Federal Direct Loans

The Direct Loan interest rate is variable and is adjusted yearly on July 1.

The rate will never exceed 8.25 percent for student loans and 9 percent for parent loans.


There are three types of Direct Loans for students:

  1. Subsidized (undergraduates only) - interest does not accrue while in school
  2. Unsubsidized - interest accrues while in school
  3. Direct PLUS -  graduate/professional students and parents of dependent undergraduate students only - interest accrues from disbursement

For general information about Direct Loans, go to: StudentAid.gov

For specific information about your Direct Loan, contact your loan servicer.

If you are not sure which servicer to contact about your loan, go to the National Student Loan Data System for Students at StudentAid.gov to retrieve your loan information and identify your servicer.

After the student graduates, leaves school, or drops below half-time enrollment, there is a six-month grace period before repayment begins. The borrower selects the option that is right for his/her financial circumstances.


There are several repayment plans:

  1. Standard - fixed monthly payment (at least $50) for up to 10 years.
  2. Extended - fixed monthly or graduated payment for up to 25 years; loan minimum $30,000; more interest under this plan.
  3. Graduated - allows payments to increase every 2 years, for up to 10 years.
  4. Income Contingent - monthly payments based on yearly income, family size and loan amount; maximum 25 years
  5. Income-Based - monthly payments based on income during any period of partial financial hardship; may exceed 10 years
  6. Pay As You Earn - monthly payments based on income if the standard repayment amount is higher than the pay as you earn amount; must be a new borrower on or after October 1, 2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011.
  7. Revised Pay As You Earn - monthly payments are 10% of discretionary income, based on income and family size; good option for those seeking Public Service Loan  Forgiveness.

For more details on the above repayment options and eligibility requirements, please visit:


Direct PLUS Loan borrowers must begin repaying their loans 60 days after the loan has been fully disbursed (unless eligible for deferment). The Direct PLUS Loan borrowers may choose from:

  1. Standard - fixed monthly payment (at least $50) for up to 10 years.
  2. Extended - fixed monthly or graduated payment for up to 25 years; loan minimum $30,000; more interest under this plan.
  3. Graduated - allows payments to increase every 2 years, for up to 10 years.

Entrance Counseling

First-time borrowers of the Federal Direct Loan at the University of Kentucky must complete a Master Promissory Note (MPN) and entrance counseling.  These steps must be performed electronically at studentaid.gov. Electronic signature of the Master Promissory Note requires your FSA ID - the same username and password used to sign your FAFSA. Your FSA ID confirms your identity when you access your financial aid information and electronically sign Federal Student Aid documents.  If you do not already have an FSA ID, you can create one when logging in to fafsa.gov.  For help in creating the FSA ID, visit StudentAid.gov/fsaid, or call 1-800-433-3243.  The loan will not be released until all requirements have been satisfied.


Exit Counseling

The Federal Direct Loan requires exit counseling when the borrower withdraws, graduates, or drops below half-time attendance. The on-line session helps you understand your rights and responsibilities, and prepares you for repayment. Complete the exit counseling at StudentAid.gov. Once there, choose Loan Repayment, then Loan Exit Counseling.  Your FSA ID is required to complete exit counseling.  See the Entrance Counseling section above for information about the FSA ID.


Consequences of Default

  • Damage to credit rating
  • Loss of deferment/forbearance options
  • Federal government may take legal action
  • Federal Government can withhold federal tax refunds
  • Garnishment of wages
  • Unpaid balance and accrued interest could be due in full immediately
  • Account may be placed with a collection agency, increasing the total debt by late fees, additional interest, court costs, collection fees, attorneys’ fees and other costs
  • Borrowers who have trouble making payments should contact their loan servicer to review options to keep the account out of default.