federal student loans

Federal Direct Loans are loans for students and parents to help pay for the cost of a student's education after high school. The lender is the U.S. Department of Education. The money you borrow must be used for any school costs including tuition, fees, books, supplies, or room and board. Here are the types of loans available through the Federal Direct Loan Program.

Federal Subsidized Stafford Loans
Federal Stafford Loans are low interest loans for students enrolled at least half-time as an undergraduate/professional student in an eligible institution. These loans are available to those who qualify based on need or income. "Subsidized" means that the federal government will pay all interest on your loan until you begin repayment which starts automatically six months after you graduate or cease to be enrolled at least half-time.

Federal Unsubsidized Stafford Loans
Unlike Federal Subsidized Stafford Loans, Unsubsidized Stafford Loans are not based on need or income. Students and families of all income levels have access to federal guaranteed loans for college. Loan limits, interest rates, and repayment terms are the same as the Subsidized Stafford Loan; however, interest begins accruing from the day the loan is made.

Federal PLUS Loan
Federal PLUS Loans (Parent Loan for Undergraduate Students) are also available for your educational costs if you are enrolled at least half-time at an eligible institution, but the loan is made to your parents. Eligibility is not based on need or income, but parents must not have an adverse credit history. A parent may borrow up to the cost of education less any other financial aid awarded with repayment beginning within 60 days of loan disbursement.

GradPLUS Loan
Effective for loans certified by the educational institution on or after July 1, 2006, a graduate student or professional student may borrow a Federal PLUS loan. With benefits similar to the traditional PLUS loan for parents, the graduate student PLUS loan program (Grad PLUS) allows graduate students or professional students to borrow up to the cost of education at a particular institution minus any other financial aid. The Grad PLUS loan is meant to fill the gap between your financial aid package and the cost of education - your school must determine your Federal Stafford loan eligibility before you apply for a PLUS loan for graduate students. With the graduate student PLUS loan, the student is the borrower and not the parent.

Consolidation Loan
There may be advantages to consolidating (combining) your federal student loans into one loan, starting with the convenience of making a single monthly payment. Consolidation generally extends the repayment period, resulting in a lower monthly payment. This may make it easier for you to repay your loans. However, you will pay more interest if you extend your repayment period through consolidation since you will be making payments for a longer period of time. Contact the Direct Loan Consolidation Center for more information at 1-800-557-7392.

Federal Student Loan Comparison Chart (Effective July 1, 2010)

	Subsidized Stafford Loan	Unsubsidized Stafford Loan	PLUS/GradPLUS Loans
Borrower	Dependent or independent student	Dependent or independent student	Parents of dependent undergraduate students AND graduate/professional students borrowing for themselves
Interest Rates	Undergraduate student - 4.5% fixed rate Rate schedule through 2011 Graduate or professional student - 6.8% fixed rate	6.8% fixed rate	7.9% fixed rate
Eligibility	Based on financial need	No income restrictions	No income restrictions
In-School Interest	Paid by federal government	Paid by student borrower*	Borrower responsibility
Grace Period	Interest paid by federal government during six-month grace period	Interest paid by borrower during six-month grace period	No grace period - parent borrower may request a forbearance while student is enrolled AND graduate/professional student may defer payments while enrolled
Repayment Terms	Repayment begins after grace period $50 minimum monthly payment 10-25 year maximum repayment term (based on total loan balance)	Repayment begins after grace period $50 minimum monthly payment 10-25 year maximum repayment term (based on total loan balance)	1st payment due within 60 days after loan is fully disbursed $50 minimum monthly payment 10-25 year maximum repayment term (based on total loan balance)

* Borrower has option of making interest payments while in school or waiting until repayment. Interest not paid during school will be capitalized one time at end of grace period.

Please reference studentaid.ed.gov for further information regarding interest rates.

Federal Subsidized and Unsubsidized Stafford Loan Limits (Effective July 1, 2010)

	Dependent Students (except students whose parents cannot borrow a PLUS loan)	Independent Students (and students whose parents cannot borrow a PLUS loan)	Graduate and Professional Students
1st year	$5,500 Maximum of $3,500 in subsidized loans	$9,500 Maximum of $3,500 in subsidized loans	$20,500 Maximum of $8,500 in subsidized loans
2nd year	$6,500 Maximum of $4,500 in subsidized loans	$10,500 Maximum of $4,500 in subsidized loans	same as above
3rd-5th (years each)	$7,500 Maximum of $5,500 in subsidized loans	$12,500 Maximum of $5,500 in subsidized loans	same as above
Maximum total Stafford debt upon graduation	$31,000 Maximum of $23,000 in subsidized loans	$57,500 Maximum of $23,000 in subsidized loans	$138,500 Maximum of $65,500 in subsidized loans

Posted: 7/7/2001
Updated: 7/7/2010

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