Where to Start: The FAFSA Is Your First Step

To borrow federal student loans, you must first complete the Free Application for Federal Student Aid (FAFSA). This is a single form that determines what federal loans you may receive, and it opens the door to all other aid — grants, work-study, and private loans. You cannot skip it.

The FAFSA opens on October 1 each year and remains open through June 30 of the following year. You fill it out online at studentaid.gov, the official U.S. Department of Education website. The form asks for your Social Security number, tax information, and details about your family's income and assets. If you are a dependent student, you will need a parent's information as well.

After you submit the FAFSA, the Department of Education sends you a Student Aid Report (SAR) — usually within three to five business days. This report shows what you reported and calculates your Expected Family Contribution (EFC), which determines how much aid you may receive. Your school uses this number to build your financial aid package.

Key Takeaways

  • You must complete the FAFSA at studentaid.gov before you can borrow federal student loans, and it opens October 1 each year.
  • Federal loans come in two main types — Direct Subsidized Loans (the government pays interest while you are in school) and Direct Unsubsidized Loans (you pay all interest) — and borrowing limits depend on your year in school and whether you are a dependent or independent student.
  • After your school receives your FAFSA results, they send you a financial aid package that lists loans, grants, and other aid you may accept or decline.
  • You sign a Master Promissory Note (MPN) and complete entrance counseling before your first loan disbursement, and these are one-time requirements that carry forward to future loans.
  • Loan money is sent directly to your school to cover tuition and fees first, and any leftover is paid to you for other education expenses.

Understanding Federal Loan Types and Borrowing Limits

The federal government offers two main types of student loans: Direct Subsidized Loans and Direct Unsubsidized Loans. The difference matters because it affects how much interest you pay.

With a Subsidized Loan, the government pays the interest while you are enrolled at least half-time in school, during your grace period after graduation, and during any deferment period. You only start paying interest after you leave school or drop below half-time enrollment. With an Unsubsidized Loan, you are responsible for all interest from the moment the loan is disbursed — interest accrues even while you are in school, though you do not have to pay it until after graduation.

Your borrowing limit depends on your year in school and your dependency status. For the 2024–2025 academic year, a dependent first-year student may borrow up to $5,500 total (no more than $3,500 of that subsidized). A dependent second-year student may borrow up to $6,500 total (no more than $4,500 subsidized). Independent students and dependent students whose parents are denied PLUS loans have higher limits. These limits increase slightly each year and vary by school, so confirm the exact amount with your school's financial aid office.

What Happens After You Submit the FAFSA

Once your school receives your FAFSA results, the financial aid office builds a financial aid package and sends it to you. This package lists all aid you may receive: grants (money you do not repay), loans (money you must repay), and work-study (a job on campus). The package shows the loan type, the amount, and the interest rate.

You do not automatically receive the loans listed. You must accept them — usually by logging into your school's student portal or by signing a form the aid office sends you. You can accept some loans and decline others. Many students decline loans they do not need or accept only subsidized loans and skip unsubsidized ones. This choice is yours to make.

If you have questions about your package — why you received a certain amount, whether you can borrow more, or whether you may have access to for different loan types — contact your school's financial aid office by phone or email. They can explain the numbers and sometimes adjust your package if your circumstances have changed.

Signing the Master Promissory Note and Entrance Counseling

Before your first federal loan is disbursed, you must sign a Master Promissory Note (MPN). This is a legal document in which you promise to repay the loan and agree to the terms. You sign it once, and it covers all federal loans you receive while you are at that school — you do not sign a new one for each loan.

You must also complete entrance counseling, an online tutorial that explains how federal loans work, what your repayment obligations are, and what happens if you default. The tutorial takes about 30 minutes and is required by federal law. Both the MPN and entrance counseling are completed online through studentaid.gov or through your school's financial aid portal.

These requirements apply only once per school. If you transfer to a different school, you will need to complete a new MPN and entrance counseling there, but you do not repeat them if you stay at the same school and borrow additional loans in future years.

How and When Loan Money Reaches You

After you sign the MPN and complete entrance counseling, your school's financial aid office submits a disbursement request to the Department of Education. The loan money is sent directly to your school, not to you. Your school applies the money first to tuition, fees, and room and board (if you live on campus). Any remaining balance is paid to you, usually by check or direct deposit into your bank account.

Disbursement timing varies by school. Some schools disburse at the start of each semester; others disburse monthly or on a different schedule. Your school's financial aid office can tell you when to expect the money. If you need the funds by a specific date — for example, to pay tuition before the deadline — ask the aid office in advance so you know whether the disbursement will arrive in time.

If you borrow more than you need, you may be able to return the excess to the Department of Education within 120 days of disbursement and avoid paying interest on that amount. This option is worth considering if you borrowed an unsubsidized loan and realize you do not need all of it.

What to Do If You Are Denied or Need More Information

If your FAFSA is rejected or flagged for verification, you will receive a notice from your school explaining what documents you need to provide. Common requests include tax returns, W-2 forms, or proof of citizenship. Verification is not a denial — it is a step to confirm the information you reported. Gather the requested documents and submit them to your school as quickly as you can, because your aid package cannot be finalized until verification is complete.

If you are denied federal loans because you are not a U.S. citizen or permanent resident, you may still have options. Some schools offer institutional loans or private loans to non-citizen students. Contact your school's financial aid office to learn what is available to you.

If you have questions at any point — about your FAFSA results, your aid package, loan types, or the application process — your school's financial aid office is your primary resource. They have access to your file and can answer questions specific to your situation. You can also call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243) for general questions about federal loans.

Frequently Asked Questions

Do I have to fill out the FAFSA every year?

Yes. The FAFSA determines your aid for each academic year, and your financial situation may change. You must complete a new FAFSA each year you want to borrow. The form opens October 1 and you can submit it anytime through June 30 of the following year, but submitting early is better because some aid is limited and awarded on a first-come, first-served basis.

What if my parents refuse to provide their information for the FAFSA?

If you are a dependent student and your parents will not provide their information, you may be able to file as an independent student. Contact your school's financial aid office to discuss your situation. You may need to provide documentation of your circumstances, and becoming independent for financial aid purposes is different from being independent for tax purposes.

Can I borrow federal loans if I am part-time?

Yes, but your borrowing limits are lower. You must be enrolled at least half-time to receive subsidized loans. If you are enrolled less than half-time, you may still borrow unsubsidized loans, but the limits are reduced. Check with your school's financial aid office about the exact limits for your enrollment status.

What happens if I do not use all the loan money my school disburses?

You can return the excess within 120 days of disbursement and avoid paying interest on it. After 120 days, the money is considered fully disbursed and you are responsible for repaying it. Contact your school's financial aid office if you want to return funds.

Do I start repaying federal loans right away?

No. Federal loans enter a grace period after you graduate or drop below half-time enrollment. The grace period is typically six months, during which you do not have to make payments. After the grace period ends, you must begin repayment. Your loan servicer will contact you with information about your repayment plan and first payment due date.