Federal student loans are available for college students through the U.S. Department of Education. There are two types of federal student loan programs.

  1. The William D. Ford Federal Direct Loan Program  is the largest federal student loan program. The U.S. Department of Education is the lender. There are four types of Direct Loans.
    • Direct Subsidized Loans are offered to undergraduate students who can demonstrate financial need. Students may borrow between $3,500 and $5,500 depending on their year in school.
    • Direct Unsubsidized Loans are available to undergraduate, graduate and professional students. Students do not need to demonstrate financial need for this type of loan. Students may be awarded between $5,500 and $20,500 depending on the year in school and other financial aid received.difference between a Federal Direct and Perkins Loan
    • Direct PLUS Loans are offered to graduate and professional students or parents of undergraduate students. Maximum amount for PLUS loans is the cost of attendance minus any other financial aid awarded.
    • Direct Consolidation Loans allows borrowers to consolidate all loans under a single loan program and make one payment.
  2. The Federal Perkins Loan Program is for undergraduate and graduate students who demonstrate great financial need. Through this program, the school is the lender. As of 2012, undergraduate students may borrow up to $5,500 and graduate students may borrow up to $8,500.

Students or parents may apply for federal student loans online by completing the Free Application for Federal Student Aid (FAFSA). Based on the results of the FAFSA, the U.S. Department of Education may send student loan offers.

Before receiving loans, borrowers must complete entrance counseling and sign a Master Promissory Note (MPN) agreeing to terms of the loan. Entrance counseling provides borrowers with information about the loan program and ensures the borrower understands how to repay the loan.


Before accepting any type of loan, it is important to understand the terms of repayment. You will eventually have to repay student loans with interest. The good news is that the interest rate on federal student loans is usually much lower than the interest rate on private loans or credit cards.

Federal student loan repayment plans are unique in a few ways.

  • For Direct Loans, repayment does not begin until the student leaves college or drop below half time.
  • Repayment for PLUS loans begins once the loan is fully paid out.
  • Some federal loans offer a 6-month grace period, meaning the borrower does not have to begin repaying until 6 months after they leave school.
  • Borrowers who demonstrate financial need may qualify to have their interest paid by the government while in college.
  • There are many repayment plans to choose from to fit your individual needs.
  • Some borrowers may qualify for an income-based repayment plan. Payments are based on the borrower's income.
  • Federal student loans offer the option to postpone payments in times of financial need.
  • Borrowers who work in certain careers may qualify for loan forgiveness.
  • Make payments online or by postal mail.