Types of Federal Student Loans

By Jill Gardiner , last updated January 10, 2012

If you or your child is getting ready to go to college in the near future, it’s probably about time you started to familiarize yourself with the types of federal student loans that may be available to you. Because of the rising cost of higher education, more and more students will have to rely on loans to help finance their degree. Choosing a federal student loan rather than one offered by a private lender has a lot of perks, including a reasonable interest rate, flexible repayment options, and little to no credit requirements. Understanding the type of federal student loans, whom they’re for, and what their lending limits are can help you budget for paying your tuition bill. In order to find out for sure which types of federal student loans you qualify for, fill out the Free Application for Federal Student Aid (FAFSA) as soon as possible at FAFSA.ed.gov.


One of the most common types of federal student loans is the Stafford loan because some version of this loan is available to all undergraduate and graduate students. There are two types of Stafford loans, subsidized and unsubsidized. With subsidized loans, you are not charged interest while you’re in school or during grace periods, but with unsubsidized student loans, you are. You can, however, choose to pay the interest during these periods rather than letting it accrue. Your financial need will determine which of these you qualify for. The amount you can borrow and the interest rate you’ll pay for your Stafford loan depends on what academic year you’re in and whether you’re pursuing an undergraduate or graduate degree. Undergraduates pay a fixed interest rate of 3.4% on all subsidized Stafford loans, while the fixed interest rate on unsubsidized Stafford loans for undergraduates is 6.8%. For both subsidized and unsubsidized loans for graduate and professional degree candidates, the fixed interest rate is 6.8% and the total amount per year is $20,500 with no more than $8,500 in subsidized loans. Undergraduate loan limits vary by school year and dependency status.


Perkins loans are issued through the school rather than through the federal government and are available based on financial need. The fixed interest rate is a low 5%. Qualified undergraduates can borrow up to $5,500 per year with the total not to exceed $27,500, while qualified graduate and professional students can borrow up to $8,000 with the total (including any Perkins loans you received as an undergraduate) not to exceed $60,000.


PLUS loans are available to graduate and professional students and the parents of dependant undergraduate students. These loans require a reasonable credit history and have a fixed rate of 7.9%. The amount you can borrow will depend on the other types of aid for which you have qualified. PLUS loans are offered to cover the difference between your other loans, grants, scholarships, etc., and the total cost of your schooling.


For students who want to roll all their loans into one single bill or who want to lower their monthly payment, there are direct consolidation loans. While offered interest rates vary according to the current market, the interest rate on the loan is fixed once it’s been taken out.

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