Federal Student Loan Types

Since passing the Health Care and Education Reconciliation Act of 2010, the only loan program funded exclusively by the Federal Government is the Federal Direct Loan Program. Under this ideal, banks and other financial institutions only offer Private Student Loans and all Federal Student Loans are provided by the Department of Education. As of 2016, the DOE has issued trillions of dollars in the form of Direct Federal Student Loans. These loans are far more affordable to students because the benefits largely outweigh those of Private Student Loans.

Some of the exclusive benefits of a Federal Student Loan are….

-fixed and drastically lower interest rates,

-income driven repayment plans,

-several forgiveness options

-periods of deferment, and

-credit is not a factor (Federal Loans are currently issued with no credit checks necessary)

Direct Subsidized Loans

These loans are approved for students who will be attending college at least half-time and can prove financial need to cover the cost of their education. These loans range in size from $3,500 – $5,500 per semester. Direct Subsidized Loans taken out between July 1, 2016 and July 1, 2017 have an interest rate of 3.76. Students with Direct Subsidized loans do not accrue interest while the borrower is enrolled in school or while the loans are on deferment. Therefor, the Department of Education pays the interest on the loan while the borrower is enrolled at least half-time, during the six month grace period, and during any periods of deferment. This type of Federal Student Loan is granted by the school the borrower is enrolled in and all payments on that loan are issued to that educational institution.

Direct Unsubsidized Loans

These loans are approved for graduate and undergraduate students with no requirement to prove financial need. The borrower must attend college at least half-time. Direct Unsubsidized Loans can range from $5,500 – $20,000. Unlike the Direct Subsidized Loan, a unsubsidized Direct Loan will require interest payments during all periods. This means the borrower is responsible for payments toward accrued interest while actively enrolled, while on grace period, and during any period that the loan is deferred. Loans issued between July 1, 2016 and July 1, 2017 will have a set interest rate of 3.76 for undergraduates and 5.31 for graduates. The loan is granted by the school the borrower is enrolled in and all payments on the loan are issued to that educational institution.

Federal Perkins Loans

Both graduates and undergraduate students are eligible for Federal Perkins Loans. There are no additional fees outside of interest on a Federal Perkins and that interest rate is typically 5. The school will grant the Federal Perkins Loan to the borrower and all payments will be made to the educational institution from which it was received. The maximum loan size for an undergraduate is $ 5,500 per year/ $27,500 in total. The maximum loan size for a graduate student is $8,000 per year/ 60,000 in total.

Direct Plus Loans for Graduates

This loan type is available to graduate students and professional degree students that are enrolled at least half-time.