You don’t have to pay back the FAFSA, because the FAFSA is an application, not money. What you may have to repay depends on which types of aid you accept after filing it. Federal grants and Federal Work-Study wages generally stay with you. Federal student loans do not: you sign a promise to repay them with interest before any funds are disbursed.
Aid You Keep: Grants and Work-Study
Grants are often called gift aid because they don’t create a debt in ordinary circumstances. The two main federal grants awarded through the FAFSA are the Federal Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG). Both are need-based, and neither requires repayment as long as you complete the term you were awarded for.
The Pell Grant is the largest source of federal grant aid. For the 2025–2026 award year, the maximum award is $7,395, though your actual amount depends on financial need, cost of attendance, and enrollment status.1Federal Student Aid. Don’t Miss Out on Federal Pell Grants You have to be an undergraduate who hasn’t yet earned a bachelor’s or professional degree to qualify.2Federal Student Aid. Student Eligibility for Pell Grants
FSEOG goes to undergraduates with the most extreme financial need, with awards from $100 to $4,000 per year set by your school’s financial aid office based on available funding.3eCFR. 34 CFR 676.20 – Minimum and Maximum FSEOG Awards Once your school’s allocation runs out, no more FSEOG is awarded for that year.
Federal Work-Study is different in form but similar in effect: you don’t repay it because you earned it. The program provides part-time jobs for undergraduate and graduate students with financial need, paying at least the federal minimum wage, with your school paying you at least monthly.4Federal Student Aid. Work-Study Jobs The money is treated as income, not a loan. It does count as taxable wages on your federal return, though you may be exempt from Social Security and Medicare (FICA) taxes on on-campus work if you’re enrolled at least half-time.5Internal Revenue Service. Student FICA Exception
Aid You Repay: Federal Student Loans
Federal student loans are the part of a FAFSA-based aid package that creates a real debt. Before any loan funds are disbursed, you sign a Master Promissory Note, a legal contract in which you promise to repay the principal plus all interest and fees.6Federal Student Aid. Completing a Master Promissory Note There are three main Direct Loan types.
Direct Subsidized Loans
These are available only to undergraduates with financial need. The U.S. Department of Education pays the interest while you’re enrolled at least half-time, during your six-month grace period after leaving school, and during approved deferment periods.7Federal Student Aid. Subsidized and Unsubsidized Loans For loans first disbursed between July 1, 2025, and June 30, 2026, the fixed interest rate is 6.39%.8FSA Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026
Direct Unsubsidized Loans
These are open to undergraduates, graduate students, and professional students regardless of financial need. Interest starts accruing as soon as the money is disbursed, including while you’re still in school. If you don’t pay that interest as it accrues, it capitalizes onto your principal and grows the balance you’ll eventually repay. Undergraduate borrowers pay the same 6.39% rate as subsidized loans; graduate and professional students pay 7.94% for the 2025–2026 disbursement period.8FSA Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026
Direct PLUS Loans
PLUS loans go to parents of dependent undergraduates and to graduate or professional students. They carry the highest rate of the federal loan programs, 8.94% for loans disbursed in 2025–2026.8FSA Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 They also require a credit check. Borrowers with an adverse credit history, such as accounts more than 90 days delinquent, a bankruptcy, foreclosure, or wage garnishment within the past five years, may be denied unless they meet additional requirements or obtain an endorser.9Federal Student Aid. Student and Parent Eligibility for Direct Loans – Section: Direct PLUS Loans
When Grants Turn Into Money You Owe
Grants normally aren’t repaid, but three situations can change that.
Withdrawing Before 60% of the Term
If you withdraw from all your classes before completing more than 60% of the academic term, your school must calculate how much of your Title IV aid, grants included, you actually earned based on the percentage of the term you completed. The unearned portion has to be returned to the Department of Education, partly by the school and partly by you.10Federal Student Aid Handbook. General Requirements for Withdrawals and the Return of Title IV Funds If you completed 30% of the term, you earned 30% of the aid, and 70% goes back. Past the 60% mark, you’ve earned all of it and owe nothing back even if you leave.
Over-Awards
An over-award happens when your total aid, federal, state, and private combined, exceeds your cost of attendance. If you receive an outside scholarship after your package is finalized, your school may reduce your federal aid to stay within the limit, and if funds have already gone out you may have to return the excess. Schools apply a $300 tolerance for campus-based aid like FSEOG, so small overages within that amount don’t trigger repayment.11Federal Student Aid Knowledge Center. Overawards and Overpayments
TEACH Grant Conversion
The TEACH Grant is the biggest grant repayment risk. It pays up to $4,000 a year to students who agree to teach in high-need fields, such as math, science, special education, or bilingual education, at schools serving low-income students for at least four years within eight years of finishing their program. If you don’t complete the teaching requirement, the entire grant converts into a Direct Unsubsidized Loan, with interest charged retroactively from the date each disbursement was originally made.12eCFR. 34 CFR Part 686 – Teacher Education Assistance for College and Higher Education (TEACH) Grant Program That retroactive interest can add thousands of dollars to what started as gift aid.
When Loan Repayment Starts and What It Looks Like
Repayment on Direct Subsidized and Unsubsidized Loans begins after a six-month grace period that starts when you graduate, leave school, or drop below half-time enrollment.13Federal Student Aid. How Long Is My Grace Period Parent PLUS loans enter repayment as soon as the loan is fully disbursed, though parents can request a deferment while the student is enrolled. You can switch repayment plans at any time without penalty.
The Standard Repayment Plan divides your balance into fixed monthly payments over 10 years. It’s the default and produces the lowest total interest cost. The Extended Repayment Plan stretches the term to as long as 25 years for a smaller monthly bill and a much larger total interest cost.
Income-driven repayment (IDR) plans set your monthly payment as a percentage of your discretionary income. Three IDR plans are generally available: Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR).14Federal Student Aid. Income-Driven Repayment Plans A fourth plan, SAVE, introduced in 2023, is no longer accepting new borrowers following a December 2025 settlement between the U.S. Department of Education and the State of Missouri; existing SAVE borrowers are being transitioned to other plans.15U.S. Department of Education. U.S. Department of Education Announces Agreement with Missouri to End SAVE Plan Under IDR plans, any remaining balance after 20 to 25 years of qualifying payments may be forgiven, depending on the specific plan. Borrowers in default aren’t eligible for IDR until they resolve the default through rehabilitation or consolidation.
Ways Loans Can Be Forgiven or Discharged
Several federal programs can eliminate part or all of your loan balance if you meet the criteria. Forgiveness isn’t automatic. You have to apply and document eligibility.
Public Service Loan Forgiveness (PSLF) cancels the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for an eligible employer, which includes federal, state, local, and tribal government agencies, and 501(c)(3) nonprofits. The 120 payments don’t have to be consecutive. Only certain plans count: all IDR plans and the 10-year Standard Repayment Plan qualify, but Graduated and Extended plans do not.16Federal Student Aid. Public Service Loan Forgiveness Because the 10-year Standard Plan leaves little to forgive after 120 payments, most PSLF recipients use an IDR plan.
Teacher Loan Forgiveness, separate from PSLF and the TEACH Grant, can cancel up to $17,500 in Direct Loan debt for highly qualified math, science, or special education teachers, or up to $5,000 for other qualifying teachers, after five consecutive years of full-time teaching at a low-income school.17Federal Student Aid. 4 Loan Forgiveness Programs for Teachers
Total and Permanent Disability Discharge can wipe out federal student loans entirely. You qualify with certification from a licensed physician, nurse practitioner, or physician assistant, or by showing you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) based on disability. Veterans can qualify with Department of Veterans Affairs documentation of a service-connected disability that makes them unemployable.18eCFR. 34 CFR 685.213 – Total and Permanent Disability Discharge
What Happens If You Don’t Pay
Missing federal student loan payments triggers an escalating sequence. Your servicer reports late payments to the national credit bureaus once you’re 90 or more days behind, which can damage your credit score and make it harder to be approved for a mortgage, car loan, or credit card.19Federal Student Aid. Student Loan Delinquency and Default
At 270 days without a payment on a Direct Loan, you’re officially in default. Default opens the door to collection tools the federal government can use without going to court, including administrative wage garnishment of up to 15% of your disposable earnings and seizure of federal tax refunds through the Treasury Offset Program.20U.S. Department of Labor. Fact Sheet #30: Wage Garnishment Protections of the Consumer Credit Protection Act (CCPA) Portions of Social Security benefits can also be reduced to satisfy the debt. There is no statute of limitations on federal student loan collections, so these consequences can continue until the debt is resolved. Default also disqualifies you from IDR plans, additional federal student aid, and forgiveness programs until you rehabilitate, consolidate, or pay in full.19Federal Student Aid. Student Loan Delinquency and Default