FAFSA gives you both grants and loans — grants are free, loans must be repaid

Not all FAFSA money is the same. When you complete the FAFSA form, you become may be able to access for federal student aid that comes in two types: grants and loans. Grants are assistance programs you do not repay. Loans are borrowed money you must pay back with interest, starting after you leave school or drop below half-time enrollment.

Your financial aid package from a school will show you exactly which aid is a grant and which is a loan. The school decides how much of each type to offer based on your FAFSA information and their own funding. You do not have to accept the loans — you can decline them and take only the grants, though that may leave a gap in your funding.

Key Takeaways

  • Federal Pell Grants are assistance programs based on financial need and do not require repayment under any circumstance.
  • Federal student loans (Stafford loans, PLUS loans) must be repaid with interest, and repayment typically begins six months after you graduate or leave school.
  • Your school's financial aid letter will clearly label which funds are grants and which are loans.
  • You can refuse loans offered to you, but refusing them may mean you have less total aid to cover tuition and expenses.
  • Some states and schools offer their own grants that do not require repayment, separate from federal FAFSA aid.

Federal Pell Grants — the assistance programs in your aid package

The Federal Pell Grant is the main grant available through FAFSA. It is assistance programs based on your family's financial situation, and you never repay it. The amount changes year to year and depends on how much your family is expected to contribute, your school's cost of attendance, and whether you are a full-time or part-time student.

Pell Grants are limited — not every student receives one, and the amount is capped by federal law. If your family's income is above a certain threshold, you will not receive a Pell Grant. Schools also sometimes offer their own institutional grants to students with financial need, and these also do not require repayment.

Federal student loans — what you borrow and must repay

Federal student loans come through FAFSA and must be repaid. The most common type for undergraduates is the Direct Subsidized Stafford Loan or Direct Unsubsidized Stafford Loan. Subsidized loans do not accrue interest while you are in school; unsubsidized loans do. Both require repayment after you graduate or leave school.

Repayment typically begins six months after you graduate, leave school, or drop below half-time enrollment — this period is called the grace period. You will owe the full amount you borrowed plus interest. The interest rate on federal student loans is set by Congress and changes each year; it is the same for all borrowers in a given year.

Graduate students and parents can also borrow Direct PLUS Loans through FAFSA, which have a higher interest rate and begin accruing interest immediately. These also must be repaid.

How to tell what you owe and what you don't

Your school sends you a financial aid letter after you are admitted. This letter breaks down your aid package into grants (free) and loans (must repay). Read it carefully — the language is usually clear, with sections labeled "Grants and Scholarships" and "Loans."

You can also log into your Federal Student Aid account at studentaid.gov to see your loan history and current balances. This account shows every federal loan you have taken out and tracks what you owe. If you have questions about a specific loan or grant, contact your school's financial aid office — they can explain what each line item means and whether you are required to repay it.

What happens if you don't repay federal student loans

If you do not make payments on federal student loans, your loan goes into default after you miss payments for 270 days (about nine months). Defaulting has serious consequences: your wages can be garnished, your tax refunds seized, and your credit score damaged. The federal government can also take action to recover the money without going to court first.

If you are struggling to make payments, you have options before default occurs. You can request income-driven repayment, which lowers your monthly payment based on your current income. You can also request deferment or forbearance, which temporarily pause or reduce payments. Contact your loan servicer as soon as you know you will have trouble paying — waiting until you are in default makes your situation much harder to fix.

Private loans and other aid that may require repayment

Some students also borrow private student loans from banks or other lenders. These are not part of FAFSA and are not assistance programs — they must be repaid with interest. Private loans often have higher interest rates and fewer protections than federal loans, so they are usually a last resort after you have used all available federal aid.

Some employers, unions, and organizations offer tuition reimbursement or scholarships. Read the terms carefully — most scholarships and grants do not require repayment, but some programs (particularly employer reimbursement) may require you to stay with the company for a set period or repay the money if you leave.

Frequently Asked Questions

Do I have to accept all the loans my school offers me?

No. You can accept only the grants and decline the loans. However, if the total aid does not cover your costs, you will need to find another way to pay the difference — through savings, work, or other borrowing.

What if I get a grant but my circumstances change?

Grants are based on your FAFSA information from the year you received them. If your family's income changes significantly, you can update your FAFSA the following year, which may change your grant amount. You do not have to repay a grant if your circumstances improve.

Can I pay back my federal loans early without a penalty?

Yes. Federal student loans have no prepayment penalty, so you can pay extra toward your balance or pay off the loan entirely at any time without owing extra fees.

What is the difference between subsidized and unsubsidized loans?

Subsidized loans do not accrue interest while you are in school or during your grace period after graduation. Unsubsidized loans accrue interest from the moment you borrow them. Both must be repaid, but unsubsidized loans cost more over time because of the extra interest.

If I don't use all my FAFSA aid, do I owe it back?

No. If you receive a grant and do not use it, you do not owe it back. If you borrow a loan and do not use it, the school will not disburse it to you. You only owe back money you actually borrowed.