Federal Student Loans

If you file a FAFSA, your financial aid package may include Federal Direct Student Loans. These loans from the federal government do not require repayment while you are enrolled (for at least six credits) in a degree program. A separate FAFSA will need to be filed each year to continue receiving federal loans.

Please note, items with an * denote a change to federal rules regarding student loans that went into effect July 1, 2026.

Federal Direct Student Loan (Undergraduates)

• This loan is taken out in the student’s name and they will be responsible for repayment.
• For Subsidized Federal Student Loans: you must file a FAFSA and demonstrate financial need to qualify. The government will pay the interest while you’re enrolled and during your post-graduation grace period.
• For Unsubsidized Federal Student Loans: you must file a FAFSA to qualify and you will pay interest as well as principal, but the payments will be deferred until after graduation.
• For the 2026-2027 academic year, the fixed interest rate is 6.52%. The federal government subtracts an origination fee of 1.057% prior to disbursement.
• A dependent undergraduate student may borrow up to $31,000 in total under the Direct Loan program, of which a maximum of $23,000 may come from subsidized loans if the student is eligible. An independent undergraduate student may borrow up to $57,500 in total, of which a maximum of $23,000 may come from subsidized loans if the student is eligible.
• The full-year loan award will disburse in two segments, one in each semester after the add/drop period.
• Repayment is deferred until six-months after graduation, you drop below half-time status(six credits), or you are no longer enrolled at the college. At that point, you should receive an email about exit counseling, which is recommended. Online exit counseling can be completed here on the Federal Student Aid website.
• More information about Federal Student Loans, including specific requirements and eligibility, can be found at the Federal Student Aid website here.

Federal Direct Parent PLUS Loan (Undergraduates)

• Parent PLUS loans are borrowed by a parent on behalf of a dependent undergraduate student. The parent borrowing the PLUS loan is responsible for repayment.
• The fixed interest rate for Parent PLUS loans borrowed for the 2026-2027 school year is 9.07%. Prior to disbursement, the federal government subtracts an origination fee of 4.228%.
• Funds for the year will be credited to the student’s account in two disbursements, one for each semester.
• Current students who meet the legacy eligibility rules may continue to use Parent PLUS borrowing under the transition provisions through the allowed period. Parents of new incoming students and of current students who do not qualify for legacy status, will be subject to new rules and limits beginning July 1, 2026, such as a borrowing limit of $20,000 per year per dependent student and a lifetime limit of $65,000 per dependent student.*
• Repayment begins within 60 days after the final loan disbursement (usually spring semester). However, parents may request deferment until after graduation, but they need to choose to defer during the PLUS loan application process, or afterward, based upon the student’s enrollment status. The deferment is not automatic and interest continues to accrue.
• New Parent PLUS loans will not be eligible for income-driven repayment or Public Service Loan Forgiveness (PSLF).*
• More information about Parent PLUS Loans, including specific requirements, eligibility, and how to apply can be found at the Federal Student Aid website here.

Federal Direct Unsubsidized Loans (Graduates)

• Graduate students accepted into a St. Mike’s Graduate degree program and are enrolled at least half time per semester (six credits) may be eligible for this loan.
• The fixed interest rate for a Graduate Direct Unsubsidized loan for the 2026-2027 school year is 8.07%. An origination fee of 1.057% is deducted by the federal government prior to each disbursement.
• The academic year’s loan is disbursed in two parts, one for each semester.
• Graduate federal loans cap at $20,500 per year with a lifetime cap of $100,000.*
• Repayment of interest and principal begins six months after graduation or upon going below half-time student status.
• More information about Federal Unsubsidized Student Loans, including specific requirements and eligibility, can be found at the Federal Student Aid website here.

Graduate PLUS Loans (Graduates)

• Grad PLUS is eliminated for new borrowers after July 1, 2026 with legacy borrowers allowed to continue only under the transition rules.*
• The fixed interest rate for Grad PLUS loans borrowed for the 2026-2027 school year is 9.07%. Prior to disbursement, the federal government subtracts an origination fee of 4.228%.

Loan Repayment

Borrowers have two repayment options*:

1. Standard Repayment Plan – Fixed monthly payments over 10 to 25 years, depending on the loan balance: under $25,000 (10 years), $25,000–$49,999 (15 years), $50,000–$99,999 (20 years), $100,000+ (25 years).
2. Repayment Assistance Plan (RAP) – Income-driven, with payments ranging from 1% to 10% of adjusted gross income (AGI), minimum $10/month, reduced by $50 per dependent. Forgiveness occurs after 30 years, with interest subsidies and principal reductions to prevent negative amortization.

Legacy plans like SAVE, PAYE, and ICR will end for new enrollees on July 1, 2026, and fully sunset by July 1, 2028. These borrowers will need to switch to a Standard Repayment Plan or the Repayment Assistance Plan. IBR remains available for loans disbursed before July 1, 2026.*

Tax and Forgiveness Implications*

• Forgiveness under income-driven plans (RAP) is now taxable, except for occupation-based forgiveness like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness.
• Borrowers should plan for potential tax liabilities if expecting loan cancellation in 2026.
• Public Service Loan Forgiveness (PSLF) has new rules that narrow employer eligibility. Payments made after July 1, 2026 may not count if the employer engages in activities with a “substantial illegal purpose.” Existing qualifying payments remain credited under prior rules.

Planning Tips for Borrowers

• Graduate and professional students should evaluate whether federal caps cover program costs or if private loans are needed.
• Current borrowers on legacy plans should review options before July 1, 2028, to avoid automatic enrollment in RAP or Standard Repayment.
• Consider scholarships, grants, and tuition payment plans to reduce reliance on loans.

Additional information about these loans can be found on the Federal Student Aid website. A more comprehensive explanation of changes to federal student loans effective July 2026 can be found here.

Federal Student Loan Rates for 2026-2027 Academic Year

Based on the May 12 Treasury auction high yield of 4.468%, the fixed interest rates for federal student loans disbursed on or after July 1, 2026 are: