Federal Student Loan Programs 101

The Federal Direct Student Loan Program Links to an external site. (Direct Loan Program) is funded by the federal government and provides long-term, low-interest loans to students and parents.

There are different types of Direct Loans. They vary according to who is eligible, the amount awarded, when payment of interest and/or principle is due, and whether and when loan interest accrues and who pays it. For more details on each type of Direct Loan, click on the following loan names:

Direct Subsidized Loans Links to an external site. are made to undergraduate students who demonstrate financial need. With this particular loan, the federal government pays the interest during certain periods when repayment by the borrower isn’t required. (The loan gets its name from the government assistance—called a subsidy—provided to the borrower.) 

Direct Unsubsidized Loans Links to an external site. are made to undergraduate, graduate, and professional-school students who do not demonstrate need or who need additional funds after they’ve received the maximum Direct Subsidized Loan. The student is responsible for payment of all interest that accrues from the date of the first disbursement and throughout the life of the loan.

Direct PLUS Loans Links to an external site. are made to parents of dependent students and to graduate and professional-degree students. Unlike other Direct Loans, eligibility for these loans may be based in part on the borrower’s credit history and ability to repay. Grace and deferment periods are available on PLUS loans, but interest continues to accrue. Be sure to stay up to date on the interest rates, annual loan limits, and origination fees. Origination fees are fees charged by a lender that cover the cost of processing the loan.

Federal Direct Parent PLUS Links to an external site. loans are borrowed by parents of dependent undergraduate students. It is based on credit history and has a 5.30% interest rate. There is no grace period, and interest accrues after disbursement. You may contact loan servicer to request a deferment while enrolled at least half-time.

Federal Direct Graduate PLUS Links to an external site. loans are borrowed by graduate and professional degree-seeking students. It is credit-based and has a 7.08% interest rate. There is no grace period, and interest accrues after disbursement. You may contact loan servicer to request a deferment while enrolled at least half-time.

Federal Perkins Loans Links to an external site. provide low-interest loans to undergraduate, graduate, and professional-degree students with high financial need. They were distributed by the school based on the financial needs of its students and the amount of funds it has available. Under federal law, the authority for schools to make new Perkins Loans ended on Sept. 30, 2017, and final disbursements were permitted through June 30, 2018. As a result, students can no longer receive Perkins Loans. A borrower who received a Perkins Loan can learn more about managing the repayment of the loan by contacting either the school that made the loan or the school’s loan servicer. 

More information on Federal Student Loans can be found on the Federal Student Aid website Links to an external site.. In order to receive any student loans you must complete the FAFSA Links to an external site.. Student loan interest does change and it is a good idea to refer to the Federal Student Aid website Links to an external site. for the most updated information.

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