Federal Student Loans

Direct Subsidized and Unsubsidized Loans

Direct Loans (most commonly referred to as Stafford Loans in the past) have a low fixed interest rate, have flexible income-based repayment options, and are based on need rather than credit. These federal loans are used primarily for tuition, books and on campus housing, whereas private student loans can also be put toward supplies, off campus housing, transportation and even laptops for schoolwork.

With a Direct Subsidized Loan, interest does not accrue while you are attending school or during the post-graduation grace period, but there is a maximum amount a student can borrow. Interest does accrue on a Direct Unsubsidized Loan, but the interest payments can also be deferred. To qualify for a Direct Subsidized Loan, one must show a significant amount of financial need. *Note: As of July 1, 2012, graduate and professional students may only be eligible for Direct Unsubsidized Loans.

PLUS Loans

PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can borrow in order to contribute to tuition and school related expenses. Students must be enrolled at least half-time, and the parent must have moderately good credit. PLUS Loans typically have lower interest rates than most private loans and allow parents to borrow up to the total cost of attendance.

PLUS Loans, along with private student loans, can help fill the gap after Direct Loans and scholarships have been exhausted. The primary benefit is that families can borrow federally guaranteed, low interest loans to help pay for their child’s education, without needing to worry about collateral, need-based forms, or FAFSA preparation time.

Graduate Loans

Attending graduate school can be very expensive. As a result, financial aid for graduate students has become increasingly important. Graduate and professional degree students may qualify for Direct Unsubsidized Loans if they are enrolled at least half-time.

Graduate students can also apply for PLUS Loans to help pay for the total cost of education minus any aid already awarded. Similar to the Parent PLUS Loan, the graduate student would need to have a good credit history with minor adversities. Graduate students who can demonstrate exceptional financial need may qualify for a Perkins Loan.

Perkins Loans

The Perkins Loan is a low-interest federal student loan for undergraduate and graduate students. In the case of Perkins Loans, the college acts as the lender, drawing funds from a small pool of money provided by the federal government. Perkins Loans are awarded based on exceptional financial need.


Find student loan tips in our expert advice articles.