How Do Direct Student Loans Work?

Q: How do direct loans work?

A: Direct student loans are a form of federal financial aid. Like all student loans, direct loans must be repaid. However, most students will not need to make any student loans payments while they are enrolled.

Step 1: Complete the FAFSA
The process starts with the FAFSA (Free Application for Federal Student Aid). This free form can be completed online at and will allow the government to determine how much and what types of financial aid you qualify to receive.

Completing the FAFSA can also make you eligible to receive scholarships and grants that do not have to be repaid, so you have nothing to lose by completing the FAFSA.

Starting January 1 of your senior year in high school, you can complete the FAFSA. By completing the form you will let the Department of Education know which colleges to share your financial information with.

Almost all students will need help from a parent to complete the FAFSA. We recommend that your parents complete their tax returns first since much of the information requested is the same.

But do not miss a financial aid deadline just because you or your parents have not filed your tax returns yet. You can provide estimates and update the data later.

Step 2: Receive Your Award Letters
Once you are offered admission, the schools you put on your FAFSA will send you a financial aid award letter. Your award letter will explain how much and which forms of aid you qualify to receive. Most likely, it will combine free aid like grants and scholarships, loans, and perhaps the offer of a federal work study.

Keep in mind that you are not required to accept all or any of the financial aid being offered. To accept the aid being offered, follow the instructions spelled out in the award letter.

Learn more at