Not all FAFSA money is a loan — grants don't require repayment, but loans do

FAFSA determines what federal aid you may receive, but the type of aid matters enormously. Grants and work-study do not have to be paid back. Federal student loans do. The FAFSA form itself doesn't tell you which is which — you find out when your school sends your financial aid package, which lists each aid type separately and shows which ones carry a repayment obligation.

The confusion happens because FAFSA is one application that feeds into multiple programs with different rules. Your FAFSA results go to your school, and your school decides which programs to offer you based on your financial need and other factors. A grant from one program and a loan from another can both appear on the same aid package.

Key Takeaways

  • Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), and state grants do not require repayment under any circumstance.
  • Federal student loans — Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans — must be repaid with interest, usually beginning six months after you leave school.
  • Work-study earnings are paid to you as you work and do not have to be repaid, though you must actually work the hours to receive the money.
  • Your school's financial aid package lists each aid type separately and clearly marks which ones are loans and which are not.
  • Declining a loan on your aid package does not affect your grant or work-study offer.

Grants: money that stays with you

Federal Pell Grants are the largest grant program and do not require repayment. The amount depends on your Expected Family Contribution (calculated from your FAFSA), your school's cost of attendance, and your enrollment status. For the 2024–2025 academic year, the maximum Pell Grant is $7,395, though most students receive less.

Federal Supplemental Educational Opportunity Grants (FSEOG) are awarded by your school to students with exceptional financial need. These also do not require repayment. Many states offer additional grant programs for residents attending in-state schools; these vary by state and do not require repayment either.

The key rule: if your aid package labels something a grant, you keep it. You do not repay it, and there is no interest. The only condition is that you remain enrolled and maintain satisfactory academic progress as defined by your school.

Federal student loans: what you borrow, you repay

Direct Subsidized Loans and Direct Unsubsidized Loans are the most common federal student loans. Both must be repaid with interest. The difference is that the federal government pays the interest on subsidized loans while you are in school at least half-time; with unsubsidized loans, interest accrues from the moment the loan is disbursed, even while you are still studying.

Direct PLUS Loans are available to graduate students and parents of undergraduate students. These also require repayment and typically carry a higher interest rate than Direct Loans.

Repayment usually begins six months after you graduate, leave school, or drop below half-time enrollment. This period is called the grace period. During the grace period, you do not have to make payments, but interest on unsubsidized loans continues to accrue.

The federal government sets interest rates annually. For loans disbursed in the 2024–2025 academic year, the rates are fixed for the life of the loan. You can find the current rates on the Federal Student Aid website.

Work-study: earned money, not borrowed money

Federal Work-Study is a program that provides part-time jobs to students with financial need. You earn an hourly wage for hours you actually work. This money does not have to be repaid because you are working for it — it is wages, not a loan or grant.

Work-study jobs are typically on campus or with approved off-campus employers. Your school determines the hourly wage, which must meet at least the federal minimum wage. You are paid regularly, usually every two weeks or monthly, just like any other job.

If you decline work-study or do not work the hours offered, you simply do not receive that money. There is no debt and no obligation to repay anything.

How to tell what you owe from your aid package

When your school sends your financial aid package, it lists each aid type with a dollar amount. Look for language that says "loan" or "borrowed funds" — those require repayment. Anything labeled a grant, scholarship, or work-study does not.

Your school should also provide a loan summary that shows the loan type, the amount borrowed, the interest rate, and the expected monthly payment after graduation. If this information is not clear on your aid package, contact your school's financial aid office and ask them to explain which parts you must repay.

You can also log into your Federal Student Aid account at studentaid.gov to see a record of all federal loans you have taken out. This account tracks your loans across all schools you have attended.

What happens if you don't repay a loan

If you do not repay a federal student loan, the debt does not disappear. The loan goes into default, which means you have failed to make payments for more than 270 days. Once in default, the federal government can take action: garnishing your wages, withholding your tax refund, or suing you to recover the debt.

Default also damages your credit score, making it harder to borrow money for a car, house, or other needs in the future. If you are struggling to repay, contact your loan servicer before you miss a payment. Income-driven repayment plans can lower your monthly payment to as little as $0 per month if your income is low enough.

Frequently Asked Questions

Can I turn down a loan and keep the grant?

Yes. Your aid package lists loans and grants separately. You can decline the loan portion without affecting your grant or work-study offer. Contact your school's financial aid office to let them know you are declining the loan.

Do private student loans show up on FAFSA?

No. FAFSA only determines federal aid. Private student loans come from banks and other lenders outside the federal system. They also require repayment and typically have higher interest rates than federal loans. You apply for private loans separately through the lender.

What if I received a grant but my circumstances changed?

You should report changes to your school's financial aid office. If your income increased significantly, your grant amount might decrease in the following year. If your circumstances worsened, you may become may be able to access for additional aid. Your school recalculates aid based on updated information.

Is there a way to get my federal student loans forgiven?

Federal loan forgiveness programs exist but have strict requirements. Public Service Loan Forgiveness forgives loans after 120 may have access to payments if you work for a government agency or nonprofit. Teacher Loan Forgiveness covers teachers in low-income schools. Income-Driven Repayment plans forgive remaining balance after 20 to 25 years of payments. These programs have specific may be able to access rules and application processes.

What's the difference between subsidized and unsubsidized loans?

With subsidized loans, the government pays interest while you are in school. With unsubsidized loans, interest accrues from day one, even while you study. Both must be repaid after graduation. Unsubsidized loans cost more over time because unpaid interest gets added to your principal balance.