To accept federal student loans, you complete three things on StudentAid.gov and in your school’s financial aid system: entrance counseling, a Master Promissory Note, and formal acceptance of the specific loan amounts through your school’s financial aid portal. No money moves until all three are done. Most students finish in a couple of hours, but the choices you make here fix the interest rates, origination fees, and balances you’ll be paying for years, so it’s worth slowing down on the “how much” question before clicking accept.
Decide How Much to Accept Before You Click Anything
Your financial aid award notification lists the maximum you can borrow in each loan type. You are not required to take all of it. Borrowing only what you need to close the gap between your cost of attendance and your other funding is the single biggest decision in this process.
Two loan types usually appear on an undergraduate award. Subsidized loans don’t accrue interest while you’re enrolled at least half-time, because the government pays it for you.1Consumer Financial Protection Bureau. How Does Interest Accrue While I Am in School Unsubsidized loans accrue interest from the day they’re disbursed, and that unpaid interest gets added to your balance. Accept subsidized first, and only reach for unsubsidized if costs remain.
Annual and Lifetime Limits
Federal law caps borrowing by year and in total. For dependent undergraduates, the annual limits are $5,500 as a freshman (up to $3,500 subsidized), $6,500 as a sophomore (up to $4,500 subsidized), and $7,500 as a junior or senior (up to $5,500 subsidized). Independent undergraduates, and dependent students whose parents can’t get a PLUS loan, can borrow $9,500, $10,500, and $12,500 at those same class levels.2eCFR. 34 CFR 685.203 – Loan Limits Lifetime aggregate caps are $31,000 for dependent undergraduates and $57,500 for independent undergraduates, with no more than $23,000 of either total in subsidized loans.3Knowledge Center. Annual and Aggregate Loan Limits 2025-2026
Interest Rates and the Origination Fee
Federal rates are fixed for the life of each loan but reset each year for new borrowers. Loans first disbursed between July 1, 2025, and June 30, 2026, carry a 6.39% rate for undergraduate subsidized and unsubsidized loans, 7.94% for graduate unsubsidized loans, and 8.94% for PLUS loans.4Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025, and June 30, 2026 Rates for loans disbursed after July 1, 2026, will be announced in mid-2026.
The government also deducts an origination fee before the money reaches you. For subsidized and unsubsidized loans disbursed between October 1, 2025, and September 30, 2026, that fee is 1.057% of the loan amount.5Knowledge Center. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs On a $5,500 loan, that’s roughly $58 you never see but still owe. The fee shifts annually due to sequestration, so check StudentAid.gov for the current rate if your loan disburses after October 1, 2026.
Run the Numbers in the Loan Simulator
Before accepting an amount, use the Department of Education’s free Loan Simulator at StudentAid.gov. Enter a loan balance and expected income, pick a repayment goal, and the tool returns estimated monthly payments under each available repayment plan.6Federal Student Aid. Loan Simulator Seeing that a $27,000 balance at 6.39% means roughly $305 per month for ten years tends to clarify how much is really worth borrowing.
Sign In With Your FSA ID
Every step that follows requires an FSA ID. This is a username and password tied to your Social Security number that functions as your legal electronic signature on the FAFSA, the Master Promissory Note, counseling acknowledgments, and other federal aid forms.7Federal Student Aid. Attestation and Validation of Identity If you don’t already have one, create it at StudentAid.gov and store the credentials somewhere you’ll still have access to after graduation. You’ll use the same login throughout repayment.
Complete Entrance Counseling
Federal regulations require first-time borrowers to complete entrance counseling before a school can release any loan funds.8Federal Student Aid Handbook. Direct Loan Counseling It’s an interactive online session on StudentAid.gov that walks through how federal loans work, how interest accrues, what repayment plans look like, and what happens if you default.9eCFR. 34 CFR 685.304 – Counseling Borrowers Budget 30 to 45 minutes.
One point the counseling makes explicit catches some borrowers off guard: you owe the full balance even if you don’t finish your degree, can’t find work in your field, or are unhappy with the education you received.9eCFR. 34 CFR 685.304 – Counseling Borrowers You’ll enter your anticipated graduation date and expected salary so the tool can model repayment. Your completion is reported directly to your school’s financial aid office.
Sign the Master Promissory Note
The Master Promissory Note (MPN) is the legal contract in which you promise to repay the loans plus interest. Complete it on StudentAid.gov. You’ll provide contact information, your driver’s license number, and the names and addresses of two personal references who don’t live with you.10Federal Student Aid Partners. MPN Basics Those references are not cosigners. They are people the Department of Education can contact if it loses touch with you later.
A single MPN can cover up to ten years of borrowing, so most undergraduates sign it once and don’t repeat it each year.10Federal Student Aid Partners. MPN Basics That convenience has a flip side. Every time your school certifies a new year of loans under the same MPN, you’re adding debt under a contract you already signed.
Accept the Loans in Your School’s Portal
With counseling and the MPN complete, log into your school’s financial aid portal and formally accept the loans. Most schools display each loan type with buttons to accept, decline, or reduce. You can take less than the offered amount. If scholarships or savings cover part of your costs, reducing the unsubsidized loan first saves the most money, because that’s the loan already accruing interest.
Once you confirm your selections, the school communicates with the Department of Education to finalize the loan. Processing usually takes a few business days when all your documents are in order, and funds are typically disbursed near the start of each semester or payment period.
What Happens After You Accept
Your loan funds go to your school first and are applied to tuition, fees, and other institutional charges on your account. If money is left over, the school must release the credit balance to you within 14 days by direct deposit, check, or another method you’ve authorized.11U.S. Department of Education. Chapter 1 – Disbursing FSA Funds That surplus covers living expenses: books, rent, food.
Shortly after disbursement, the Department of Education assigns your loan to a federal servicer. If you already have federal loans, the new one typically goes to the same servicer; first-time borrowers are assigned through the department’s performance-based allocation system.12Knowledge Center. Loan Servicing and Collection Frequently Asked Questions The servicer handles billing, repayment plan changes, and requests for deferment or forbearance. Log into StudentAid.gov to see who yours is and save the contact information.
You Can Cancel or Return the Money
Accepting a loan isn’t permanent. Before funds are disbursed, you can cancel all or part of a loan by notifying your school. After disbursement, you have a window of 14 to 30 days (your school will give you the exact deadline) to ask the school to cancel or reduce the loan with no interest or origination fee owed on the returned amount.13Federal Student Aid. Direct Loan Borrowers Rights and Responsibilities Statement
Even outside that window, you can return all or part of the money directly to the Department of Education within 120 days of disbursement, and your balance will be adjusted to remove interest and fees on the returned portion.13Federal Student Aid. Direct Loan Borrowers Rights and Responsibilities Statement Contact your loan servicer for instructions. This matters if a scholarship comes through after your loans post, or if you realize mid-semester that you borrowed more than you needed.
Heads Up for Loans Disbursed After July 1, 2026
Significant changes to federal student loans take effect on July 1, 2026, under recently enacted legislation. Annual limits for undergraduate subsidized and unsubsidized loans stay the same, but any loans you take after that date count toward a new overall lifetime cap of $257,500 across all federal student loans combined (Parent PLUS excluded).14U.S. Department of Education. U.S. Department of Education Issues Proposed Rule to Make Higher Education More Affordable and Simplify Student Loan Repayment
The same law eliminates Graduate PLUS loans and caps Parent PLUS at $20,000 per year per student with a $65,000 lifetime limit per child. New graduate students will borrow through the unsubsidized loan program, capped at $20,500 per year with a $100,000 lifetime limit; professional students face a $50,000 annual cap and a $200,000 lifetime limit. If you’re thinking about graduate or professional school after your bachelor’s, these ceilings may change how much you want to borrow now. The Department of Education is still finalizing implementation rules, so check StudentAid.gov for details as the effective date approaches.