Types of federal student loans

There are three types of federal student loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans

These 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.

Learn more about the three types of federal student loans:

  • Direct Subsidized Loans are for students with demonstrated financial need, as determined by federal regulations. There is no interest charged while an undergraduate student is in school at least half-time, during deferment (a period when loan payments are temporarily postponed), or during grace (the period, usually six months after you graduate or leave school, before you begin to make principal and interest payments).
  • Direct Unsubsidized Loans are federal student loans that aren’t based on financial need. Your school determines the amount you can borrow based on the cost of attendance and other financial aid you receive. Interest is charged during all periods and will be capitalized (when unpaid interest is added to a student loan’s current principal), even when you’re in school, during grace, and deferment periods. This increases your total federal loan cost.
  • Direct PLUS Loans are unsubsidized credit-based federal loans for parents of dependent students and graduate/professional students. PLUS loans can help pay for education expenses up to the cost of attendance (the amount of money your school estimates you’ll need to attend there one year), after your other financial aid is exhausted. Interest is charged during all periods and will be capitalized. This increases your total federal loan cost.


Federal student loan benefits

  • You have flexibility.
    Though any student loan—federal or private—is a legal agreement and must be paid back with interest, federal student loans generally offer more flexible options than private student loans. For example, with federal student loans, the borrower can change their repayment options even after the loan has been disbursed (sent to your school).
  • You can make payments based on your salary.
    Some federal student loans allow for income-driven (or income-based) repayment plans, which cap payments based on the borrower’s income and family size.
  • You don’t need a strong credit history to get federal student loans.
    Unlike with private student loans, most federal student loans don’t require the borrower to have a strong credit history. This can be especially helpful for recent high school graduates who plan on attending college but haven’t had enough time to build up credit of their own.
  • You don’t need a cosigner.
    With most federal student loans, other than Direct PLUS Loans, the borrower’s credit is not considered, so it’s not necessary to apply with a cosigner.

How to apply for federal student loans for college

Applying for a federal student loan is free. All you need to do is complete the Free Application for Federal Student Aid (FAFSA). In addition to federal student loans, the FAFSA also determines your eligibility 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 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.

Submitting the FAFSA is totally free. If you’re asked to pay, that means you’re in the wrong place. Only submit your FAFSA at FAFSA.gov.


What happens after you submit the FAFSA

After you submit the FAFSA, the government will send you a Student Aid Report (SAR), 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 grants, work-study, and loans you may qualify for.

The colleges you’re accepted to will send you a financial aid award letter 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.



Availability of federal student loans

To find out if the school you’re interested in participates in the federal student aid programs, there’s a college search tool, hosted by the National Center for Education Statistics.

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