While you're in school
How the loans are disbursed (paid out)
Generally, your loan will cover a full academic year and your school will make at least two disbursements to you, for example, at the beginning of each semester or quarter, or at the beginning and midpoint of your academic year.
In most cases your school will disburse your loan money by crediting it to your school account to pay (tuition and fees, room and board, and other authorized charges). If the loan disbursement amount exceeds your school charges, the school will pay you the remaining balance of the disbursement directly by check or other means. Your school will notify you in writing each time they disburse part of your loan money and will provide information about how to cancel all or part of your disbursement if you find you no longer need the money. You will also receive a notice from your loan servicer confirming the disbursement. You should read and keep all correspondence received concerning your loan.
Using the loan for education expenses: You may use the loan money you receive only to pay for your education expenses at the school that is giving you the loan. Education expenses include school charges such as tuition, room and board, fees and indirect expenses such as books, supplies, equipment, dependent child care expenses, transportation and rental or purchase of a personal computer.
It's important to keep your loan servicer informed of any changes in your status, so that your loan information is up-to-date. This is your responsibility.
You must notify the loan servicer if you:
- Change your local address, permanent address or telephone number;
- Change your name (for example, maiden name to married name);
- Do not enroll at least half-time for the loan period certified by the school;
- Do not enroll at the school that certified your loan;
- Stop attending school or drop below half-time enrollment;
- Transfer from one school to another school; or
Until you graduate or leave school, you must also keep your school's financial aid office informed of these changes.
A scheduled break in enrollment, such as the summer session at many traditional 4-year schools, is not considered an interruption in your enrollment if you are planning to return to school during the next regularly scheduled enrollment period.
When you graduate, drop below half-time, or withdraw from your academic program, you will receive a six-month grace period for your Direct Subsidized and Unsubsidized Loans. Once your grace period ends, you must begin repaying your loan(s). See When you graduate or leave school.
You may choose to pay interest on your Direct Unsubsidized or Direct PLUS Loans while you are in school. If you choose not to pay the interest while you're in school, it will be added to the unpaid principal amount of your loan.
This is called capitalization, and it can substantially increase the amount you repay, especially if you are receiving multiple loans for a multi-year program. Capitalization increases the unpaid principal balance of your loan, and you will be charged interest on the increased principal amount.
It will save you money in the long run if you pay the interest as it accrues on your loan while you're in school or during the grace period. This is also true if you pay any interest that accrues during periods of deferment or forbearance after you leave school.
If you've already taken out at least one Direct Loan, you can check your interest statements and use the online calculators to find out how much you'll pay over the life of the loan if the in-school interest is added to your loan balance.