loan on July 1,~~
~~2013, or on the date the borrower obtains a Direct Loan program loan after July~~
~~1, 2013. 34 C.F.R. §685.200(f)(1)(i).~~
repay it. Forbearance
A period during which a borrowerA period during which a borrower may temporarilymay temporarily stop making loan payments, stop making loan payments,
~~temporarily make smal er~~ temporarily make smaller payments, or payments, or extend the timeextend the time for making payments. for making payments.
Full-time ~~student~~
An enrol edAn enrol ed student carrying a ful -time academic workload,student carrying a ful -time academic workload, as determinedas determined by the ~~by the~~
~~(enrollment)~~
institution, under a standard applicable institution, under a standard applicable ~~to al~~ student to all students enrol edstudents enrol ed in a particular in a particular
~~educational program.~~
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educational program. (enrollment)
Grace period
A period of six months after a borrowerA period of six months after a borrower of a Directof a Direct Subsidized Loan or a Direct Subsidized Loan or a Direct
Unsubsidized Loan graduates, leaves Unsubsidized Loan graduates, leaves school, or drops below half-time enrol ment, school, or drops below half-time enrol ment,
during which the borrowerduring which the borrower is not required to make payments. is not required to make payments.
Half-time ~~student~~
An enrol edAn enrol ed student who is carrying a half-time academic workload, as determined student who is carrying a half-time academic workload, as determined
~~(enrollment)~~
by the institution, that amounts to at by the institution, that amounts to at student least half of the workload of the applicable least half of the workload of the applicable
~~minimum requirement~~ minimum requirement outlined in the definition of a ful -time student, except outlined in the definition of a ful -time student, except (enrollment) that that
a student enrol eda student enrol ed ~~solely~~ solely in a program of study by correspondence must be in a program of study by correspondence must be
carrying a workload of at least 12 hours of work per week,carrying a workload of at least 12 hours of work per week, or be earning at least or be earning at least
six credit hours per semester,six credit hours per semester, trimester,trimester, or quarter. Note that regardlessor quarter. Note that regardless of the of the
amount of work,amount of work, no student enrol edno student enrol ed ~~solely~~ solely in correspondence study is considered in correspondence study is considered
~~more~~ more than a half-time student. than a half-time student.
In school
The period during which borrowersThe period during which borrowers are enrol edare enrol ed in a postsecondary educational in a postsecondary educational
program.program. For purposes of eligibilityFor purposes of eligibility for for loan deferments,loan deferments, a student must be a student must be
enrol edenrol ed at least half-time as an eligibleat least half-time as an eligible student to be considered “in-school.” student to be considered “in-school.”
~~Interest~~
~~The cost of borrowing money.~~ Income-driven A loan repayment plan under which a borrower’s monthly payment amounts vary according to their income. Under the repayment Direct Loan program, a borrower’s monthly payments are capped at a specified percentage of their discretionary (IDR) plan income and any loan balance that remains outstanding after a specified maximum repayment period is to be forgiven. Congressional Research Service 93 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program U.S. Department of Education, Office of Federal Student Aid, “Income-Driven Repayment (IDR) Plans,” https://studentaid.gov/manage-loans/repayment/plans/income-driven. Interest The cost of borrowing money. Interest is an expense calculated as a percentage of Interest is an expense calculated as a percentage of
the outstanding (unpaid) principal the outstanding (unpaid) principal balance. balance.
Interest ~~accrual~~
The process through which interestThe process through which interest accumulates over time. accumulates over time.
~~Interest rate~~
accrual Interest rate The price charged per unit of money borrowed per year, or other unit of time, The price charged per unit of money borrowed per year, or other unit of time,
~~usual y~~usually expressed expressed as a percentage. as a percentage.
Loan ~~forgiveness~~
~~Cancel ation~~ Cancellation or reduction of the balance due on a loan or reduction of the balance due on a loan.
~~Loan origination fee~~
~~The amount a borrower~~ fol owing an extended period of repayment according to an forgiveness income-driven repayment plan or completion of a period of public service Loan The amount a borrower is required to pay the Department of Education to help is required to pay the Department of Education to help
defray the costs of subsidizing a Directdefray the costs of subsidizing a Direct origination fee Loan. Loan.
Loan principal
~~Initial y~~ Initially, the amount borrowed plus any fees charged by the lender., the amount borrowed plus any fees charged by the lender. Later,Later, it it
includes capitalized interest,includes capitalized interest, charges and fees charges and fees ~~al owed~~ allowed by regulation,by regulation, less any less any
amount paid and credited to principal, and any amount amount paid and credited to principal, and any amount ~~cancel ed~~cancelled, forgiven, or , forgiven, or
discharged. discharged.
Loan servicer
An entity that col ectsAn entity that col ects payments on loans, responds to customerpayments on loans, responds to customer ~~service~~ service inquiries, inquiries,
and performsand performs other administrativeother administrative tasks associated with maintaining a loan (e.g., tasks associated with maintaining a loan (e.g.,
processing requests for a change in repayment plans). A federal loan processing requests for a change in repayment plans). A federal loan ~~servicer~~ servicer is a is a
loan servicerloan servicer for the U.S. Department of Education. for the U.S. Department of Education.
Master ~~promissory note~~
A promissoryA promissory note under which the borrowernote under which the borrower may receivemay receive loans for a single loans for a single
~~(MPN)~~
academic year or multipleacademic year or multiple academic years. promissory note (MPN) Negative A period of time during which a borrower’s ~~academic years. 34 C.F.R. §685.102(b).~~
~~Maximum eligibility period~~
~~A period of time, measured in academic years, equal to 150% of the length of the~~
~~educational program, as published by the institution, in which the borrower is~~
~~currently enrol ed.~~
~~Negative amortization~~
~~A period of time during which a borrower’s monthly payment amount may~~
~~sometimes be less~~ monthly payment amount may sometimes be less than the amount of than the amount of amortization interest that accrues on the borrower’s interest that accrues on the borrower’s
loans. U.S. Department of Education, Office of Federal Student Aid,loans. U.S. Department of Education, Office of Federal Student Aid, “Income-“Income-
Driven Plans Questions and Answers”Driven Plans Questions and Answers” (https://studentaid.(https://studentaid.~~ed.gov/sa/repay-~~
~~loans/understand~~gov/manage-loans/repayment/plans/income-driven/questions/plans/income-driven/questions~~#miscel aneous~~). ).
New borrower
An individual who has no outstanding balance on a loan made through either the An individual who has no outstanding balance on a loan made through either the
~~Direct~~ Direct Loan program or the FFEL Loan program or the FFEL ~~program~~ program at the timeat the time the borrowerthe borrower ~~receives a~~
receives a loan through the Directloan through the Direct Loan program on or after a specific date. Loan program on or after a specific date.
Partial financial ~~hardship~~
A period during which the total annual payments for A period during which the total annual payments for al all of a borrower’sof a borrower’s ~~eligible~~
~~(in IBR plans and PAYE~~
eligible loans, as calculated according to a loans, as calculated according to a hardship standard 10-year repayment period,standard 10-year repayment period, are greater are greater
~~repayment plan)~~
than an applicable percentage (e.g., than an applicable percentage (e.g., 1510% or % or 1015%) of the borrower’s%) of the borrower’s ~~discretionary~~
~~income. For a married borrower, the eligible~~ (in IBR plans discretionary income. For a married borrower, the eligible loans and discretionaryloans and discretionary income of the income of the
borrower’sborrower’s spouse and PAYE ~~spouse~~ may also be included in the calculation.may also be included in the calculation. ~~34 C.F.R. §§685.209(a)~~
~~and 685.221.~~ repayment plan)
Prepayment
A loan payment made before it is due under the termsA loan payment made before it is due under the terms of the applicable of the applicable
~~promissory note.~~
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~~Principal balance~~
promissory note. Principal The amount of principal that remains unpaid on a loan. The amount of principal that remains unpaid on a loan.
~~Promissory note~~
~~A legal y~~balance Promissory A legally binding contract between a lender binding contract between a lender and a borrowerand a borrower that contains the that contains the
~~terms~~ terms and conditions of the loan, including and conditions of the loan, including note how the loan is to be repaid. It how the loan is to be repaid. It
~~becomes legal y~~becomes legally binding when signed (executed) by the borrower. binding when signed (executed) by the borrower. Most federal Most federal
education loans are made under a Master Promissoryeducation loans are made under a Master Promissory Note (MPN). Note (MPN).
Rehabilitation
Process by which a borrowerProcess by which a borrower may bring a loan out of default by adhering to may bring a loan out of default by adhering to
specified repayment requirements. (of a defaulted loan) Remaining ~~(of a defaulted loan)~~
~~specified repayment requirements.~~
~~Remaining accrued~~
A portion of accrued interest that the SecretaryA portion of accrued interest that the Secretary of Education does not charge a of Education does not charge a
~~interest (IBR, PAYE, and~~
~~borrower~~ borrower if the borrower'sif the borrower's monthly monthly accrued payment amount is not sufficient to pay the payment amount is not sufficient to pay the
~~REPAYE repayment plans)~~
accrued interest on accrued interest on ~~his or her~~their loans due to the loans being negatively amortized. loans due to the loans being negatively amortized.
interest (IBR, 34 C.F.R.34 C.F.R. §§685.209(a) and (c) and 685.221. §§685.209(a) and (c) and 685.221.
~~Repayment period~~
PAYE, and REPAYE repayment plans) Repayment The time during which a borrowerThe time during which a borrower is obligated to makeis obligated to make payments on a loan payments on a loan
according to the termsaccording to the terms and conditions of the and conditions of the ~~loan’s promissory~~ period loan’s promissory note and the note and the
repayment plan the borrowerrepayment plan the borrower chooses.chooses. For DirectFor Direct Subsidized Loans and Direct Subsidized Loans and Direct
Unsubsidized Loans, repayment begins the day after the grace period ends. For Unsubsidized Loans, repayment begins the day after the grace period ends. For
~~Direct~~ Direct PLUS Loans, repayment begins the day after the loan is ful y disbursed. PLUS Loans, repayment begins the day after the loan is ful y disbursed.
~~Satisfactory repayment~~
Congressional Research Service 94 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Satisfactory For the purpose of regaining eligibilityFor the purpose of regaining eligibility for federal student aid funds, the agreement for federal student aid funds, the agreement
~~arrangement~~
of a borrowerof a borrower to maketo make ~~a predetermined~~ a repayment predetermined number of on-time,number of on-time, voluntary monthly voluntary monthly
payments on a defaulted loan, or an overpayment of federal payments on a defaulted loan, or an overpayment of federal arrangement student aid. For the student aid. For the
purpose of consolidating a defaulted loan, the making of three consecutive, purpose of consolidating a defaulted loan, the making of three consecutive,
voluntary, on-time,voluntary, on-time, ful monthly payments on a defaulted loan. The required ful monthly payments on a defaulted loan. The required
monthly payment amount may not be moremonthly payment amount may not be more than is reasonable and affordable than is reasonable and affordable
based on the borrower’sbased on the borrower’s total financial circumstances.total financial circumstances.
Subsidized ~~component of a~~ The portion of a DirectThe portion of a Direct Consolidation Loan attributable to certain subsidizedConsolidation Loan attributable to certain subsidized ~~Title~~
~~Direct Consolidation Loan~~
Title IV education loans that were repaid IV education loans that were repaid component of by the consolidation loan. Interest is not by the consolidation loan. Interest is not
~~(Direct Subsidized~~
charged to the borrowercharged to the borrower during deferment periods,during deferment periods, or, for a borroweror, for a borrower whose whose
~~Consolidation Loan)~~a Direct
consolidation application was received consolidation application was received before July 1, 2006, during in-school and before July 1, 2006, during in-school and
grace periods.grace periods. 34 C.F.R. §685.102(b). 34 C.F.R. §685.102(b).
~~Subsidized interest~~
Consolidation Loan (Direct Subsidized Consolidation Loan) Subsidized Interest that is not charged, or is only Interest that is not charged, or is only ~~partial y~~partially charged, which would otherwise charged, which would otherwise
~~(interest subsidy)~~
accrue on a loan during a specified accrue on a loan during a specified interest period of time. 34 C.F.R. §§685.102(b), period of time. 34 C.F.R. §§685.102(b),
~~685.209(a) and (c) and 685.221.~~
~~Subsidized usage period~~
~~A period of time measured in academic years and rounded down to the nearest~~
~~tenth of a year, calculated as number of days in the borrower’s loan period for a~~
~~Direct Subsidized Loan, divided by number of days in the academic year for which~~
~~the borrower receives the Direct Subsidized Loan.~~
~~Teach-out plan~~
~~A written plan developed by an institution that provides~~ 685.209(a) and (c) and 685.221. (interest subsidy) Teach-out A written agreement between institutions that provides for the equitable treatment of students and a reasonable agreement opportunity for students to complete their program of study if an institution, or an institutional location that provides one hundred percent of at least one program offered, ceases to operate before all enrol ed students have completed their program of study. Teach-out plan A written plan developed by an institution that provides for the equitable for the equitable
treatment of students if an institution, or an treatment of students if an institution, or an institutional location that provides institutional location that provides
100% of at least one program, ceases100% of at least one program, ceases to operate to operate ~~before al~~ (or plans to cease operations) before all enrol ed students have students have
completed their program of study, and may include, if requiredcompleted their program of study, and may include, if required by the institution’s by the institution’s
accrediting agency, a teach-out agreementaccrediting agency, a teach-out agreement between institutions.between institutions.
Unsubsidized ~~component~~
The portion of a DirectThe portion of a Direct Consolidation Loan attributable to unsubsidized Title IV Consolidation Loan attributable to unsubsidized Title IV
~~of a Direct Consolidation~~
education loans, certain subsidizededucation loans, certain subsidized Title component of ~~Title~~ IV education loans, and certain other IV education loans, and certain other
~~Loan (Direct Unsubsidized~~
federal education loans that werefederal education loans that were repaid by the consolidation loan. The borrower repaid by the consolidation loan. The borrower
~~Consolidation Loan)~~a Direct
is responsible is responsible for the interestfor the interest that accrues during any period. 34 C.F.R. that accrues during any period. 34 C.F.R.
§685.102(b). §685.102(b).
~~Variable interest rate~~
~~An interest~~ Consolidation Loan (Direct Unsubsidized Consolidation Loan) Variable An interest rate on a loan that fluctuates over the term of a loan on the basis of rate on a loan that fluctuates over the term of a loan on the basis of
changes in an index that reflectschanges in an index that reflects changes interest rate ~~changes~~ in market rates. in market rates.
Voluntary ~~payments~~
Payments made directly by a borrowerPayments made directly by a borrower who owes a federal student aid debt and who owes a federal student aid debt and
that do not include payments obtained that do not include payments obtained payments by federal offset, garnishment, or income or by federal offset, garnishment, or income or
asset execution. asset execution.
Source: U.S. Department of Education, Office of Federal Student Aid, U.S. Department of Education, Office of Federal Student Aid, 2020--2021 Federal Student Aid Handbook, ,
Appendix A: Federal Student Aid GlossaryAppendix A: Federal Student Aid Glossary and Acronyms; 34 C.F.R.and Acronyms; 34 C.F.R. ~~Part~~ Parts 600 and 685; U.S. Department of Education, Office 685; U.S. Department of Education, Office
of Federalof Federal Student Aid; U.S.Student Aid; U.S. Department of the Treasury. Department of the Treasury.
~~Congressional Research Service~~

89

~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~Notes:~~ ~~Definitions of terms general y~~ Notes: Definitions of terms generally are from the are from the Federal Student Aid Handbook and federal regulations.and federal regulations. ~~General y, in~~
Generally, in instances where the definitions are frominstances where the definitions are from ~~sources~~ sources other than the other than the Federal Student Aid Handbook,, citations are noted at citations are noted at
the end of the definitions. the end of the definitions.
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~~link to page 101 link to page 101 link to page 101 link to page 101 link to page 101~~95 link to page 106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Appendix C. Historical Tables on Selected Loan
Terms and Conditions
Table C-1. History of Annual and Aggregate Loan Limits for
Direct Loan ~~program loans~~Program Loans, by Borrower Type and Academic Level
(dollars) Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
July 1, 1994, to September 30, 1998
Undergraduate students
Annual loan limits

1st year 1st year
2,625 2,625
2,625 2,625
6, 6,625a625
n.a. n.a.
2nd year 2nd year
3,500 3,500
3,500 3,500
7, 7,500a500
n.a. n.a.
3rd year and above 3rd year and above
5,500 5,500
5,500 5,500
10, 10,500a500
n.a. n.a.
Aggregate loan limitsb~~,c,d~~a,b,c

Al
All 23,000 23,000
23,000 23,000
46, 46,000a000
n.a. n.a.
Graduate and professional students
Annual loan limits

In general In general
8,500 8,500
n.a. n.a.
18,500 18,500
n.a. n.a.
Health professions Health professions
8,500 8,500
n.a. n.a.
38,500 38,500
n.a. n.a.
~~programsef~~programsd,e
to 45,167 to 45,167
Health professions Health professions
8,500 8,500
n.a. n.a.
31,000 31,000
n.a. n.a.
~~programseg~~programsd,f
to 35,167 to 35,167
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
65,500 65,500
n.a. n.a.
138,500 138,500
n.a. n.a.
Health professions Health professions
programsg 65,500 65,500
n.a. n.a.
189,125 189,125
n.a. n.a.
~~programsh~~
Parents of dependent ~~undergraduate~~ undergraduate students
Annual loan limits

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Up to COA- Up to COA-
EFAiEFAh
Aggregate loan limitsba,cb

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Not limited Not limited
October 1, 1998, to June 30, 2007
Undergraduate students
Annual loan limits

Preparatory coursework Preparatory coursework for for
2,625 2,625
2,625 2,625
6,625 6,625
n.a. n.a.
undergraduate program undergraduate program
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Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
1st year 1st year
2,625 2,625
2,625 2,625
6,625 6,625
n.a. n.a.
2nd year 2nd year
3,500 3,500
3,500 3,500
7,500 7,500
n.a. n.a.
3rd year and above 3rd year and above
5,500 5,500
5,500 5,500
10,500 10,500
n.a. n.a.
Preparatory coursework Preparatory coursework for for
5,500 5,500
5,500 5,500
10,500 10,500
n.a. n.a.
graduate graduate ~~progra~~mjprogrami
Teacher certificatio Teacher certificationjni
5,500 5,500
5,500 5,500
10,500 10,500
n.a. n.a.
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
23,000 23,000
23,000 23,000
46,000 46,000
n.a. n.a.
Graduate and professional students
Annual loan limits

In general In general
8,500 8,500
n.a. n.a.
18,500 18,500
n.a. n.a.
Health professions Health professions
8,500 8,500
n.a. n.a.
38,500 38,500
n.a. n.a.
~~programse,f~~programsd,e
to 45,167 to 45,167
Health professions Health professions
8,500 8,500
n.a. n.a.
31,000 31,000
n.a. n.a.
~~programse,g~~programsd,f
to 35,167 to 35,167
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
65,500 65,500
n.a. n.a.
138,500 138,500
n.a. n.a.
Health professions Health professions
programsg 65,500 65,500
n.a. n.a.
189,125 189,125
n.a. n.a.
~~programsh~~
Parents of dependent ~~undergraduate~~ undergraduate students
Annual loan limits

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Up to COA- Up to COA-
EFAiEFAh
Aggregate loan limitsba,cb

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Not limited Not limited
July 1, 2007, to June 30, 2008
Undergraduate students
Annual loan limits

Preparatory coursework Preparatory coursework for for
2,625 2,625
2,625 2,625
6,625 6,625
n.a. n.a.
undergraduate program undergraduate program
1st year 1st year
3,500 3,500
3,500 3,500
7,500 7,500
n.a. n.a.
2nd year 2nd year
4,500 4,500
4,500 4,500
8,500 8,500
n.a. n.a.
3rd year and above 3rd year and above
5,500 5,500
5,500 5,500
10,500 10,500
n.a. n.a.
Preparatory coursework Preparatory coursework for for
5,500 5,500
5,500 5,500
10,500 10,500
n.a. n.a.
graduate graduate ~~progra~~mjprogrami
Teacher certificatio Teacher certificationjni
5,500 5,500
5,500 5,500
10,500 10,500
n.a. n.a.
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Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
23,000 23,000
23,000 23,000
46,000 46,000
n.a. n.a.
Graduate and professional students
Annual loan limits

In general In general
8,500 8,500
n.a. n.a.
20,500 20,500
Up to COA- Up to COA-
EFAiEFAh
Health professions Health professions
8,500 8,500
n.a. n.a.
40,500 40,500
Up to COA- Up to COA-
~~programse,f~~programsd,e
to 47,167 to 47,167
EFAiEFAh
Health professions Health professions
8,500 8,500
n.a. n.a.
33,000 33,000
Up to COA- Up to COA-
~~programse,g~~programsd,f
to 37,167 to 37,167
EFAiEFAh
Aggregate loan limitsb~~,c,d~~a,b,c

n.a. n.a.

In general In general
65,500 65,500
n.a. n.a.
138,500 138,500
Not limited Not limited
Health professions Health professions
65,500 65,500
n.a. n.a.
189,125 189,125
Not limited Not limited
~~programsh,~~kprogramsg,j
Parents of dependent ~~undergraduate~~ undergraduate students
Annual loan limits

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Up to COA- Up to COA-
EFAiEFAh
Aggregate loan limitsba,cb

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Not limited Not limited
July 1, 2008, to June 30, 2012
Undergraduate students
Annual loan limits

Preparatory coursework Preparatory coursework for for
2,625 2,625
2,625 2,625
8,625 8,625
n.a. n.a.
undergraduate program undergraduate program
1st year 1st year
3,500 3,500
5,500 5,500
9,500 9,500
n.a. n.a.
2nd year 2nd year
4,500 4,500
6,500 6,500
10,500 10,500
n.a. n.a.
3rd year and above 3rd year and above
5,500 5,500
7,500 7,500
12,500 12,500
n.a. n.a.
Preparatory coursework Preparatory coursework for for
5,500 5,500
5,500 5,500
12,500 12,500
n.a. n.a.
graduate graduate ~~progra~~mjprogrami
Teacher certificatio Teacher certificationjni
5,500 5,500
5,500 5,500
12,500 12,500
n.a. n.a.
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
23,000 23,000
31,000 31,000
57,500 57,500
n.a. n.a.
Graduate and professional students
Annual loan limits

In general In general
8,500 8,500
n.a. n.a.
20,500 20,500
Up to COA- Up to COA-
EFAiEFAh
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link to page link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 link to page 101 ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~Direct~~
~~Direct Subsidized Loans and~~
~~Direct~~
~~Subsidized~~
~~Direct Unsubsidized~~ 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 106 link to page 107 link to page 106 link to page 107 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Direct Direct Subsidized Loans and Direct Subsidized Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Health professions Health professions
8,500 8,500
n.a. n.a.
40,500 40,500
Up to COA- Up to COA-
~~programse,~~fprogramsd,e
to 47,167 to 47,167
EFAiEFAh
Health professions Health professions
8,500 8,500
n.a. n.a.
33,000 33,000
Up to COA- Up to COA-
~~programse,~~gprogramsd,f
to 37,167 to 37,167
EFAiEFAh
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
65,500 65,500
n.a. n.a.
138,500 138,500
Not limited Not limited
Health profession Health professionsksj
65,500 65,500
n.a. n.a.
224,000 224,000
Not limited Not limited
Parents of dependent ~~undergraduate~~ undergraduate students
Annual loan limits

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Up to COA- Up to COA-
EFAiEFAh
Aggregate loan limitsba,cb

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Not limited Not limited
On or after July 1, 2012
Undergraduate students
Annual loan limits

Preparatory coursework Preparatory coursework for for
2,625 2,625
2,625 2,625
8, 8,~~625~~625k
n.a. n.a.
undergraduate program undergraduate program
1st year 1st year
3,500 3,500
5,500 5,500
9, 9,~~500~~500k
n.a. n.a.
2nd year 2nd year
4,500 4,500
6,500 6,500
10, 10,~~500~~500k
n.a. n.a.
3rd year and above 3rd year and above
5,500 5,500
7,500 7,500
12, 12,~~500~~500k
n.a. n.a.
Preparatory coursework Preparatory coursework for for
5,500 5,500
5,500 5,500
12, 12,~~500~~500k
n.a. n.a.
graduate graduate ~~progra~~mjprogrami
Teacher certificatio Teacher certificationjni
5,500 5,500
5,500 5,500
12, 12,~~500~~500k
n.a. n.a.
Aggregate loan limitsb~~,c,d~~a,b,c

In general In general
23,000 23,000
31,000 31,000
57, 57,~~500~~500k
n.a. n.a.
Graduate and professional students
Annual loan limits

In general In general
n.a. n.a.
n.a. n.a.
20, 20,~~500~~500l
Up to COA- Up to COA-
EFAiEFAh
Health professions Health professions
n.a. n.a.
n.a. n.a.
40,500 40,500
Up to COA- Up to COA-
~~programse,f~~programsd,e
to 47, to 47,~~167~~
EFAi16 7l EFAh
Health professions Health professions
n.a. n.a.
n.a. n.a.
33,000 33,000
Up to COA- Up to COA-
~~programse,g~~programsd,f
to 37, to 37,~~167~~
EFAi16 7l EFAh
Aggregate loan limitsb~~,c,d,l~~a,b,c,m

In general In general
65,50 65,500m0n
n.a. n.a.
138,500 138,500
Not limited Not limited
Health profession Health professionsksj
65,50 65,500m0n
n.a. n.a.
224,000 224,000
Not limited Not limited
Congressional Research Service Congressional Research Service

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link to page link to page ~~101~~106 link to page link to page ~~101~~106 link to page link to page ~~101~~106 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Direct
Direct Subsidized Loans and
Direct
Subsidized
Direct Unsubsidized Loans
PLUS

Loans
Combined
Loans
Borrower Type
All Eligible
Dependent
Independent
All Eligible
and Program Level
Borrowers
Students
Students
Borrowers
Parents of dependent ~~undergraduate~~ undergraduate students
Annual loan limits

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Up to COA- Up to COA-
EFAiEFAh
Aggregate loan limitsb,ca,b

In general In general
n.a. n.a.
n.a. n.a.
n.a. n.a.
Not limited Not limited
Source: HEAHEA, §§428, 428A, 428B, and 428H; P.L. 89-329; P.L. 90-575; P.L. 92-318; P.L. 92-391; P.L. 94-482; P.L. §§428, 428A, 428B, and 428H; P.L. 89-329; P.L. 90-575; P.L. 92-318; P.L. 92-391; P.L. 94-482; P.L.
95-566; P.L. 96-374; P.L. 97-35; P.L. 99-498; P.L. 100-297; P.L. 102-325; P.L. 103-66; P.L. 103-208; P.L. 105-244; 95-566; P.L. 96-374; P.L. 97-35; P.L. 99-498; P.L. 100-297; P.L. 102-325; P.L. 103-66; P.L. 103-208; P.L. 105-244;
P.L. 109-171; P.L. 110-227; P.L. 112-25; Department of Education, Office of Postsecondary Education, Dear P.L. 109-171; P.L. 110-227; P.L. 112-25; Department of Education, Office of Postsecondary Education, Dear
Col eague LettersCol eague Letters GEN-96-14; GEN-97-14, GEN-05-09, GEN-08-04, and GEN-08-08; 45 C.F.R. §177.14(a)(3) GEN-96-14; GEN-97-14, GEN-05-09, GEN-08-04, and GEN-08-08; 45 C.F.R. §177.14(a)(3)
(1967 edition). (1967 edition).
Notes: “n.a.” means not applicable “n.a.” means not applicable
a. a. ~~These loan limits also apply to dependent undergraduate students whose parents are unable to obtain~~
~~Direct PLUS Loans.~~
b. Includes Subsidized Stafford Loans and Unsubsidized Stafford Loans borrowed through the FFEL program.Includes Subsidized Stafford Loans and Unsubsidized Stafford Loans borrowed through the FFEL program.
c b. Accrued interest and other charges that have not been capitalized do not count toward aggregate loan . Accrued interest and other charges that have not been capitalized do not count toward aggregate loan
limits. limits.
d c. Direct. Direct Subsidized Loans and Direct Unsubsidized Loans (and comparable loans made through the FFEL Subsidized Loans and Direct Unsubsidized Loans (and comparable loans made through the FFEL
program) that have been included in a Direct program) that have been included in a Direct Consolidation Loan remain Consolidation Loan remain ~~attributab le~~attributable to the aggregate limits to the aggregate limits
for Direct Subsidized Loans and total Directfor Direct Subsidized Loans and total Direct Subsidized Loans and DirectSubsidized Loans and Direct Unsubsidized Loans combined in Unsubsidized Loans combined in
accordance with their proportionate share of the Directaccordance with their proportionate share of the Direct Consolidation Loan. Consolidation Loan.
ed. In accordance with authority provided the Secretary under P.L. 104-134, effective July 1, 1996, increased . In accordance with authority provided the Secretary under P.L. 104-134, effective July 1, 1996, increased
Direct Direct Unsubsidized Loan borrowing limitsUnsubsidized Loan borrowing limits ~~were~~ were extended to students who became unable to borrow extended to students who became unable to borrow
under the Health Education Assistanceunder the Health Education Assistance Loan (HEAL) program.Loan (HEAL) program.
f.
e. Students enrol edStudents enrol ed in programs in the fol owing disciplinesin programs in the fol owing disciplines are eligibleare eligible ~~to annual y~~ to annually borrow an additional borrow an additional
$20,000 more$20,000 more than regular students in Direct Unsubsidized Loans for programsthan regular students in Direct Unsubsidized Loans for programs with nine-month academic with nine-month academic
years, and an additional $26,667 for programs with 12-month academic years:years, and an additional $26,667 for programs with 12-month academic years: Doctor of Doctor of ~~Al opathic~~
Allopathic Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry,Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry, Doctor of VeterinaryDoctor of Veterinary Medicine, Doctor of Medicine, Doctor of
Optometry,Optometry, Doctor of Podiatric Medicine; and effective May 1, 2005, Doctor of Naturopathic Medicine,Doctor of Podiatric Medicine; and effective May 1, 2005, Doctor of Naturopathic Medicine, and and
Doctor of Naturopathy. (Amounts are prorated for 10- and 11-month programs.) Doctor of Naturopathy. (Amounts are prorated for 10- and 11-month programs.)
g. f. Students enrol edStudents enrol ed in programs in the fol owing disciplinesin programs in the fol owing disciplines are eligibleare eligible ~~to annual y~~ to annually borrow an additional borrow an additional
$12,500 more$12,500 more than regular students in Direct Unsubsidized Loans for programsthan regular students in Direct Unsubsidized Loans for programs with nine-month academic with nine-month academic
years, and an additional $16,667 for programs with 12-month academic years:years, and an additional $16,667 for programs with 12-month academic years: Doctor of Pharmacy, Doctor of Pharmacy,
Graduate in Public Health, Doctor of Chiropractic,Graduate in Public Health, Doctor of Chiropractic, Doctoral DegreeDoctoral Degree in Clinical Psychology, Masters or in Clinical Psychology, Masters or
Doctoral DegreeDoctoral Degree in Health Administration.in Health Administration. (Amounts are prorated for 10- and 11-month programs.)(Amounts are prorated for 10- and 11-month programs.)
h g. On December. On December 1, 1997, aggregate loan limits1, 1997, aggregate loan limits of $189,500 were established for borrowersof $189,500 were established for borrowers enrol edenrol ed in certain in certain
health professions health professions programs.programs.
i.
h. There is no There is no ~~statutory~~statutorily specified dol ar amount borrowing limit borrowing limit for Directfor Direct PLUS Loans; however,PLUS Loans; however, ~~borrowers~~ borrowers must be credit-worthy must be credit-worthy
and and al all aid combined may not exceed COA.aid combined may not exceed COA.
j i. .
For individuals who have obtained a baccalaureate degree. For individuals who have obtained a baccalaureate degree.
k. j. Effective AprilEffective April 14, 2008, aggregate loan limits14, 2008, aggregate loan limits of $224,000 were established for borrowersof $224,000 were established for borrowers enrol edenrol ed in in
certain health professionscertain health professions programs.programs.
l.
~~Aggregate loan limits for graduate and professional students include amounts borrowed for undergraduate~~
~~study.~~
~~m. The aggregate loan limit for Direct Subsidized Loans to graduate and professional students applies to loans~~
~~borrowed for programs of instruction beginning before July 1, 2012.~~
~~Congressional Research Service~~

95

link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 link to page 103 ~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

k. These loan limits also apply to dependent undergraduate students whose parents are unable to obtain Direct PLUS Loans. l. Direct Subsidized Loans are not currently available to graduate students. m. Aggregate loan limits for graduate and professional students include amounts borrowed for undergraduate study. Congressional Research Service 100 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 link to page 108 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program n. The aggregate loan limit for Direct Subsidized Loans to graduate and professional students applies to loans borrowed for programs of instruction beginning before July 1, 2012. Table C-2. History of Interest Rate Formulas for Direct Subsidized Loans, Direct
Unsubsidized Loans, and Direct PLUS Loans

Variable Interest Rate Formula or Fixed Interest Rate in Effecta
Disbursement Period,
Direct
Direct
Direct
Borrower Type, and
Subsidized
Unsubsidized
PLUS
Loan Period (if applicable)
Loans
Loans
Loans
July 1, 1994, to June 30, 1995
Undergraduate students Undergraduate students
91-day T-bil + 3.1% 91-day T-bil + 3.1%
91-day T-bil + 3.1% 91-day T-bil + 3.1%
n.a. n.a.
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Graduate and professional Graduate and professional students students
91-day T-bil + 3.1% 91-day T-bil + 3.1%
91-day T-bil + 3.1% 91-day T-bil + 3.1%
n.a. n.a.
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
52-week T-bi 52-week T-bil c + 3.1% + 3.1%
(9% cap), variabl(9% cap), variableb
July 1, 1995, to June 30, 1998
Undergraduate students: Undergraduate students:
91-day T-bil + 2.5% 91-day T-bil + 2.5%
91-day T-bil + 2.5% 91-day T-bil + 2.5%
n.a. n.a.
In-school, grace, and deferment In-school, grace, and deferment
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Undergraduate students: Undergraduate students:
91-day T-bil + 3.1% 91-day T-bil + 3.1%
91-day T-bil + 3.1% 91-day T-bil + 3.1%
n.a. n.a.
Repayment periods Repayment periods
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Graduate and professional Graduate and professional students: students:
91-day T-bil + 2.5% 91-day T-bil + 2.5%
91-day T-bil + 2.5% 91-day T-bil + 2.5%
n.a. n.a.
In-school, grace, and deferment In-school, grace, and deferment (8.25% cap), variabl(8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Graduate and professional Graduate and professional students: students:
91-day T-bil + 3.1% 91-day T-bil + 3.1%
91-day T-bil + 3.1% 91-day T-bil + 3.1%
n.a. n.a.
Repayment periods Repayment periods
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
52-week T-bi 52-week T-bil c + 3.1% + 3.1%
(9% cap), variable (9% cap), variable
July 1, 1998, to June 30, 2006
Undergraduate students: Undergraduate students:
91-day T-bil + 1.7% 91-day T-bil + 1.7%
91-day T-bil + 1.7% 91-day T-bil + 1.7%
n.a. n.a.
In-school, grace, and deferment In-school, grace, and deferment (8.25% cap), variabl(8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Undergraduate students: Undergraduate students:
91-day T-bil + 2.3% 91-day T-bil + 2.3%
91-day T-bil + 2.3% 91-day T-bil + 2.3%
n.a. n.a.
Repayment periods Repayment periods
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Graduate and professional Graduate and professional students: students:
91-day T-bil + 1.7% 91-day T-bil + 1.7%
91-day T-bil + 1.7% 91-day T-bil + 1.7%
n.a. n.a.
In-school, grace, and deferment In-school, grace, and deferment (8.25% cap), variabl(8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Graduate and professional Graduate and professional students: students:
91-day T-bil + 2.3% 91-day T-bil + 2.3%
91-day T-bil + 2.3% 91-day T-bil + 2.3%
n.a. n.a.
Repayment periods Repayment periods
(8.25% cap), variabl (8.25% cap), variableb
(8.25% cap), variabl (8.25% cap), variableb
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
91-day T-bil + 3.1% 91-day T-bil + 3.1%
(9% cap), variabl(9% cap), variableb
July 1, 2006, to June 30, 2007
Undergraduate students Undergraduate students
6.8%, fixed rate 6.8%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
n.a. n.a.
Graduate and professional Graduate and professional students students
6.8%, fixed rate 6.8%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
n.a. n.a.
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
7.9%, fixed rate 7.9%, fixed rate
~~July 1, 2007, to June 30, 2009~~
~~Undergraduate students~~
~~6.0%, fixed rate~~
~~6.8%, fixed rate~~
~~n.a.~~
~~Graduate and professional students~~
~~6.8%, fixed rate~~
~~6.8%, fixed rate~~
~~7.9%, fixed rate~~
Congressional Research Service Congressional Research Service

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link to page link to page ~~103~~108 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Variable Interest Rate Formula or Fixed Interest Rate in Effecta
Disbursement Period,
Direct
Direct
Direct
Borrower Type, and
Subsidized
Unsubsidized
PLUS
Loan Period (if applicable)
Loans
Loans
Loans
July 1, 2007, to June 30, 2009 Undergraduate students 6.0%, fixed rate 6.8%, fixed rate n.a. Graduate and professional students 6.8%, fixed rate 6.8%, fixed rate 7.9%, fixed rate Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
7.9%, fixed rate 7.9%, fixed rate
July 1, 2009, to June 30, 2010
Undergraduate students Undergraduate students
5.6%, fixed rate 5.6%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
n.a. n.a.
Graduate and professional Graduate and professional students students
6.8%, fixed rate 6.8%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
7.9%, fixed rate 7.9%, fixed rate
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
7.9%, fixed rate 7.9%, fixed rate
July 1, 2010, to June 30, 2011
Undergraduate students Undergraduate students
4.5%, fixed rate 4.5%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
n.a. n.a.
Graduate and professional Graduate and professional students students
6.8%, fixed rate 6.8%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
7.9%, fixed rate 7.9%, fixed rate
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
7.9%, fixed rate 7.9%, fixed rate
July 1, 2011, to June 30, 2012
Undergraduate students Undergraduate students
3.4%, fixed rate 3.4%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
n.a. n.a.
Graduate and professional Graduate and professional students students
6.8%, fixed rate 6.8%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
7.9%, fixed rate 7.9%, fixed rate
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
7.9%, fixed rate 7.9%, fixed rate
July 1, 2012, to June 30, 2013
Undergraduate students Undergraduate students
3.4%, fixed rate 3.4%, fixed rate
6.8%, fixed rate 6.8%, fixed rate
n.a. n.a.
Graduate and professional Graduate and professional students students
n.a. n.a.
6.8%, fixed rate 6.8%, fixed rate
7.9%, fixed rate 7.9%, fixed rate
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
7.9%, fixed rate 7.9%, fixed rate
On or after July 1, 2013
Undergraduate students Undergraduate students
10-yr T-note + 2.05% 10-yr T-note + 2.05%
10-yr T-note + 2.05% 10-yr T-note + 2.05%
n.a. n.a.
(8.25% cap), fixed rate (8.25% cap), fixed rate
(8.25% cap), fixed rate (8.25% cap), fixed rate
Graduate and professional Graduate and professional students students
n.a. n.a.
10-yr T-note + 3.6% 10-yr T-note + 3.6%
10-yr T-note + 4.6% 10-yr T-note + 4.6%
(9.5% cap), fixed rate (9.5% cap), fixed rate
(10.5% cap), fixed rate (10.5% cap), fixed rate
Parent borrowers Parent borrowers
n.a. n.a.
n.a. n.a.
10-yr T-note + 4.6% 10-yr T-note + 4.6%
(10.5% cap), fixed rate (10.5% cap), fixed rate
Source: HEA §§427A, 428, and 455(b); (20 U.S.C. §§1077a, 1078 and 1087e(b)). HEA §§427A, 428, and 455(b); (20 U.S.C. §§1077a, 1078 and 1087e(b)).
Note: “n.a.” means not applicable. “n.a.” means not applicable.
a. Interest rates shown are rates for new borrowersa. Interest rates shown are rates for new borrowers with no outstanding loan balance on loanswith no outstanding loan balance on loans made priormade prior to to
July 1, 1994. Different July 1, 1994. Different interest rate proceduresinterest rate procedures apply to borrowersapply to borrowers with an outstanding balance on a loan with an outstanding balance on a loan
made under HEA, Title IV, Part B prior to July 1, 1994. made under HEA, Title IV, Part B prior to July 1, 1994.
b. Rates adjust every July 1 based on last auction prior to June 1. b. Rates adjust every July 1 based on last auction prior to June 1.
c. The Consolidated Appropriations Act, 2001 (P.L. 106-554) includes an amendment to the HEA that changed c. The Consolidated Appropriations Act, 2001 (P.L. 106-554) includes an amendment to the HEA that changed
the index used in the formulas the index used in the formulas that determinethat determine interest rates for PLUS Loans disbursed between July 1, 1987, interest rates for PLUS Loans disbursed between July 1, 1987,
and June 30, 1998. The amendment substituted the one-year constant maturity Treasury yield for the 52-and June 30, 1998. The amendment substituted the one-year constant maturity Treasury yield for the 52-
week Treasury bil .week Treasury bil . This change, which affects interest rate adjustments made for any 12This change, which affects interest rate adjustments made for any 12 -month period -month period
beginning on or after July 1, 2001, became necessary because the Department of the Treasury stopped beginning on or after July 1, 2001, became necessary because the Department of the Treasury stopped
issuing 52-week Treasury bil s.issuing 52-week Treasury bil s.
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Table C-3. History of Interest Rate Formulas for Direct Consolidation Loans
Direct Consolidation Loan
Disbursement Period
Interest Rate Formula in Effect
July 1, 1994, to June 30, 1995
Direct Direct Subsidized Consolidation LoanSubsidized Consolidation Loansa andand
91-day T-bil + 3.1% (8.25% cap), variable 91-day T-bil + 3.1% (8.25% cap), variable ~~rat~~ec ratec
Direct Direct Unsubsidized Consolidation LoanUnsubsidized Consolidation Loansb
Direct Direct PLUS Consolidation LoanPLUS Consolidation Loansd
52-week T-bi 52-week T-bil e ++ 3.1% (9% cap), variable 3.1% (9% cap), variable ~~rat~~ecratec
July 1, 1995, to June 30, 1998
Direct Direct Subsidized Consolidation LoanSubsidized Consolidation Loansa andand

Direct Direct Unsubsidized Consolidation LoanUnsubsidized Consolidation Loansb
In-school, grace, and deferment periods
91-day T-bil + 2.5% (8.25% cap), variable 91-day T-bil + 2.5% (8.25% cap), variable ~~rat~~ec ratec
Repayment periods
91-day T-bil + 3.1% (8.25% cap), variable 91-day T-bil + 3.1% (8.25% cap), variable ~~rat~~ec ratec
Direct Direct PLUS Consolidation LoanPLUS Consolidation Loansd
52-week T-bi 52-week T-bil e ++ 3.1% (9% cap), variable 3.1% (9% cap), variable ~~rat~~ecratec
July 1, 1998, to September 30, 1998
Direct Direct Subsidized Consolidation LoanSubsidized Consolidation Loansa andand

Direct Direct Unsubsidized Consolidation LoanUnsubsidized Consolidation Loansb
In-school, grace, and deferment periods
91-day T-bil + 1.7% (8.25% cap), variable 91-day T-bil + 1.7% (8.25% cap), variable ~~rat~~ec ratec
Repayment periods
91-day T-bil + 2.3% (8.25% cap), variable 91-day T-bil + 2.3% (8.25% cap), variable ~~rat~~ec ratec
Direct Direct PLUS Consolidation LoanPLUS Consolidation Loansd
52-week T-bi 52-week T-bil e ++ 3.1% (9% cap), variable 3.1% (9% cap), variable ~~rat~~ecratec
October 1, 1998, to January 31, 1999
Direct Direct Consolidation Loans Consolidation Loans
91-day T-bil + 2.3% (8.25% cap), variable 91-day T-bil + 2.3% (8.25% cap), variable ~~rat~~ec ratec
February 1, 1999, to June 30, 2013
Direct Direct Consolidation Loans Consolidation Loans
Weighted average of the interest rates on the loans Weighted average of the interest rates on the loans
consolidated, rounded to the nearest higher one-consolidated, rounded to the nearest higher one-
eighth of 1% (8.25% cap), fixed rate eighth of 1% (8.25% cap), fixed rate
On or after July 1, 2013
Direct Direct Consolidation Loans Consolidation Loans
Weighted average of the interest rates on the loans Weighted average of the interest rates on the loans
consolidated, rounded to the nearest higher one-consolidated, rounded to the nearest higher one-
eighth of 1% (no cap), fixed rate eighth of 1% (no cap), fixed rate
Source: HEA §§428C and 455(b); (20 U.S.C. §§1078-3 and 1087e(b)); and 34 C.F.R.HEA §§428C and 455(b); (20 U.S.C. §§1078-3 and 1087e(b)); and 34 C.F.R. §685.202(a)(3). §685.202(a)(3).
Notes: “n.a.” means not applicable. “n.a.” means not applicable.
a. This refersa. This refers to the subsidized component of a Directto the subsidized component of a Direct Consolidation Loan. Consolidation Loan.
b. This refersb. This refers to the unsubsidized component of a Directto the unsubsidized component of a Direct Consolidation Loan, excluding the portion of a Consolidation Loan, excluding the portion of a
Direct Direct Consolidation Loan attributable to DirectConsolidation Loan attributable to Direct PLUS Loans, Direct PLUS Consolidation Loans, and FFEL PLUS Loans, Direct PLUS Consolidation Loans, and FFEL
PLUS Loans that werePLUS Loans that were repaid by the Direct Consolidation Loan.repaid by the Direct Consolidation Loan.
c. Rates adjust every July 1 based on last auction prior to June 1. c. Rates adjust every July 1 based on last auction prior to June 1.
d. This refersd. This refers to the unsubsidized component of a Directto the unsubsidized component of a Direct Consolidation Loan attributable to Direct PLUS Consolidation Loan attributable to Direct PLUS
Loans, Direct Loans, Direct PLUS Consolidation Loans, and FFEL PLUS Loans that werePLUS Consolidation Loans, and FFEL PLUS Loans that were repaid by the Direct repaid by the Direct
Consolidation Loan. Consolidation Loan.
e. For outstanding Direct PLUS Consolidation Loans with rate setting formulas e. For outstanding Direct PLUS Consolidation Loans with rate setting formulas tied to the 52-week Treasury tied to the 52-week Treasury
bil , bil , for periodsfor periods beginning July 1, 2001, the average weeklybeginning July 1, 2001, the average weekly one-year constant maturity Treasury yield was one-year constant maturity Treasury yield was
substituted for the bond equivalent rate of 52-week Treasury bil s.substituted for the bond equivalent rate of 52-week Treasury bil s. This change became necessary because This change became necessary because
the Department of Treasury decided to stop issuing 52-week Treasury bil s. the Department of Treasury decided to stop issuing 52-week Treasury bil s.

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Table C-4. History of Interest Rates in Effect for Direct Loan program loans
For the period of July 1 through June 30 For the period of July 1 through June 30
(%) Disbursement
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 July 1, 1994, to June 30, 1995 Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans,a and Direct Unsubsidized Consolidation

~~Period,~~
~~Loan Type, and~~
~~-1995~~
~~-1996~~
~~-1997~~
~~-1998~~
~~-1999~~
~~-2000~~
~~-2001~~
~~-2002~~
~~-2003~~
~~-2004~~
~~-2005~~
~~-2006~~
~~-2007~~
~~-2008~~
~~-2009~~
~~-2010~~
~~-2011~~
~~-2012~~
~~-2013~~
~~-2014~~
~~-2015~~
~~-2016~~
~~-2017~~
~~-2018~~
~~-2019~~
~~-2020~~
~~-2021~~
~~-2022~~
~~Loan Period~~
~~(if applicable)~~
~~1994~~
~~1995~~
~~1996~~
~~1997~~
~~1998~~
~~1999~~
~~2000~~
~~2001~~
~~2002~~
~~2003~~
~~2004~~
~~2005~~
~~2006~~
~~2007~~
~~2008~~
~~2009~~
~~2010~~
~~2011~~
~~2012~~
~~2013~~
~~2014~~
~~2015~~
~~2016~~
~~2017~~
~~2018~~
~~2019~~
~~2020~~
~~2021~~
~~July 1, 1994, to June 30, 1995~~
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans,a ~~and Direct Unsubsidized Consolidation~~ Loansb
91-day T-bil + 3.1% 7.43 8.25 8.25 8.25 8.25 7.72 8.25 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.46 3.23 3.12 91-day T-bil + 3.1% 7.43 8.25 8.25 8.25 8.25 7.72 8.25 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.46 3.23 3.12 4.24 TBD
(8.25% cap), variable (8.25% cap), variable
Direct PLUS Loans and Direct PLUS Consolidation Loansc
52-wk. T-bil + 3.1% 8.38 8.98 8.72 8.98 8.53 7.98 9.00 6.56 5.23 4.05 5.26 6.50 8.34 8.05 5.67 3.58 3.39 3.27 3.29 3.23 3.20 3.12 3.65 4.32 5.44 5.08 3.27 52-wk. T-bil + 3.1% 8.38 8.98 8.72 8.98 8.53 7.98 9.00 6.56 5.23 4.05 5.26 6.50 8.34 8.05 5.67 3.58 3.39 3.27 3.29 3.23 3.20 3.12 3.65 4.32 5.44 5.08 3.27 3.19 5.93 TBD TBD
(9% cap), variabl(9% cap), variabled
July 1, 1995, to June 30, 1998
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized ~~Consolidation Loans~~ Consolidation Loans,a and Direct Unsubsidized ~~Consolidation~~ Consolidation Loansb
In-school, grace, and deferment periods
91-day T-bil + 2.5% 91-day T-bil + 2.5%
— 8.25 7.66 7.66 7.66 7.12 8.25 6.19 4.26 3.62 3.57 5.50 7.34 7.42 4.41 2.68 2.67 2.56 2.59 2.55 2.53 2.52 2.85 3.48 4.43 4.86 2.63 2.52 — 8.25 7.66 7.66 7.66 7.12 8.25 6.19 4.26 3.62 3.57 5.50 7.34 7.42 4.41 2.68 2.67 2.56 2.59 2.55 2.53 2.52 2.85 3.48 4.43 4.86 2.63 2.52 3.64 TBD
(8.25% cap), variable (8.25% cap), variable
Repayment periods
91-day T-bil + 3.1% 91-day T-bil + 3.1%
— 8.25 8.25 8.25 8.25 7.72 8.25 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.46 3.23 3.12 — 8.25 8.25 8.25 8.25 7.72 8.25 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.46 3.23 3.12 4.24 TBD
(8.25% cap), variable (8.25% cap), variable
Direct PLUS Loans and Direct PLUS Consolidation Loansc
52-wk. T-bil + 3.1% 52-wk. T-bil + 3.1%
— 8.98 8.72 8.98 8.53 7.98 9.00 6.56 5.23 4.05 5.26 6.50 8.34 8.05 5.67 3.58 3.39 3.27 3.29 3.23 3.20 3.12 3.65 4.32 5.44 5.08 3.27 — 8.98 8.72 8.98 8.53 7.98 9.00 6.56 5.23 4.05 5.26 6.50 8.34 8.05 5.67 3.58 3.39 3.27 3.29 3.23 3.20 3.12 3.65 4.32 5.44 5.08 3.27 3.19 5.93 TBD TBD
(9% cap), variabl (9% cap), variabled
July 1, 1998, to ~~June 30, 2006~~September 30, 1998
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized ~~Consolidation Loans~~ Consolidation Loans,a and Direct Unsubsidized ~~Consolidation~~ Consolidation Loansb
In-school, grace, and deferment periods
CRS- CRS-99104

link to page link to page ~~112~~120 link to page 120
Disbursement
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

~~Period,~~
~~Loan Type, and~~
~~-1995~~
~~-1996~~
~~-1997~~
~~-1998~~
~~-1999~~
~~-2000~~
~~-2001~~
~~-2002~~
~~-2003~~
~~-2004~~
~~-2005~~
~~-2006~~
~~-2007~~
~~-2008~~
~~-2009~~
~~-2010~~
~~-2011~~
~~-2012~~
~~-2013~~
~~-2014~~
~~-2015~~
~~-2016~~
~~-2017~~
~~-2018~~
~~-2019~~
~~-2020~~
~~-2021~~
~~-2022~~
~~Loan Period~~
~~(if applicable)~~
~~1994~~
~~1995~~
~~1996~~
~~1997~~
~~1998~~
~~1999~~
~~2000~~
~~2001~~
~~2002~~
~~2003~~
~~2004~~
~~2005~~
~~2006~~
~~2007~~
~~2008~~
~~2009~~
~~2010~~
~~2011~~
~~2012~~
~~2013~~
~~2014~~
~~2015~~
~~2016~~
~~2017~~
~~2018~~
~~2019~~
~~2020~~
~~2021~~
91-day T-bil + 1.7% 91-day T-bil + 1.7%
— — — — 6.86 6.32 7.59 5.39 3.46 2.82 2.77 4.70 6.54 6.62 3.61 1.88 1.87 1.76 1.79 1.75 1.73 1.72 2.05 2.68 3.63 4.06 1.83 1.72 — — — — 6.86 6.32 7.59 5.39 3.46 2.82 2.77 4.70 6.54 6.62 3.61 1.88 1.87 1.76 1.79 1.75 1.73 1.72 2.05 2.68 3.63 4.06 1.83 1.72 2.84 TBD
(8.25% cap), variable (8.25% cap), variable
Repayment periods
91-day T-bil + 2.3% 91-day T-bil + 2.3%
— — — — 7.46 6.92 8.19 5.99 4.06 3.42 3.37 5.30 7.14 7.22 4.21 2.48 2.47 2.36 2.39 2.35 2.33 2. — — — — 7.46 6.92 8.19 5.99 4.06 3.42 3.37 5.30 7.14 7.22 4.21 2.48 2.47 2.36 2.39 2.35 2.33 2.3332 2.65 3.28 4.23 4.66 2.43 2.32 2.65 3.28 4.23 4.66 2.43 2.32 3.44 TBD
(8.25% cap), variable (8.25% cap), variable
Direct PLUS Loans ~~and Direct PLUS Consolidation Loans~~c
~~91-day T-bil + 3.1%~~
~~— — — — 8.26 7.72 8.99 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.08 3.23 3.12~~
~~(9% cap), variable~~
~~July 1, 2006, to June 30, 2008~~
~~Direct Subsidized Loans and Direct Unsubsidized Loans~~
~~6.8% fixed rate~~
~~— — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80~~
~~Direct PLUS Loans~~
~~7.9% fixed rate~~
~~— — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90~~
~~July 1, 2008, to June 30, 2009~~
~~Direct Subsidized Loans to Undergraduate Students~~
~~6.0% fixed rate~~
~~— — — — — — — — — — — — — — 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00~~
~~Direct Subsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students~~
~~6.8% fixed rate~~
~~— — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80~~
~~Direct PLUS Loans~~
~~7.9% fixed rate~~
~~— — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90~~
~~July 1, 2009, to June 30, 2010~~
~~Direct Subsidized Loans to Undergraduate Students~~
~~5.6% loans~~
~~— — — — — — — — — — — — — — — 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60~~
~~CRS-100~~

~~Disbursement~~

~~Period,~~
~~Loan Type, and~~
~~-1995~~
~~-1996~~
~~-1997~~
~~-1998~~
~~-1999~~
~~-2000~~
~~-2001~~
~~-2002~~
~~-2003~~
~~-2004~~
~~-2005~~
~~-2006~~
~~-2007~~
~~-2008~~
~~-2009~~
~~-2010~~
~~-2011~~
~~-2012~~
~~-2013~~
~~-2014~~
~~-2015~~
~~-2016~~
~~-2017~~
~~-2018~~
~~-2019~~
~~-2020~~
~~-2021~~
~~-2022~~
~~Loan Period~~
~~(if applicable)~~
~~1994~~
~~1995~~
~~1996~~
~~1997~~
~~1998~~
~~1999~~
~~2000~~
~~2001~~
~~2002~~
~~2003~~
~~2004~~
~~2005~~
~~2006~~
~~2007~~
~~2008~~
~~2009~~
~~2010~~
~~2011~~
~~2012~~
~~2013~~
~~2014~~
~~2015~~
~~2016~~
~~2017~~
~~2018~~
~~2019~~
~~2020~~
~~2021~~
~~Direct Subsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students~~
~~6.8% fixed rate~~
~~— — — — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80~~
~~PLUS Loans~~
~~7.9% fixed rate~~
~~— — — — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90~~
~~July 1, 2013, to June 30, 2014~~
~~Direct Subsidized Loans and Direct Unsubsidized Loans to Undergraduate Students~~
~~10-yr T-note +~~
~~— — — — — — — — — — — — — — — — — — — 3.86 3.86 3.86 3.86 3.86 3.86 3.86 3.86 3.86~~
~~2.05% (8.25% cap),~~
~~fixed~~
~~Direct Unsubsidized Loans to Graduate Students~~
~~10-yr T-note +~~
~~— — — — — — — — — — — — — — — — — — — 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41~~Direct PLUS Consolidation Loansc 91-day T-bil + 3.1% — — — — 8.26 7.72 8.99 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.08 3.23 3.12 4.24 TBD (9% cap), variable October 1, 1998-January 31, 1999 Direct Subsidized Loans and Direct Unsubsidized Loans In-school, grace, and deferment periods 91-day T-bil + 1.7% — — — — 6.86 6.32 7.59 5.39 3.46 2.82 2.77 4.70 6.54 6.62 3.61 1.88 1.87 1.76 1.79 1.75 1.73 1.72 2.05 2.68 3.63 4.06 1.83 1.72 2.84 TBD (8.25% cap), variable Repayment periods 91-day T-bil + 2.3% — — — — 7.46 6.92 8.19 5.99 4.06 3.42 3.37 5.30 7.14 7.22 4.21 2.48 2.47 2.36 2.39 2.35 2.33 2.32 2.65 3.28 4.23 4.66 2.43 2.32 3.44 TBD (8.25% cap), variable Direct PLUS Loans 91-day T-bil + 3.1% — — — — 8.26 7.72 8.99 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.08 3.23 3.12 4.24 TBD (9% cap), variable Direct Consolidation Loansf 91-day T-bil + 2.3% — — — — 7.46 6.92 8.19 5.99 4.06 3.42 3.37 5.3 7.14 7.22 4.21 2.48 2.47 2.36 2.39 2.35 2.33 2.32 2.65 3.28 4.23 4.66 2.43 2.32 3.44 TBD (8.25%), variable CRS-105 Disbursement 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 February 1, 1999-June 30, 2006 Direct Subsidized Loans and Direct Unsubsidized Loans In-school, grace, and deferment periods 91-day T-bil + 1.7% — — — — 6.86 6.32 7.59 5.39 3.46 2.82 2.77 4.70 6.54 6.62 3.61 1.88 1.87 1.76 1.79 1.75 1.73 1.72 2.05 2.68 3.63 4.06 1.83 1.72 2.84 TBD (8.25% cap), variable Repayment periods 91-day T-bil + 2.3% — — — — 7.46 6.92 8.19 5.99 4.06 3.42 3.37 5.30 7.14 7.22 4.21 2.48 2.47 2.36 2.39 2.35 2.33 2.32 2.65 3.28 4.23 4.66 2.43 2.32 3.44 TBD (8.25% cap), variable Direct PLUS Loans 91-day T-bil + 3.1% — — — — 8.26 7.72 8.99 6.79 4.86 4.22 4.17 6.10 7.94 8.02 5.01 3.28 3.27 3.16 3.19 3.15 3.13 3.12 3.45 4.08 5.03 5.08 3.23 3.12 4.24 TBD (9% cap), variable July 1, 2006, to June 30, 2008 Direct Subsidized Loans and Direct Unsubsidized Loans 6.8% fixed rate — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 Direct PLUS Loans 7.9% fixed rate — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 July 1, 2008, to June 30, 2009 Direct Subsidized Loans to Undergraduate Students 6.0% fixed rate — — — — — — — — — — — — — — 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Direct Unsubsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students 6.8% fixed rate — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 Direct PLUS Loans 7.9% fixed rate — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 CRS-106 Disbursement 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 July 1, 2009, to June 30, 2010 Direct Subsidized Loans to Undergraduate Students 5.6% loans — — — — — — — — — — — — — — — 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 Direct Unsubsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students 6.8% fixed rate — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 Direct PLUS 7.9% fixed rate — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 July 1, 2010, to June 30, 2011 Direct Subsidized Loans to Undergraduate Students 4.5% fixed rate — — — — — — — — — — — — — — — — 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 Direct Unsubsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students 6.8% fixed rate — — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 PLUS Loans 7.9% fixed rate — — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 July 1, 2011, to June 30, 2012 Direct Subsidized Loans to Undergraduate Students 3.4% fixed rate — — — — — — — — — — — — — — — — — 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 Direct Unsubsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students 6.8% fixed rate — — — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 PLUS Loans 7.9% fixed rate — — — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 CRS-107 Disbursement 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 July 1, 2012, to June 30, 2013 Direct Subsidized Loans to Undergraduate Students 3.4% fixed rate — — — — — — — — — — — — — — — — — — 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 3.40 Direct Unsubsidized Loans to Undergraduate Students, and Direct Subsidized Loans and Direct Unsubsidized Loans to Graduate Students 6.8% fixed rate — — — — — — — — — — — — — — — — — — 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 PLUS Loans 7.9% fixed rate — — — — — — — — — — — — — — — — — — 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 7.90 July 1, 2013, to June 30, 2014 Direct Subsidized Loans and Direct Unsubsidized Loans to Undergraduate Students 10-yr T-note + — — — — — — — — — — — — — — — — — — — 3.86 3.86 3.86 3.86 3.86 3.86 3.86 3.86 3.86 3.86 3.86 2.05% (8.25% cap), fixed Direct Unsubsidized Loans to Graduate Students 10-yr T-note + — — — — — — — — — — — — — — — — — — — 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 3.60% (9.50% cap), fixed Direct PLUS Loans
~~3.60% (9.50% cap),~~
~~fixed~~
~~Direct PLUS Loans~~
10-yr T-note + 4.6% 10-yr T-note + 4.6%
— — — — — — — — — — — — — — — — — — — 6.41 6.41 6.41 6.41 6.41 6.41 6.41 6.41 6.41 — — — — — — — — — — — — — — — — — — — 6.41 6.41 6.41 6.41 6.41 6.41 6.41 6.41 6.41 6.41 6.41
(10.5% cap), fixed (10.5% cap), fixed
July 1, 2014, to June 30, 2015
Direct Subsidized Loans and Direct Unsubsidized Loans to Undergraduate Students
10-yr T-note + 10-yr T-note +
— — — — — — — — — — — — — — — — — — — — 4.66 4.66 4.66 4.66 4.66 4.66 4.66 4.66 — — — — — — — — — — — — — — — — — — — — 4.66 4.66 4.66 4.66 4.66 4.66 4.66 4.66 4.66 4.66 2.05% (8.25% cap), fixed CRS-108 Disbursement 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Direct Unsubsidized Loans to Graduate Students 10-yr T-note + — — — — — — — — — — — — — — — — — — — — 6.21 6.21 6.21 6.21 6.21 6.21 6.21 6.21 6.21 6.21 3.60% (9.50% cap), fixed
~~2.05% (8.25% cap),~~
~~fixed~~
~~Direct Unsubsidized Loans to Graduate Students~~
~~10-yr T-note +~~
~~— — — — — — — — — — — — — — — — — — — — 6.21 6.21 6.21 6.21 6.21 6.21 6.21 6.21~~
~~3.60% (9.50% cap),~~
~~fixed~~
~~CRS-102~~

Disbursement
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1 2 3 4 Period, 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 20 Loan Type, and 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- Loan Period 99 99 99 99 99 99 00 00 00 00 00 00 00 00 00 00 10 10 10 10 10 10 10 10 10 10 20 20 20 20 (if applicable) 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Direct Unsubsidized Loans to Graduate Students 10-yr T-note + — — — — — — — — — — — — — — — — — — — — — — — — — — — — 6.54 6.54 3.60% (9.50% cap), fixed

~~Period,~~
~~Loan Type, and~~
~~-1995~~
~~-1996~~
~~-1997~~
~~-1998~~
~~-1999~~
~~-2000~~
~~-2001~~
~~-2002~~
~~-2003~~
~~-2004~~
~~-2005~~
~~-2006~~
~~-2007~~
~~-2008~~
~~-2009~~
~~-2010~~
~~-2011~~
~~-2012~~
~~-2013~~
~~-2014~~
~~-2015~~
~~-2016~~
~~-2017~~
~~-2018~~
~~-2019~~
~~-2020~~
~~-2021~~
~~-2022~~
~~Loan Period~~
~~(if applicable)~~
~~1994~~
~~1995~~
~~1996~~
~~1997~~
~~1998~~
~~1999~~
~~2000~~
~~2001~~
~~2002~~
~~2003~~
~~2004~~
~~2005~~
~~2006~~
~~2007~~
~~2008~~
~~2009~~
~~2010~~
~~2011~~
~~2012~~
~~2013~~
~~2014~~
~~2015~~
~~2016~~
~~2017~~
~~2018~~
~~2019~~
~~2020~~
~~2021~~
Direct PLUS Loans
10-yr T-note + 4.6% 10-yr T-note + 4.6%
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
— —
— — ~~5.30 5.30~~— — 7.54 7.54
(10.5% cap), fixed (10.5% cap), fixed
July 1, ~~2021~~2022, to June 30, ~~2022~~2023
Direct Subsidized Loans and Direct Unsubsidized Loans to Undergraduate ~~Students~~ Students
10-yr T-note + 10-yr T-note +
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
— —
— — — — ~~3.73~~— — 5.49
2.05% (8.25% cap), 2.05% (8.25% cap),
fixed fixed
Direct Unsubsidized Loans to Graduate ~~Students~~ Students
10-yr T-note + 10-yr T-note +
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
— —
— — — — ~~5.28~~— — 7.05
3.60% 3.60%
(9.50% cap), fixed (9.50% cap), fixed
Direct PLUS Loans
10-yr T-note + 4.6% 10-yr T-note + 4.6%
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
— —
— — — — ~~6.28~~— — 8.05
(10.5% cap), fixed (10.5% cap), fixed
Sources: U.S. Department of Education, Office of Federal Student Aid,U.S. Department of Education, Office of Federal Student Aid, " “Annual Notice of Interest Rates for Variable-Rate Federal Student Loans Made Under the Annual Notice of Interest Rates for Variable-Rate Federal Student Loans Made Under the
Wil iamWil iam D. Ford FederalD. Ford Federal Direct Loan Program,Direct Loan Program,~~" 83~~” 87 Federal Register ~~53858-53860, October 25, 2018;~~50320-50322, August 16, 2022 and prior notices; U.S. Department of Education, Office of Federal Student Aid, Department of Education, Office of Federal Student Aid, " “Annual Annual
Notice of Interest Rates for Fixed-Rate FederalNotice of Interest Rates for Fixed-Rate Federal Student Loans Made Under the Wil iamStudent Loans Made Under the Wil iam D. Ford Federal DirectD. Ford Federal Direct Loan Program,Loan Program,~~" 83~~” 87 Federal Register ~~53864-53866, October~~
~~25, 2018~~50326-50328, August 16, 2022, and prior notices; U.S. and prior notices; U.S. Department of Education, Office of FederalDepartment of Education, Office of Federal ~~Student Aid, LOANS-21-06 “Interest Rates for Direct Loans First Disbursed Between July 1,~~
~~2021 and June 30, 2022,” May 19, 2021~~ Student Aid, “Federal Stafford, Federal PLUS, Federal SLS, and Federal Consolidation Interest Rate Calculations for the Period July 1, 2022-June 30, 2023 (Updated July 1, 2022),” June 13, 2022; and U.S. Department of Education, Office of ; and U.S. Department of Education, Office of Federal Student Aid, Electronic Announcement, DL-23-03, “FY23 Interest Rates for Direct Loans First Disbursed Between July 1, 2023 and June 30, 2024,” May 16, 2023, https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2023-05-16/interest-rates-direct-loans-first-disbursed-between-july-1-2023-and-june-30-2024, TBD means to be determined. CRS-113 a. This refers ~~Federal Student Aid, “Federal Stafford, Federal PLUS, Federal SLS, and Federal~~
~~Consolidation Interest Rate Calculations for the Period July 1, 2021-June 30, 2022,” June 3, 2021.~~
~~a. This refers~~ to the subsidized component of a Directto the subsidized component of a Direct Consolidation Loan. Consolidation Loan.
b. This refersb. This refers to the unsubsidized component of a Directto the unsubsidized component of a Direct Consolidation Loan, excluding the portion of a Direct Consolidation Consolidation Loan, excluding the portion of a Direct Consolidation ~~Loa n~~Loan attributable to Direct attributable to Direct PLUS Loans, PLUS Loans,
Direct Direct PLUS Consolidation Loans, and FFEL PLUS Loans that werePLUS Consolidation Loans, and FFEL PLUS Loans that were repaid by the Direct Consolidation Loan. repaid by the Direct Consolidation Loan.
c. This refers c. This refers to the unsubsidized component of a Directto the unsubsidized component of a Direct Consolidation Loan attributable to Direct PLUS Loans, Direct PLUS Consolidation Loans, and FFEL PLUS Consolidation Loan attributable to Direct PLUS Loans, Direct PLUS Consolidation Loans, and FFEL PLUS
Loans that were repaid by the Direct Loans that were repaid by the Direct Consolidation Loan. Consolidation Loan.
d. The Consolidated Appropriations Act for FY2001 (P.L. 106-554) includes an amendment to the HEA that changed the index used in the formulas d. The Consolidated Appropriations Act for FY2001 (P.L. 106-554) includes an amendment to the HEA that changed the index used in the formulas that determine that determine
interest rates for PLUS Loans made under the FFEL and Direct interest rates for PLUS Loans made under the FFEL and Direct Loan programsLoan programs disbursed between July 1, 1987, and June 30, 1998. The amendment disbursed between July 1, 1987, and June 30, 1998. The amendment ~~substitut ed the~~
~~CRS-106~~

substituted the one-year constant maturity Treasury yield for the 52-week Treasury bil .one-year constant maturity Treasury yield for the 52-week Treasury bil . This change, which affects interestThis change, which affects interest rate adjustments made for any 12-month period rate adjustments made for any 12-month period
beginning on or after July 1, 2001, became necessary because the Department of the Treasury stopped issuing 52beginning on or after July 1, 2001, became necessary because the Department of the Treasury stopped issuing 52 -week Treasury bil s.-week Treasury bil s.

~~CRS-107~~

link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 link to page 114 ~~Federal Student Loans Made Through~~ e. For Direct PLUS Consolidation Loans, the application for such loans must have been received before October 1, 1998, and the loan must have been first disbursed on or after July 1, 1998. f. Applications for the Direct Consolidation Loan must have been received on or after October 1, 1998, and before February 1, 1999. CRS-114 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 link to page 121 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program

Table C-5. History of Direct Loan Origination Fees
Direct
Direct
Direct
Subsidized
Unsubsidized
PLUS
Loans
Loans
Loans
Disbursement Period
(%)
(%)
(%)
July 1, 1994, through August 14, 1999 July 1, 1994, through August 14, 1999
4.000 4.000
4.000 4.000
4.000 4.000
August 15, 1999, through June 30, 2006 August 15, 1999, through June 30, 2006
3.00 3.000a
3.00 3.000a
4.000 4.000
July 1, 2006, through June 30, 2007 July 1, 2006, through June 30, 2007
3.000 3.000
3.000 3.000
4.000 4.000
July 1, 2007, through June 30, 2008 July 1, 2007, through June 30, 2008
2.500 2.500
2.500 2.500
4.000 4.000
July 1, 2008, through June 30, 2009 July 1, 2008, through June 30, 2009
2.000 2.000
2.000 2.000
4.000 4.000
July 1, 2009, through June 30, 2010 July 1, 2009, through June 30, 2010
1.500 1.500
1.500 1.500
4.000 4.000
July 1, 2010, through June 30, 2013 July 1, 2010, through June 30, 2013
1.000 1.000
1.000 1.000
4.000 4.000
July 1, 2013, through November July 1, 2013, through November 30, 20130, 2013b
1.051 1.051
1.051 1.051
4.204 4.204
December December 1, 2013, through September 30, 2011, 2013, through September 30, 2014b
1.072 1.072
1.072 1.072
4.288 4.288
October 1, 2014, through September October 1, 2014, through September 30, 20130, 2015b
1.073 1.073
1.073 1.073
4.292 4.292
October 1, 2015, through September October 1, 2015, through September 30, 20130, 2016b
1.068 1.068
1.068 1.068
4.272 4.272
October 1, 2016, through September October 1, 2016, through September 30, 20130, 2017b
1.069 1.069
1.069 1.069
4.276 4.276
October 1, 2017, through September October 1, 2017, through September 30, 20130, 2018b
1.066 1.066
1.066 1.066
4.264 4.264
October 1, 2018, through September October 1, 2018, through September 30, 20130, 2019b
1.062 1.062
1.062 1.062
4.248 4.248
October 1, 2019, through September October 1, 2019, through September 30, 20230, 2020b
1.059 1.059
1.059 1.059
4.236 4.236
October 1, 2020, through September October 1, 2020, through September 30, 20230, 2021b
1.057 1.057
1.057 1.057
4.228 4.228
October 1, 2021, through September October 1, 2021, through September 30, 2022b 1.057 1.057 4.228 October 1, 2022, through September 30, 2023b 1.057 1.057 4.228 October 1, 2023, through September 30, 2024b~~30, 202~~2b
1.057 1.057
1.057 1.057
4.228 4.228
Sources: HEA, §455(c); 20 U.S.C. §1087e(c); U.S. Department of Education, Direct HEA, §455(c); 20 U.S.C. §1087e(c); U.S. Department of Education, Direct Loan Task Force,Loan Task Force, Direct Direct
Loan Bul etin,Loan Bul etin, DLB 99-39, “Meeting Our PromiseDLB 99-39, “Meeting Our Promise – Procedures on Processing– Procedures on Processing the Reduced Loan Origination the Reduced Loan Origination
Fee,” June 1, 1999, https://ifap.ed.gov/dlbul etins/doc0188_bodyoftext.htm; U.S. Department of Education, Fee,” June 1, 1999, https://ifap.ed.gov/dlbul etins/doc0188_bodyoftext.htm; U.S. Department of Education,
“Wil iam“Wil iam D. Ford Federal DirectD. Ford Federal Direct Loan Program:Loan Program: Final Regulations,” 64 Final Regulations,” 64 Federal Register 46252-24255, August 24, 46252-24255, August 24,
1999, https://www.govinfo.gov/content/pkg/FR-1999-08-24/pdf/99-21957.pdf; and BBEDCA, §256(b); 1999, https://www.govinfo.gov/content/pkg/FR-1999-08-24/pdf/99-21957.pdf; and BBEDCA, §256(b); ~~FY22~~
U.S. Department of Education, Office of Federal Student Aid,“FY24 Sequester-Required Changes to the Title IV Student Aid Programs,”Sequester-Required Changes to the Title IV Student Aid Programs,” ~~May 17, 2021,~~
Electronic Announcement GENERAL-23-37, May 15, 2023, https://fsapartners.ed.gov/knowledge-center/library/https://fsapartners.ed.gov/knowledge-center/library/~~elect ronic~~electronic-announcements/-announcements/~~2021-05-17/fy-22~~2023-05-15/fy-24-sequester--sequester-
required-changes-title-iv-student-aid-programsrequired-changes-title-iv-student-aid-programs~~-ea-id-general-21-31,~~ and prior notices. and prior notices.
a. During the period froma. During the period from August 15, 1999 through June 30, 2006, the Department of Education charged a August 15, 1999 through June 30, 2006, the Department of Education charged a
reduced loan origination fee of 3.0% on Direct Subsidized Loans and Direct Unsubsidized Loans. reduced loan origination fee of 3.0% on Direct Subsidized Loans and Direct Unsubsidized Loans.
b. Origination fee increased due to a sequestration order being in effect. b. Origination fee increased due to a sequestration order being in effect.

~~Congressional Research Service~~

~~108~~

~~Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program~~

~~Author Information~~

~~Alexandra Hegji~~

~~Analyst in Social Policy~~

~~Acknowledgments~~
~~This report was originally authored by David P. Smole, CRS Coordinator of Research Planning.~~

~~Disclaimer~~
~~This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan~~
~~shared staff to congressional committees and Members of Congress. It operates solely at the behest of and~~
~~under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other~~
~~than public understanding of information that has been provided by CRS to Members of Congress in~~
~~connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not~~
~~subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in~~
~~its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or~~
~~material from a third party, you may need to obtain the permission of the copyright holder if you wish to~~
~~copy or otherwise use copyrighted material.~~

~~Congressional Research Service~~
~~R45931 · VERSION 5 · UPDATED~~
~~109~~ Congressional Research Service 115 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Appendix D. COVID-19 Flexibilities In response to the COVID-19 pandemic, lawmakers and the Department of Education (ED) have provided various types of relief for federal student loans borrowers. In general, this relief is available for a temporary period; although, some forms of relief may have a lasting impact on borrowers’ loans for years into the future. Several key forms of COVID-19 student loan relief are presented in this Appendix. For detailed information about these and other forms of COVID-19 student loan relief, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19. Interest Accrual Pause From March 13, 2020, through September 1, 2023, the accrual of interest on all types of Direct Loan program loans is suspended.302 Thus, borrowers will not be responsible for paying interest on their Direct Loan program loans during this period. Payment Pause From March 13, 2020, through October 1, 2023, monthly payments on all types of Direct Loan program loans are suspended.303 (In practice, ED is placing all loans in administrative forbearance.) During this time, borrowers are not required to make payments due on their loans. This special administrative forbearance is frequently called the payment pause. Whereas interest typically accrues on loans during periods of forbearance, the interest accrual pause (see above) ensures that interest does not accrue on loans during all but the final month of the payment pause. In addition, suspended payments will count toward the maximum periods under the income-driven repayment plans (see the “Income-Driven Repayment [IDR] Plans” section), loan rehabilitation for defaulted loans (see the “Loan Rehabilitation” section), and the 120 required monthly payments under the Public Service Loan Forgiveness program (see the “Public Service Loan Forgiveness [PSLF] program” section). Income-Driven Repayment (IDR) Plan Account Adjustment Under all of the IDR plans, borrowers may have any remaining outstanding balance of their Direct Loan program loans forgiven after making payments according to the plans for a maximum repayment period (20 years/240 months or 25 years/300 months). Typically, only payments made on selected repayment plans count toward the maximum repayment period under the IDR plans, and with the exception of the economic hardship deferment and the COVID-19 payment pause, periods of deferment or forbearance do not count toward the maximum repayment period under the IDR plans. Payments made on any loans, including FFEL program 302 The Fiscal Responsibility Act of 2023 (P.L. 118-5) specifies that the interest accrual pause shall cease to be effective 60 days after June 30, 2023. While 60 days after June 30, 2023, is August 29, 2023, ED has indicated that interest accrual will not begin until September 1, 2023. U.S. Department of Education, Office of Federal Student Aid, “COVID-19 Emergency Relief and Federal Student Aid,” https://studentaid.gov/announcements-events/covid-19,” accessed June 15, 2023. 303 The Fiscal Responsibility Act of 2023 (P.L. 118-5) specifies that the payment pause shall cease to be effective 60 days after June 30, 2023. While 60 days after June 30, 2023, is August 29, 2023, ED has indicated that student loan payments will not be due until October 2023. U.S. Department of Education, Office of Federal Student Aid, “COVID-19 Emergency Relief and Federal Student Aid,” https://studentaid.gov/announcements-events/covid-19,” accessed June 15, 2023. Congressional Research Service 116 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program loans, prior to consolidation do not count toward the maximum repayment period for the Consolidation Loan. In April 2022, in response to the COVID-19 pandemic and to address “historical failures in the administration of the federal student loan programs,”304 ED announced a one-time adjustment to borrower loan accounts to revise the number of IDR-qualifying payments for purposes of satisfying the maximum repayment period under the IDR plans. Through the account adjustment, borrowers are to receive IDR payment credit for the following periods: • any months in which a borrower’s loan was in repayment status “regardless of the payments made, loan type, or repayment plan”; • a minimum of 12 months or more of consecutive forbearance; • 36 or more months of cumulative forbearance, with any combination of forbearance periods counting toward the cumulative amount; • months spent in economic hardship deferment or military deferments after 2013; • months spent in any type of deferment, excluding in-school deferment, prior to 2013; and • months in repayment prior to consolidation. ED intends to automatically forgive the loans of borrowers who have accumulated at least 240 months or 300 months in repayment, even if they are not currently enrolled in an IDR plan, “by the end of 2023.”305 To receive automatic forgiveness, a borrower will need to meet one of the following requirements, all of which include the terms of the above-described account adjustment: • Borrowers with only undergraduate student loan debt must have been in repayment for 240 months. • Borrowers with undergraduate and graduate student loan debt, or graduate student loan debt only, and who are currently enrolled in the PAYE repayment plan must have been in repayment for 240 months. • Borrowers with undergraduate and graduate student loan debt, or graduate student loan debt only, and who are currently not enrolled in the PAYE repayment plan must have been in repayment for 300 months. • Parent PLUS Loans and Consolidation Loans used to repay Parent PLUS Loans must have been in repayment for 300 months.306 All other borrowers who will not receive automatic forgiveness are to see their loan accounts updated in 2024.307 304 U.S. Department of Education, “Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs,” press release, April 19, 2022, https://www.ed.gov/news/press-releases/department-education-announces-actions-fix-longstanding-failures-student-loan-programs. 305 U.S. Department of Education, Office of Federal Student Aid, “Income-Driven Repayment Account Adjustment,” https://studentaid.gov/announcements-events/idr-account-adjustment, accessed May 19, 2023. 306 Ibid. 307 Ibid. Congressional Research Service 117 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Limited Public Service Loan Forgiveness (PSLF) Waiver Under the PSLF program, Direct Loan borrowers who, on or after October 1, 2007, are employed full-time in certain public service jobs for 10 years while making 120 qualifying monthly payments on their loans may have any remaining balance of their loans forgiven. Typically, only payments made on selected repayment plans count toward the required 120 qualifying payments, and with the exception of the COVID-19 payment pause, periods of deferment or forbearance do not count toward the required 120 payments. Payments made late, made for less than the monthly amount due, and made on any loans (including FFEL program loans) prior to consolidation also do not count toward the required 120 payments. Borrowers must be employed full-time in a public service job at the time PSLF benefits are granted. PSLF benefits may not be provided for the same service used to qualify for benefits under the Teacher Loan Forgiveness Program, the Civil Legal Assistance Attorney Loan Repayment Program, or the Loan Forgiveness for Service in Areas of National Need Program. In October 2021, ED announced a series of limited-time waivers of numerous PSLF program rules to enable borrowers to receive credit for past periods of repayment that would not otherwise qualify for PSLF. Through October 31, 2022, borrowers could receive PSLF payment credit for the following: • periods of repayment on Direct Loan program, FFEL program, and other older HEA authorized program loans, even if payments were made according to a nonqualifying repayment plan, made late, or made for less than the amount due; • periods of deferment before 2013; • periods of economic hardship deferment on or after January 1, 2013; • periods of forbearance of 12 consecutive months or greater; • periods of forbearance of 36 cumulative months or greater; and • periods of military service deferment. In addition, ED waived the requirement that a borrower be employed full-time in qualifying public service at the time of application for and forgiveness under PSLF, and the prohibition against periods of service performed to receive benefits under the Teacher Loan Forgiveness program also counting towards periods of PSLF qualifying employment.308 One-Time Student Loan Debt Relief On August 24, 2022, invoking the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act; P.L. 108-76, as amended), ED announced a “one-time debt relief”309 policy “to address the financial harms of the [COVID-19] pandemic for low- and middle-income borrowers.”310 Under the policy, the Administration intends to cancel the following: • up to $10,000 in student loans for borrowers whose annual income in 2020 or 2021 was less than $125,000 (for individuals or married borrowers who file their 308 U.S. Department of Education, Office of Federal Student Aid, “The Limited PSLF Waiver Opportunity Ended on Oct. 31, 2022,” https://studentaid.gov/announcements-events/pslf-limited-waiver#key-points, accessed March 23, 2023. 309 U.S. Department of Education, Office of Federal Student Aid, “One-time Federal Student Loan Debt Relief,” https://studentaid.gov/manage-loans/forgiveness-cancellation/debt-relief-info, accessed April 3, 2023. 310 U.S. Department of Education, “Fact Sheet: President Biden Announces Student Loan Relief for Borrowers Who Need It Most,” press release, August 24, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/. Congressional Research Service 118 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program federal income taxes separately), or $250,000 (for married couples filing jointly, heads of households, or qualifying widow(er)s); borrowers enrolled in postsecondary education as dependent students between July 1, 2021, and June 30, 2022, will be eligible for cancellation based on parental income; and • an additional $10,000, for a total of up to $20,000, in student loans for borrowers who meet the above criteria and received at least one Pell Grant in any amount at any point.311 Borrowers’ cancellation benefits are to be capped at the amount of their outstanding debt. Borrowers who made voluntary payments on their loans during the COVID-19 payment pause and qualify for debt relief may automatically receive refunds of those payments in limited circumstances.312 These benefits are available for Direct Loan program loans—as well as Federal Family Education Loan (FFEL) program and Perkins Loan program loans held by ED and defaulted FFEL program loans held by guaranty agencies—disbursed on or before June 30, 2022, except that for Consolidation Loans only the underlying loans that were repaid by the Consolidation Loan must have been disbursed on or before June 30, 2022.313 The policy has not yet been implemented due to lawsuits challenging ED’s legal authority to effectuate it. The Supreme Court heard oral arguments for the lawsuits on February 28, 2023.314 Thus, loan cancellation under the policy would occur, if at all, only if the Supreme Court renders a decision in favor of the Administration. Collection Pause From March 13, 2020, through one year after the COVID-19 payment pause ends315 (see above), involuntary collection practices are suspended. Involuntary collection practices include administrative wage garnishment; offset of federal income tax returns, Social Security benefits, and certain other federal benefits; and civil litigation on Direct Loan program loans. In addition, ED and its contractors are not engaging in proactive collection activities (e.g., are not making collection calls or sending letters or billing statements to defaulted borrowers). However, borrowers may contact ED and its contractors to begin or continue default resolution arrangements (see the “Resolution of Default” section).316 311 For additional information, see CRS Insight IN11997, The Biden Administration’s One-Time Student Loan Debt Relief Policy. 312 U.S. Department of Education, “One-time Federal Student Loan Debt Relief,” https://studentaid.gov/manage-loans/forgiveness-cancellation/debt-relief-info#refunds, accessed April 3, 2023. 313 Direct Consolidation Loans comprised of any FFEL or Perkins Loan program loans not held by ED are eligible for debt relief, so long as the borrower applied for consolidation before September 29, 2022. 314 Transcript of Oral Argument, Nebraska v. Biden, No. 22-506 (February 28, 2023), https://www.supremecourt.gov/oral_arguments/argument_transcripts/2022/22-506_22p3.pdf and transcript and Transcript of Oral Argument, Dep’t. of Educ. v. Brown No. 22-535 (February 28, 2023), https://www.supremecourt.gov/oral_arguments/argument_transcripts/2022/22-535_4g15.pdf. 315 CRS communication with staff of U.S. Department of Education, Office of Legislation and Congressional Affairs, February 27, 2023. 316 U.S. Department of Education, Office of Federal Student Aid, “Coronavirus and Forbearance Info for Students, Borrowers, and Parents,” Loans in Default, https://studentaid.gov/announcements-events/coronavirus#defaulted-loan-questions, accessed May 24, 2021. For additional information on the cessation of debt collection activities due to COVID-19, see CRS Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19. Congressional Research Service 119 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Fresh Start Initiative A borrower who defaults on a Direct Loan program loan becomes subject to many consequences, and has multiple options available to them for bringing their loan out of default. In April 2022, ED announced a new policy “to eliminate the negative effects of default for borrowers who defaulted on their student loans prior to the [COVID-19] pandemic payment pause.” 317 Under this Fresh Start Initiative, all qualifying borrowers of defaulted Direct Loans will have several Title IV student aid benefits temporarily restored that are otherwise unavailable when a borrower is in default on their loan. If such borrowers use the Fresh Start Initiative to get out of default, they would be able to retain those benefits long-term. Under the initiative, ED has, for a temporary period, automatically provided the following benefits to all qualifying defaulted borrowers: • restored eligibility for Title IV federal student aid; • reporting of defaulted loans as “current” rather than “in collections” to credit reporting agencies; and • discontinued reporting of borrowers’ default status to the Credit Alert Verification Reporting System (CAIVRS).318 Borrowers who take the following actions will be permitted to keep the above-listed benefits long-term: (1) accept Title IV student aid under the Fresh Start Initiative, or (2) request to have their loans placed in repayment status after receiving notification from ED that their loans are being reported to consumer reporting agencies as current rather than in collections. In addition, other benefits not available to defaulted borrowers, such as eligibility for IDR plans or loan forgiveness programs, will be restored. These borrowers’ loans will also be transferred to a nondefault loan servicer, their loans will be returned to in-repayment status, and ED will ask consumer reporting agencies to remove the record of default from the borrower’s credit report. Borrowers who use the Fresh Start Initiative to bring their loans out of default or who rehabilitated their loans during the COVID-19 payment pause would not have these actions counted as their one opportunity to rehabilitate their loans.319 Many of the benefits available to borrowers under the initiative are to be available until one year after the end of the COVID-19 payment pause (referred to as the Fresh Start period). Borrowers who do not take either of the above-described actions during the Fresh Start period will again be subject to collections after that period ends and will have their loans reported as in collections to consumer reporting agencies. 317 U.S. Department of Education, Office of Postsecondary Education, “Federal Student Aid Eligibility for Borrowers with Defaulted Loans,” Dear Colleague Letter GEN-22-13, August 17, 2022, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2022-08-17/federal-student-aid-eligibility-borrowers-defaulted-loans. 318 CAIVRS is a database of individuals who have defaulted on federal debts and is used to prescreen and verify applicant eligibility for various federal direct and guaranteed loans. For additional information, see Department of Housing and Urban Development, “CAIVRS-Credit Alert Verification Reporting System,” https://www.hud.gov/program_offices/housing/sfh/caivrs, accessed June 13, 2023. 319 U.S. Department of Education, Office of Federal Student Aid, “A Fresh Start for Federal Student Loan Borrowers in Default,” https://studentaid.gov/announcements-events/default-fresh-start, accessed March 27, 2023. Congressional Research Service 120 Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program Author Information Alexandra Hegji Analyst in Social Policy Acknowledgments This report was originally authored by David P. Smole, CRS Coordinator of Research Planning. Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. Congressional Research Service R45931 · VERSION 8 · UPDATED 121