Types of Federal Student Loans

Federal Direct Loans are student loans that are provided to the student directly from the U.S. Department of Education.

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Direct Subsidized Loans and Direct Unsubsidized Loans are federal student loans offered by the U.S. Department of Education (ED) to help eligible students cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. (You might see Direct Subsidized Loans and Direct Unsubsidized Loans referred to as Stafford Loans or Direct Stafford Loans, but these aren’t the official loan names.)

Federal Direct Loans

Federal Direct Loans are student loans that are provided to the student directly from the U.S. Department of Education. For the most part, any student loan distributed after July 1, 2010 is a federal Direct Loan. There are four types of loans offered under this program.

Borrowers: Eligible undergraduate students with demonstrated financial need
Annual Award (subject to change): Up to $5,500 depending on grade level and dependency status

Borrowers: Eligible undergraduate, graduate, and professional students
Annual Award (subject to change): Up to $20,500 (minus any subsidized amounts received for the same period) depending on grade level

Borrowers: Parents borrowing money for their dependent undergraduate students, or eligible graduate or professional students
Annual Award (subject to change): Maximum amount is the cost of attendance (determined by the school) minus any other financial aid the student receives

Borrowers: Anyone with eligible federal student loans who wants to combine any number of those loans into a single loan.
Annual Award (subject to change): N/A

Direct Subsidized and Direct Unsubsidized Loans

Direct Loans are available to undergraduate students on the basis of financial need. These types of loans are broken down into two different types: Direct Subsidized and Direct Unsubsidized Loans.

Direct Subsidized Loans

  • Only available to undergraduate students
  • No credit check required
  • Federal government covers interest on these loans while student is in school at least half-time
  • Monthly payments are not required until six months after leaving school

Direct Unsubsidized Loans

  • Available to both undergraduate and graduate Students
  • No financial needs assessment required
  • No credit check required
  • Interest charged throughout the life of the loan
  • Monthly payments are not required until six months after leaving school

Loan Amount Limits

Your school determines the loan type(s), if any, and the actual loan amount you are eligible to receive each academic year; however, there are limits on the amount in subsidized and unsubsidized loans that you may be eligible to receive each academic year (annual loan limits) and the total amounts that you may borrow for undergraduate and graduate study (aggregate loan limits).

The actual loan amount you are eligible to receive each academic year may be less than the annual loan limit. These limits vary depending on

  • what year you are in school and
  • whether you are a dependent or independent student.

If you are a dependent student whose parents are not eligible for a Direct PLUS Loan, you may be able to receive additional Direct Unsubsidized Loan funds.

Dependent Undergraduates Rates for 2023 – 2024

  • First Year: $5,500 (including up to $3,500 in subsidized loans)
  • Second Year: $6,500 (including up to $4,500 in subsidized loans)
  • Third Year and beyond: $7,500 (including up to $5,500 in subsidized loans)

Annual Student Loan Limits for 2023 – 2024:

  • Independent undergraduates and dependent students whose parents are unable to obtain PLUS loans:
    • $9,500 as freshmen including up to $3,500 subsidized
    • $10,500 as sophomores including up to $4,500 subsidized
    • $12,500 as juniors and seniors including up to $5,500 subsidized
  • Graduate and Professional Students:
    • $20,500 or $40,500 for certain medical training

Aggregate Loan Limit

Aggregate loan limits are the maximum amount of federal student loans that the Department of Education will let a student borrow for their undergraduate and graduate study. Once the maximum amount is reached, the student will no longer receive financial assistance from the government. To complete their degree, the student will have to seek additional assistance through the use of personal loans.

  • Dependent Students: $31,000
  • Independent undergraduates and dependent students whose parents are unable to obtain PLUS Loans: $57,500
  • Graduate and Professional Students: $138,500 or $224,000 for certain medical training including undergraduate borrowing.

Interest Rates

Interest rates for undergraduate students are fixed at 5.05% for the entire life of the loan.

The interest rates for graduate students with unsubsidized Stafford Loans, are fixed for the life of the loan, but are a bit higher: 6.60%.

Direct PLUS Loans

Federal student loans for graduate or professional students and parents of dependent undergraduate students. There are two kinds.

  1. Grad PLUS: for graduate or professional students
  2. Parent PLUS: for parents of dependent undergraduate students

Both PLUS loans are available regardless of financial need, but credit checks are required. Cosigners can be used on these loans to cover a credit deficiency, if required. Interest rates for Direct PLUS loans first disbursed on or after July 1, 2023, and before July 1, 2024: 8.05% The loan disbursement fee (for loans dispersed on or after 10/1/20 and before 10/1/24) is 4.228% of the total loan.

  • The fee is automatically deducted from the money that is disbursed while you’re in school
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