Different Types of Federal Student Loans

Direct Subsidized Loans – These loans are offered by the US Department of Education and are available to undergraduate students who demonstrate financial need. This loan type is ideal for students who may not be able to afford their tuition without some assistance. The great thing about Direct Subsidized Loans is that the government pays your interest while you’re in school and during certain periods after graduation, such as deferment or forbearance. The downside is that these loans have an annual limit.

Direct Unsubsidized Loans – Unlike Direct Subsidized Loans, Direct Unsubsidized Loans don’t take into account financial need when offering assistance. As a result, anyone with a high school diploma or GED can qualify for one of these loans regardless of their financial situation. However, because these loans don’t require proof of financial need, borrowers will be responsible for paying interest from day one—which means the amount owed will be higher than if it were subsidized.

Direct PLUS Loans – These federal student loans are available to graduate students and parents of dependent undergraduate students who want to borrow additional funds beyond what other forms of financing offer. Since these loans come with higher borrowing limits than Direct Subsidized or Unsubsidized Loans, they may be beneficial if you need more money than those two loan types offer. Just keep in mind that this type of loan does require passing a credit check before being approved.

Federal Perkins Loan: This loan has an even lower interest rate than Direct Subsidized or Unsubsidized Loans (5%), but it’s only available to undergraduate students who demonstrate exceptional financial need; also, there isn’t as much money available for this type of loan as there is for other types so you should apply early if interested in one!

Consolidation Loan: If you have multiple federal student loans, you may be eligible for a Consolidation Loan which would allow you to combine those loans into one single loan with one monthly payment; this could potentially reduce your monthly payments and save you money over time!