William D. Ford Direct Lending Program Exit Counseling

What Is Direct Loan Exit Counseling?

Before you graduate, or if you drop below less-than-half-time enrollment, you must complete a Direct Loan (Stafford) Exit Counseling session. You can complete the entire session online in approximately 30–40 minutes. The Exit Counseling session is designed to ensure that your lender has your current information and provides you with important information about repayment of your loan(s), deferment and forbearance options. Although the information in the online counseling session is very similar to what you'll read here, it contains the most current information and should be referred to in addition to this document.

Repayment Period

The repayment period on an unsubsidized Direct Loan starts when you've received the last loan for that school year, even though you can postpone your loan payments until you leave school. (You may wish to pay your interest as it accrues -  see the section titled "Capitalization" later in this document.)

The repayment period on a subsidized Direct Loan doesn't begin until after you leave school.

Grace Period

When you leave school, you won't have to begin repaying your loan right away. Direct Loans allow a six-month "grace period" that starts when you leave school or drop below half-time enrollment. If you have a subsidized Direct Loan, you won't be charged interest while you're in school (Unsubsidized Direct Loans accrue interest from the date of disbursement.)


Your lender (the U.S. Department of Education) will give you a choice of standard, graduated, or income-sensitive repayment plans not earlier than six months before the date of the first scheduled loan payment. If you don't choose a plan within 45 days of the lender's offer, the lender will use the standard repayment plan. Even if you don't choose a particular plan, you may reach an agreement with your lender to repay all of your loans under one repayment schedule. You can change your repayment plan annually.

Comparing Repayment Plans

There are several key differences between the repayment plans, but the most important differences are your monthly payment and the total amount of interest that you'll be repaying.

  • Standard Repayment Plan - You'll usually pay your loan within ten years. You'll be repaying the same amount of the loan each month, though your monthly payment may vary slightly from year to year because of interest-rate changes.
  • Graduated Repayment Plan - You'll start with a lower monthly payment. Over time, your monthly payments will increase. While this plan may help you initially (when your starting salary is lower early in your career), keep in mind that you'll pay more total interest over the life of the loan than you would with the Standard Repayment Plan.
  • Income-Sensitive Repayment Plan - Your payments are adjusted annually based on your expected total monthly gross income. If your salary increases regularly, your monthly payments will increase, as they do under the Graduated Repayment Plan; however, if your salary is reduced, your payments will also be reduced.
  • Extended Repayment Plan - If you're a new Stafford borrower (as of October 7, 1998) who has more than $30,000 in Direct Loans, you can choose the Extended Repayment Plan. Because you make payments over a longer period (not to exceed 25 years) your monthly payments will be lower; however, the total amount of interest you repay will be greater.

Deferment Periods

These are periods during which you don't have to make loan payments. The most common deferments are for students attending college (enrolled at least half-time), who are unemployed, or who have economic hardship. If you have a subsidized Direct Loan, the government pays the interest while the loan is in deferment. If you have an unsubsidized loan, you can either pay the interest as it continues to accrue on the loan, or postpone your interest payments during the deferment. (See the section titled "Capitalization.")

If you believe you may be eligible for one of these deferments, contact Direct Loan Servicer. (See contact information at the end of this document.)

Forbearance Periods

Forbearance is an important option if you are experiencing financial difficulties, like being unemployed or under-employed. These periods are similar to the deferment periods mentioned above, but often they are at the lender's option. Also, you will always have to pay the interest that accumulates, even on a subsidized loan, but interest payments are usually small and manageable. If you are experiencing financial hardship, contact the federal loan servicer for help.


If interest is accumulating on your loan during a period when you're not making loan payments, the lender will usually capitalize the interest, which means the interest is added to the loan principal. For instance, if you choose not to pay the interest on an unsubsidized Direct Loan while you're in school, in forbearance, in deferment, or in a grace period, the interest will usually be capitalized. Because this added amount also begins accruing interest, capitalizing usually increases the overall amount to be repaid.


Unfortunately, some students don't repay their student loans, and the loans go into what is referred to as default. Default can have very serious consequences for the borrower. If you default on a loan, you will be reported to national credit bureaus (harming your credit rating and jeopardizing your ability to get a loan for a new car or home, etc.), your wages can be garnished, your income tax refund can be withheld, and you won't be able to get student aid to go back to school.

Repay Your Loan - Don’t Default!

Defaulting on your loan is a serious matter and can have severe consequences for your future credit standing. Follow these simple steps to prevent defaulting on your loans:

  • Keep all your loan paperwork. Keep your promissory note, repayment schedule, canceled checks, just the same as if you were borrowing to buy a car or a house. If you sign your promissory note electronically, print a copy of the confirmation.
  • Stay in touch with your lender. Be sure your lender always has your current address and phone number on file. When you complete the online Direct Loan Exit Counseling session, you not only obtain important information about repayment of your loan(s), you also ensure that your lender has your current information.
  • Contact your lender if you're having trouble making payments. If you find yourself in a financial bind and are having difficulty making your loan payments, the lender may be able to offer forbearance on the loan or make other arrangements to keep you from defaulting. Always, always contact your Direct Loan Servicer if you find it difficult or impossible to make your monthly payments.

Direct Loan Servicer

Last Modified: 8/4/23