Feb 20, 2018

Types of Federal Student Loans

Paying for college tuition can be difficult depending on the college you’re interested in or the state the college is located in. The U.S. Department of Education provides a variety of federal student loan programs for students who have difficulty paying for college tuition. This article describes the most popular types of federal student loans available for undergraduate and graduate college students.

William D. Ford Federal Direct Loan Program

Students who are accepted into the William D. Ford Federal Direct Loan Program receive tuition funding from the U.S. Department of Education (as the lender). As the largest federal student loan program, there are four additional types of direct loans available: 1) direct subsidized loans; 2) direct unsubsidized loans; 3) direct PLUS loans; and 4) direct consolidation loans.

Direct subsidized loans are for eligible undergraduate students who demonstrate financial need to cover the costs of higher education at a college or career school. Direct unsubsidized loans have a different eligibility process, in which undergraduate, graduate, and professional students don’t have to demonstrate financial need to be eligible. For eligible undergraduate students with either direct subsidized or unsubsidized loans, funding can be from $5,500 to 12,500 per year; this can depend on a few factors such as their current year in college. On the other hand, graduate students can receive up to $20,500 per year in direct unsubsidized loans. (

Direct PLUS loans focus on paying education expenses up to the cost of attendance minus all other financial assistance for parents of dependent students and for graduate/professional students. If you’re a graduate student with a direct PLUS loan, you can receive loans for remainder of your college costs not already covered by other financial aids. For direct consolidation loans, financial assistance for tuition allows students to combine all of their eligible federal student loans into a single loan with a single loan servicer (

Federal Perkins Loan Program

In the Federal Perkins Loan Program, the school is the lender and the program works for undergraduate and graduate students with a unique financial need. The amount of financial assistance you receive in the Perkins Loan Program can be contingent on if you’re an undergraduate or graduate student, or even a parent of a dependent undergraduate student.

Undergraduate students who are eligible for the Federal Perkins Loan Program can receive up to $5,500 per year ( The amount of loans they receive depends on the student’s financial need, the amount of other aid they receive, and the availability of funds at their college or career school.

To Consider Before Applying

There are few important factors to consider before applying for federal student loans. When you sign your promissory note, you are agreeing to repay the loan according to the terms of the note, even if you don’t complete the program or didn’t like the education you received. That’s why it’s important to understand the terms of your loan and to keep copies of the loan documents. Another vital factor is the importance of making student loan payments on time. Students are required to pay the full amount required by their repayment plan; this is because partial payments do not fulfill their obligations to repay student loans on time.

For information on how student loan debt affects your credit score, please see our blog post: Do Student Loans Affect Your Credit Score?


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