Understanding Federal Student Loans

Federal student loans, also referred to as government loans, offer reliable funding that is distributed directly from the government. Learn more about how they work and what you need to know to take the guesswork out of your application.

What is a Federal Student Loan?

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.

See our private student loans

Types of federal student loans

There are several types of federal student loans, including:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans, of which there are two types: Grad PLUS Loans for graduate and professional students, as well as loans that can be issued to a student's parents, also known as Parent PLUS Loans.

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.

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 may be capitalized (when unpaid interest is added to a student loan’s principal amount), at certain times during the loan period, which may increase your total federal loan cost.
  • Direct PLUS Loans are unsubsidized 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. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify. Interest is charged during all periods and may be capitalized at certain times during the loan period, which may increase 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 income.
    Some federal student loans allow for income-driven (or income-based) repayment plans for qualifying borrowers, 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, 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 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.

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

Next Steps

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 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.

Federal student loans for graduate students

Graduate students may qualify for aid from these federal student aid programs:

Availability of federal student loans

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.

Related topics

footnote FAFSA® is a registered service mark of U.S. Department of Education, Federal Student Aid.