Federal Student Loans

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Unsubsidized + Subsidized Loans and Parent PLUS loans.

While there are many types of federal student loans, U.S. Citizens and eligible noncitizens pursuing their degree can typically access Direct Unsubsidized + Subsidized Loans and Parent PLUS loans.

All federal student loan interest rates and fees are set on July 1st of each year and remain fixed for the life of the loan.

Federal loans come with a standard repayment schedule and offer a wide range of repayment assistance options.

Parent PLUS vs. Private Loans: Key Considerations for Families

Typically, undergraduate students hit their cap on Stafford loans (subsidized + unsubsidized) and then the family decides whether to take out Parent PLUS or private loans for the rest. Parents with good credit scores (650+) tend to gravitate towards private since they can get better rates on that market.

For Parent Plus oans disbursed on or after July 1st 2021 and before July 1st 2022, the federal interest rates and fees are 6.284% Interest + 4.228% Origination fee. market.

Loans and creditworthiness

Federal student loans do not screen creditworthiness (or the ability to repay), whereas private student loans include a credit review to determine the borrower’s anticipated ability to pay. Additionally, there are benefits unique to the federal program such as Income Driven Repayment Plans and Public Service Loan Forgiveness

Three types of loans

When you apply for federal student loans, you will find that you may qualify for one or more of three types of loans: subsidized or unsubsidized direct loans (also called Stafford loans), PLUS loans, and Perkins loans.

Direct loans

Direct loans are awarded to most undergraduate students

Plus loans

Plus loans are generally reserved for graduate students and to parents of dependent undergraduate students.

Perkins loans

Perkins loans are actually funded by your school through a program with the federal government, and not all schools participate.

Interest Rates on Federal Student Loans

Federal Loan Interest Caps

Unlike private loans, federal student loans have interest rate caps to protect you. Unsubsidized direct loans are capped at 6%, while subsidized loans are capped at 6.8%. Perkins loans are capped at an attractive 5%.

Compare Loan Options

Though you will be borrowing money from the federal government, you have options for your loans. We highly recommend shopping around if you’re going with a bank-issued federal student loan.

Beware Loan Penalties

Do read the fine print, as some benefits disappear if you miss a payment or even if you’re just a little bit late with a payment. We all know that the months (and years) after you graduate from college can be uncertain financially.

Financial Hardship, Loan Forgiveness, and Other Benefits of Federal Loans

That said, federal loans offer you a lot of options that private loans do not if you find yourself out of work or otherwise experiencing financial hardship.

For example, you may be able to suspend your payments for a few months while you get back on your feet, or you may be able to tie the amount you pay to your income so that you aren’t overburdened.

Public service

Public service can also offer you loan forgiveness with some federal loans. And these are just a couple of the ways the federal government will work with you to ease your financial stress and help you pay back your loans.

Start With a FAFSA

So, how will you know if you’re eligible for grants or federal loans? There’s just one application for federal financial aid, so you don’t have to submit multiple applications for grants, loans, etc.

Easy application submission

Several sets of algorithms will be applied to the income and tax information you supply for yourself and your parents (if you’re a dependent student) to determine what kind of aid you qualify for and how much.

Steps after algorithms

Then, once you receive your aid package, you can determine whether or not you’ll need to supplement your grants and/or federal student loans with any private loans.

‍Federal Student Loans