Federal student loans, whether they are in the student name or the parent name, are borrowed money that must be repaid with interest. Students are encouraged to borrow the Federal Direct Subsidized and Unsubsidized Loan prior to turning elsewhere for loans. To see if you qualify for federal education loans, complete the Free Application for Federal Student Aid (FAFSA).
Federal Subsidized and Unsubsidized Loans
Typically a student's first option for borrowing. This loan comes in both a subsidized and an unsubsidized version. Subsidized loans are awarded to undergraduate students who can prove financial need. The federal governments covers all interest payments on these loans while the student is in school. Students are responsible for all interest payments on unsubsidized loans, although they may be deferred while the student is in school.
Rate for 2018/19 academic year: 5.05% for undergraduate students, 6.60% for graduate students. Rates are fixed and are set every May for the upcoming academic year.
Fees: 1.066% as of Oct 1, 2017
Eligibility: U.S. Citizen/Permanent residents; full/part-time undergrad/grad student; need-based
Amount: For dependent students: 1st year - $5,500 (no more than $3,500 can be subsidized), 2nd year - $6,500 (no more than $4,500 can be subsidized), 3rd year and beyond - $7,500 (no more than $5,500 can be subsidized). Dependent undergraduate student may not borrow more than $31,000 over all years (no more than $23,000 of this amount may be in subsidized loans). For independent students: 1st year - $9,500 (no more than $3,500 can be subsidized), 2nd year - $10,500 (no more than $4,500 can be subsidized), 3rd year and beyond - $12,500 (no more than $5,500 can be subsidized). Independent undergraduate students may not borrow more than $57,500 over all years (no more than $23,000 of this amount may be in subsidized loans). Graduate/Professional Students: Borrow up to $20,500 in unsubsidized funds per year. Cannot borrow more than $138,500 for all years.
Repayment Term: Up to 10 years
Grade Period: 6 months
How to apply: Complete the FAFSA by your school's specified deadline.
Federal PLUS Loans
Description: Loan for parents and graduate students funded and administered by the U.S. Dept. of Education.
Rate: Fixed at 7.60% for the 2018/19 academic year. Rates are fixed and are set annually in May for the upcoming academic year.
Fees: 4.264% as of Oct 1, 2017
Eligibility: U.S. Citizen/permanent resident; parent of full/part-time, parent of dependent undergraduate student; graduate student. A credit check is required.
Amount: Up to the difference between college costs and financial aid received.
Repayment Term: Up to 10 years for a standard repayment term. Loan repayment begins within 60 days after final disbursement. Parents can choose to defer payments until up to 6 months after the student leaves school or drops below half-time status. Interest accrues during this period and can be paid monthly, quarterly, or will be capitalized. Payments can be deferred for graduate students until graduation. Forbearance options are also available.
Minimum payment: $50/month
How to apply: Submit the FAFSA by your school's deadline. You will also need to complete an application, known as a Master Promissory Note, to accept your award.