Types of Federal Student Loans

Understanding the different types of federal student loans is crucial for navigating financial aid. Each loan type has unique features, eligibility requirements, and repayment options, helping students manage their education costs effectively while planning for their financial future.

1. Direct Subsidized Loans

   • Available to undergraduate students with demonstrated financial need.
   • The U.S. Department of Education pays the interest while the borrower is in school at least half-time, during the grace period, and during deferment.
   • Borrowers can receive up to $3,500 to $5,500 per academic year, depending on their year in school.
   • Repayment begins six months after graduation, leaving school, or dropping below half-time enrollment.

2. Direct Unsubsidized Loans

   • Available to both undergraduate and graduate students; no financial need is required.
   • Interest accrues while the borrower is in school, during the grace period, and during deferment.
   • Borrowers can receive up to $5,500 to $20,500 per academic year, depending on their year in school and dependency status.
   • Repayment begins six months after graduation, leaving school, or dropping below half-time enrollment.

3. Direct PLUS Loans

   • Available to graduate or professional students and parents of dependent undergraduate students.
   • Requires a credit check; borrowers with adverse credit history may need an endorser.
   • Borrowers can borrow up to the total cost of attendance minus any other financial aid received.
   • Interest accrues while the borrower is in school, and repayment begins immediately, although deferment options are available.

4. Direct Consolidation Loans

   • Allows borrowers to combine multiple federal student loans into a single loan with one monthly payment.
   • Can help simplify repayment and may lower monthly payments by extending the repayment term.
   • Interest rate is a weighted average of the loans being consolidated, rounded up to the nearest one-eighth percent.
   • Borrowers can choose a repayment plan that best fits their financial situation.

5. Federal Perkins Loans (no longer offered, but still relevant for some borrowers)

   • Was a low-interest loan program for students with exceptional financial need.
   • Borrowers could receive up to $5,500 per year, with a fixed interest rate of 5%.
   • The school was the lender, and repayment began nine months after graduation or dropping below half-time enrollment.
   • Some borrowers may still have Perkins Loans and can benefit from specific repayment options and forgiveness programs.