A federal student loan is a type of loan provided by the U.S. government to eligible students or their parents/guardians to help cover the cost of higher education. Since funds are distributed directly from the government, they are a dependable option for financing education.
Paying for college tip
After exploring federal loans, private student loans can help if you still need more money to cover college expenses.
There are several types of federal student loans, including:
These federal student loans are available through the Federal Direct Loan Program. Since federal loans offer different benefits than private student loans, you should always explore them first.
To get a Direct Subsidized Loan or a Direct Unsubsidized Loan, you must be enrolled at least half-time at a school that participates in the Direct Loan Program. Typically, you must also be enrolled in a program that leads to a degree or certificate awarded by the school.
Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students—and you don’t need to show financial need.
To apply, you’ll first have to submit your Free Application for Federal Student Aid (FAFSA®).
There are two types of limits on the amount in subsidized and unsubsidized student loans that you may be eligible to receive each academic year. There are limits on the total amounts you may borrow for your undergraduate and graduate study (aggregate loan limits) and there’s annual loan limits. The limits can vary depending on things like, what year you’re in school and whether you’re an independent or dependent student.
Dependent students (except students whose parents were not eligible for Direct PLUS Loans) can get up to $31,000 in subsidized and unsubsidized loans, but no more than $23,000 of that amount can be in subsidized loans (aggregate loans).footnote 1
Undergraduate independent and dependent students whose parents were not eligible for Direct PLUS Loans can get up to $57,500, but no more than $23,000 of that amount can be in subsidized loans (aggregate loans).footnote 1
Graduate or professional students can get up to $138,500 in combined subsidized and unsubsidized loans, but no more than $65,500 of that amount can be in subsidized loans. You may also be eligible for Direct PLUS Loans for Graduate or Professional Students, which lets you borrow up to your Cost of Attendance (COA) minus any other financial aid received.footnote 1
Applying for federal student loans is free. All you need to do is complete the Free Application for Federal Student Aid (FAFSA®). In addition to determining eligibility for federal student loans, the FAFSA® also determines whether you may qualify for other federal student aid like grants and work-study. You need to submit the FAFSA® every year you’re enrolled in college to receive federal student aid.
The easiest and fastest way to file the FAFSA® and check your eligibility for federal student loans is online. Your application will be processed within 3-5 days. You can also mail in a paper application, but processing it will take about 7-10 days.
You should never pay to submit the FAFSA®—filing is always totally free and there’s only one official FAFSA® form.
After you submit the FAFSA®, the government will send you a FAFSA® Submission Summary, which gives you basic information about your eligibility for federal student aid.
The colleges you included on your FAFSA® will have access to this information, and they'll use it to determine the amount of federal student loans, grants, and work-study you may qualify for.
The colleges you’re accepted to will send you a financial aid offer detailing the financial aid you are eligible to receive—including federal student loans, grants, and work-study.
The amount of federal aid you receive from each school can vary, just as the cost of attending each school varies.
Graduate students may qualify for aid from these federal student aid programs:
To find out if the school you’re interested in participates in federal student aid programs, use the college search tool, hosted by the National Center for Education Statistics.
There are different types of repayment options for federal student loans. The two main types are fixed repayment plans and income driven repayment plans.
Fixed repayment plans—these plans determine what your monthly payments will be based on the total amount you owe, what your interest rate is, and the repayment time period.
Income-driven repayment plans—these plans determine what your monthly payments will be based on the size of your family and how much money you make.
If you make qualifying payments for a certain period on an income-driven repayment plan, your remaining loan balance (if you have one) can be forgiven (cancelled).
It's always a good idea to do your research and see what repayment options might be best for you. In some situations, you can have your federal student loans forgiven, canceled, or discharged. That means you won’t have to pay back some or all of your loan(s). Public Service Loan Forgiveness is the most common way students apply to have their loans forgiven.
The school you’re applying to will decide how much you can get through federal student loans based on how much other financial aid you receive, but there are limits.
For more details, visit the U.S. Department of Education’s website.
Yes, you can take out both federal and private student loans. You should always fill out the FAFSA® first to see what federal student loans, grants, and scholarships you’re eligible for. If you still need money to pay for college, private student loans can help bridge those gaps. It is important that you stay organized and responsible because you’ll have to pay back federal and private student loans with interest.
Federal Direct Subsidized Loans are based on financial need, while Federal Direct Unsubsidized Loans are not. Your financial need is determined by a formula factoring in your cost of attendance, student aid index number, and different types of financial aid received. Make sure you fill out the FAFSA® as early as possible to see if you're eligible. It's always worth it to complete the FAFSA®, even if you don't think you will qualify for federal loans.
All federal student loans have fixed interest rates. This means that the interest rate will remain the same over the life of your loan.
For federal student loans first disbursed on or after July 1, 2024 and before July 1, 2025, the interest rates are as follows:
Direct subsidized and unsubsidized undergraduate loans: fixed rate of 6.53%
Direct unsubsidized graduate or professional loans: fixed rate of 8.08%
Direct PLUS loans for parents, graduates, and professional students: 9.08%
For federal student loans, there are fixed repayment plans (monthly payments are based on the total amount you owe, your interest rate, and the repayment time period) and income-driven repayment plans (monthly payments are based on the size of your family and your income). Learn more about federal student loan repayment plans.
Interest rates between federal and private student loans differ as interest rates for federal loans are fixed and typically lower than private student loans. Private student loans can have fixed or variable interest rates, but the interest rates are often much higher than federal interest rates, leading to an increase in the total amount you pay back.
These interest rates differ because federal student loans are set and regulated by the government, so there are terms and conditions they must follow by law.
On the other hand, private student loans are offered by banks, lenders, and other private institutions, which set rates based on market conditions and other factors. Private student loans are also only offered after customers go through a credit check, so having a good credit history impacts the interest rate you’re offered.
For federal student loans, all borrowers need to submit the FAFSA®. From there, your school determines the loan type(s), if any, and the actual loan amount you are eligible to receive each academic year. To receive a subsidized or unsubsidized loan, you must be enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, you must also be enrolled in a program that leads to a degree or certificate awarded by the school. Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduate and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan.
For private student loans, there are a few steps borrowers must complete to get one:
This process can take between a few days to a couple of weeks, so make sure you give yourself plenty of time to complete your application process before any deadlines.
Federal student loans do not have any credit score requirements. However, private student loans do. All private student loan applications require a credit check to be approved. It is often encouraged that applicants apply with a creditworthy cosigner to up their chances of approval and lock in a lower interest rate.
If you’re wondering whether federal or private student loans are right for you, it’s always best to start with federal student loans. It’s important to fill out the FAFSA® as soon as possible as funds are first-come, first-serve. The FAFSA® offers federal student loans, as well as grants and scholarships. If you still need money to cover the rest of your school costs, private student loans are an option. Just make sure you borrow responsibly and understand that you’ll have to pay both federal and private student loans back with interest.
