How to Get a Federal Student Loan (FAFSA to Master Promissory Note)
Federal student loans come only through the FAFSAFree Application for Federal Student Aid — The form that unlocks federal grants, loans, and work-study — and most state and school aid too.Click for official info ↗. They never come from a bank. The process ends with the Master Promissory Note (MPN). This is the legal paper that explains your rights and duties as a federal borrower. It covers repayment plans and deferment. It also covers what happens if you default.
At a glance
- Cost:
- Origination fees about 1.06% of the loan amount
- Total time:
- 30–60 minutes per stage; processing takes days to weeks
- Steps:
- 7 steps
- Where to apply:
- studentaid.gov
Last reviewed October 2026 against official sources. Re-checked annually · next review due October 2027.
The Steps
Follow these in order
Each card shows the phase, expected time, and any cost. Data checked against official US sources(October 2026).
0 of 7 steps
- Before You Go 1 hour
Create your FSA ID and file the FAFSA — free
Create an account at studentaid.gov. Both the student and a parent need one, for dependents. Then file the Free Application for Federal Student Aid. It opens October 1 each year. It takes 30–60 minutes. It is always free. The IRSInternal Revenue Service — The US federal tax agency. It collects federal income taxes, issues refunds, and administers ITINs.Click for official info ↗ Direct Data Exchange brings in your tax numbers on its own, with your consent. Watch out for paid look-alike sites. The real one charges nothing.
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- Before You Go 45 min
Read your financial aid award letter like a contract
Schools send award letters in spring. They list grants, scholarships, work-study, and loans. Take free money first. Then take subsidized loans before unsubsidized loans. On Direct Subsidized loans, the Education Department pays the interest while you are in school at least half-time. On unsubsidized loans, interest builds from day one. Borrow only what you need. You repay every dollar with interest.
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- Go 30 min
Complete entrance counseling
First-time federal borrowers must finish entrance counseling on studentaid.gov. It takes about 30 minutes. It covers how interest works, repayment plans, and what default means. Your school gets a notice online when you finish. Some schools ask for an extra in-person session. Check your portal.
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- Submit & Pay 30 min
Sign the Master Promissory Note (MPN)
The MPN is the paper that explains your rights and duties as a federal student loan borrower. It covers repayment terms. It covers deferment and forbearance options. It covers cancellation and discharge conditions. It covers what happens if you default. You sign it once. It covers up to 10 years of Direct Loans at that school. Read it. It is the real contract for your loan.
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- Wait per term
Disbursement and refund
The school sets the loan payment dates. This is usually once per term. It uses the money first for tuition and fees. It refunds any money left to you for living costs. Track amounts and dates in your student portal. Your servicer is assigned after the first payment. It appears on studentaid.gov under "My Loan Servicers."
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- Follow Up 20 min
Know exactly what increases your total loan balance
Four things make your balance grow beyond what you borrowed. First, interest capitalization. This is unpaid interest. On Direct Loans it gets added to your principal mainly when a deferment ends on an unsubsidized loan, or when you leave IBR. Then it earns interest itself. Second, origination fees. These are taken off the top before you get the money. Third, late fees. Fourth, collection costs after default. These can be up to 20% of each payment on defaulted loans. While in school, you can pay unsubsidized interest as it builds. This stops capitalization completely.
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- Follow Up 30 min
Pick a repayment plan before grace ends
After you leave school, you get a 6-month grace period. Then payments start. If any of your loans was disbursed on or after July 1, 2026 and you do not pick a plan, you start on the Tiered Standard Repayment Plan. Payments are fixed over 10–25 years, depending on your balance. If that payment is too high, look at the Repayment Assistance Plan (RAP), the income-driven option for new loans. Payments are 1%–10% of your adjusted gross income (at least $10 a month), unpaid interest is waived, and the balance is forgiven after 30 years. IBR remains available to some borrowers; SAVE, PAYE, and ICR are closed to new borrowers. Compare plans with the Loan Simulator on studentaid.gov. Sign up before the first due date.
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FAQ
Frequently Asked Questions
What document explains your rights and responsibilities as a federal student loan borrower?
The Master Promissory Note (MPN). This is the binding contract you sign at studentaid.gov before your first disbursement. It sets out the loan terms. It sets out what you must repay. It covers deferment and forbearance rights. It covers cancellation and discharge conditions. It covers what happens if you default. Entrance counseling adds to it. But the MPN is the legal document itself.
What increases your total loan balance besides borrowing more?
Interest capitalization is the big one. Unpaid interest gets added to principal. Then it builds on itself. On Direct Loans this happens mainly when a deferment ends on an unsubsidized loan, and when you leave or lose eligibility for IBR. It no longer capitalizes on entering repayment, when grace or forbearance ends, when you leave non-IBR plans, or on missed recertification for non-IBR plans. Add origination fees (about 1.06% taken off before disbursement). Add late fees. Add collection costs of up to 20% per payment on defaulted loans. If you pay interest as it builds while in school, you block the largest of these.
Subsidized or unsubsidized — which should I take?
Always take the most subsidized loans first, if they are offered. The government pays subsidized-loan interest while you study at least half-time. It also pays for 6 months after. And it pays during deferment. So the balance does not grow. Unsubsidized interest builds from the first day. It does not matter if you are in school. Subsidized loans are based on need. Unsubsidized loans are open to almost everyone.
I have private loans too. Are the rules the same?
No. Private student loans have no MPN. They have no standard repayment menu. They have no IDR. Their hardship options are usually weaker. Rates are based on credit. Use all your federal options before you borrow private loans. If you already have both, put the federal safety net first when you plan repayment. Private lender terms are whatever your contract says.
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