Federal student loans offer significant advantages over private loans, including fixed interest rates, income-driven repayment options, and forgiveness programs. Understanding your options helps you borrow wisely for education.

Types of Federal Student Loans

Direct Subsidized Loans

Available to undergraduate students with demonstrated financial need:

  • Government pays interest while you're in school at least half-time
  • Interest covered during grace period and deferment
  • Loan limits based on year in school
  • Must demonstrate financial need via FAFSA

This is the best type of student loan because the interest subsidy saves thousands over the loan's life.

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Direct Unsubsidized Loans

Available to undergraduate and graduate students regardless of need:

  • Interest accrues from disbursement
  • You're responsible for all interest
  • Higher loan limits than subsidized
  • No financial need requirement

While interest accrues during school, you can pay it to prevent capitalization.

Direct PLUS Loans

For graduate students and parents of undergraduates:

  • Credit check required (not credit score based)
  • Can borrow up to cost of attendance minus other aid
  • Higher interest rate than other federal loans
  • Parent PLUS loans are parent's responsibility

See our Parent PLUS Loans guide for detailed information.

Current Federal Student Loan Interest Rates

Federal loan rates are set annually by Congress based on 10-year Treasury note rates. Unlike private loans, federal rates are fixed for the life of the loan.

Key points:

  • Rates set each July 1 for new loans
  • Existing loans keep their original rate
  • All federal loans have fixed rates
  • PLUS loans have higher rates than other federal loans

Federal Student Loan Limits

Dependent Undergraduates

  • Freshman: $5,500 ($3,500 subsidized max)
  • Sophomore: $6,500 ($4,500 subsidized max)
  • Junior/Senior: $7,500 ($5,500 subsidized max)
  • Aggregate limit: $31,000 ($23,000 subsidized max)

Independent Undergraduates

  • Higher limits due to no parental support assumption
  • Aggregate limit: $57,500 ($23,000 subsidized max)

Graduate Students

  • Direct Unsubsidized: $20,500 per year
  • PLUS: Up to cost of attendance
  • Aggregate limit: $138,500 (including undergraduate)

How to Apply: The FAFSA Process

All federal student aid requires completing the Free Application for Federal Student Aid (FAFSA):

  1. Create an FSA ID at StudentAid.gov
  2. Gather tax information and financial documents
  3. Complete FAFSA online at fafsa.gov
  4. List schools you're considering
  5. Submit before school and state deadlines
  6. Review Student Aid Report (SAR)
  7. Accept/decline aid through your school

The FAFSA opens October 1 each year. Apply early—some aid is first-come, first-served.

Federal Loan Benefits

Federal loans include protections private loans don't:

When to Consider Private Loans

Only borrow private student loans after maximizing federal options. Private loans may offer lower rates for excellent credit but lack federal protections.

Learn more at StudentAid.gov