Topic Progress:
student loans

Accept all, some or none. It's your choice!

Within the Financial Aid Award letters you receive you may be offered one or more federal student loans for varying amounts.  You can accept all of the loans, none of them, some of them, or even just a portion of any of them. Keep that in mind as you learn about each type.

Up until now the information you’ve learned about financial aid is pretty simple and straightforward. Talking about “Loans” is where things are going to start getting tricky; for some of us anyway.  In fact loans are why so many young people struggle financially after they graduate their college or career training program. We don’t want you to be one of them!

Don’t get me wrong, the federal student loan program is a wonderful thing; if it’s taken advantage of wisely. Which means you need to educate yourself about the different types of loans so you’re not just winging it while you’re going through school, and then panicking when you’re done and need to start paying them back.

That being said, knowing the details about each of the loan types is very important so that you can make smart decisions now which will help you in a huge way later on down the road when you’re out of school, on your own, and responsible for paying them back.

So be prepared… there’s a lot of information in this Topic.  You need the details if you plan to use student loans as a tool to help you finance your education and training.

But hold tight, before we get into the details about each type of student loan there are a few things to be aware of regarding Federal Student Loans in general.

Federal Student Loans. The Basics.

  • Funded by...

    The federal US Department of Education is the organization that lends the money for student loans.

  • Enrollment Status

    You must be enrolled at least half-time in a participating post-secondary school or career training program.

  • Interest Rates

    Interest rates are fixed and usually lower than private loans. See the chart below for current rates.

  • Fees

    You’ll pay a loan “fee” which is a small % of the loan principal for all Direct loans. See the chart below.

  • Credit Check

    A credit check isn’t required for most student loans.

  • Credit Builder

    Make sure you pay your student loans on time and they’ll be a great way to build your credit.

  • Paid To..

    Loan money is sent directly to your school account; if you don’t have a balance you’ll get a refund from your school.

  • When You'll Repay

    You don’t have to begin repaying your federal loan until after you graduate your school or program, leave school or drop down to below 1/2 time enrollment status.

  • Repayment Plans & Postponement

    There are various repayment plans and you can also temporarily postpone or lower your payments if you need to.

  • Cosigner

    A cosigner isn’t needed in most cases.

  • Tax Deductible Interest

    There are tax deductions for student loan interest.

  • Loan Forgiveness

    You may be able to have a portion of your loan forgiven if you end up working in public service. Learn more here… Loan Forgiveness Program.

  • Entrance Counseling

    You’ll have to go through Entrance Counseling so that you understand the responsibilities you’re taking on by borrowing money.

student loan rates

Loan Servicers

“Direct” loans are financed by the US Dept of Education, but they’re managed by a “Loan Servicer”. The Loan Servicer (there are a number of different ones) handles the billing and repayment of your “Direct” loans as well as any issues or concerns you might have with any of those loans.  You can learn more about the various Loan Servicer’s here.

Types of Loans

All About Direct SUBSIDIZED Loans

  • Eligibility = Financial Need

    Undergraduate students qualify if it’s determined they have Financial Need (per their FAFSA).

  • Subsidized Means...

    Subsidized means that the US Department of Education pays the interest while you’re enrolled in school at least half-time, during the “grace period” after you finish school, and during an authorized postponement or “deferment” of your loan.

  • School Decides...

    Your school determines the amount you can borrow; that number can’t exceed your financial need.

  • How Much Can I Borrow?

    The maximum loan amount you might qualify for each year is $5,500, but this depends on your grade level and dependency status.  See loan limits in the chart below…

Subsidized & Unsubsidized Loan Limits

student loan limits

So what does this mean for you? A Direct SUBSIDIZED loan is essentially like getting an “interest-free” loan for the entire time you’re in school.  Once you’re out of school and past the “grace period” things change; you’ll then be responsible for the new interest that accumulates and it will be added to the balance of your loan.

If you need a student loan and are offered a Direct SUBSIDIZED Loan… take it.  They’re a great deal!

All About Direct UNsubsidized Loans

  • Eligibility = Anyone

    You’re NOT required to have “Financial Need” to be eligible for an Unsubsidized loan.

  • Unsubsidized Means...

    “Unsubsidized” means that these loans are like traditional loans; the interest that accumulates while you’re in school is paid by you and will be added to the principal of your loan.

  • Pay Some Now...

    You can choose to pay the interest that accumulates on your Unsubsidized loan while you’re in school. If you don’t then it will be added to your principal amount and make for a higher loan balance when you’re ready to start repayment.

  • Interest Rate

    Interest rate for undergraduate students is lower than for graduate students.

  • School Decides...

    Your school determines how much you can borrow based on the COA and the amount of other financial aid that you receive.

  • How Much Can I Borrow?

    The maximum loan amount you might qualify for each year is $20,500 (less any subsidized loan amounts received for the same period), but this depends on your grade level and dependency status. See loan limits in the chart below…

Subsidized & Unsubsidized Loan Limits

student loan limits

Although Unsubsidized loans aren’t as great a deal as Subsidized, they can still be a good option if you need a loan to help finance your education and training.

Just be sure to only accept what you realistically need, even if you’re offered more than that. It’s definitely not free money and comes with a price (accumulated interest) that can burden you later on so… be wise, be smart, be frugal.

All About Direct PLUS Loans

  • PLUS Loans for Parents

    The PLUS loan may be offered to parent’s of undergraduate “dependent” students.

  • PLUS Loans for Students

    The PLUS loan may be offered to students who are in a graduate or professional degree program. These students are now considered “independent”.

  • Financial Need NOT Required

    Enough said.

  • Interest Rate

    Higher than the Subsidized and Unsubsidized student loans, but often a better rate than a private loan.

  • Credit History

    A credit check is required but even if you don’t have the best credit history you might still qualify. You can learn more here.

  • How Much Can I Borrow?

    Max allowed to borrow each year = the COA at the school minus any other financial aid offered.

  • Parent Doesn't Qualify!

    If a parent doesn’t qualify for a PLUS loan, and the student needs it, a student should ask the Financial Aid officer at their school for an additional Unsubsidized loan.

  • Where Can I Get More Info?

All About Perkins Loans

  • Eligibility = Financial Need

    Any student qualifies if it’s determined they have Financial Need (per their FAFSA).

  • School = Lender

    Although Perkins is a a federal loan, your school is the lender and they often also manage the loan; except in some situations where they utilize a Loan Servicer for management.

  • Not Always Available

    Some schools don’t participate in the Perkins Loan Program so you won’t have that loan option made available to you even if you qualify based on Financial Need.

  • Interest Rate & Fees

    Unlike Direct loans, the Perkins Loan interest rate remains at 5% each year and there isn’t a loan origination fee.

Why Choose Federal Loans vs. Private Loans?

Federal student loans have many benefits that you won’t get with private loans from a bank or other financial institution.  If you find that you need to take out one or more loans to help finance your education and training you should always start with federal loans if they’re offered to you!

Federal vs. Private Loans


  • Repayment

    Repayment isn’t required until you graduate, leave school or change your enrollment status to half-time.

  • Interest Rate

    Interest rate is fixed and usually lower than private loans.

  • No Interest (sometimes, for awhile)

    If you get a Subsidized loan the government pays the interest for you while you’re in school, and for some months after you leave.

  • Credit Check

    No credit check is required except for PLUS loans.

  • No Cosigner

    No cosigner needed in most cases.

  • Tax Deductibe

    The interest you pay on your federal loans may be tax deductible. Ask your tax preparer when the time comes!

  • Postponement of Loan Possible

    If you’re struggling to pay back your federal loans after you’re out of school you may qualify for a postponement (aka deferment) or a lowering of your payments.

  • Repayment Plans

    When you’re ready to pay back your loans you can choose from several types of plans, including one to tie your payment to your current income.

  • Loan Forgiveness

    If you end up working in public service you may qualify to have some of your federal student loans forgiven so that you won’t have to pay the entire amount back!

  • Prepayment Penalty Fees = None

    If you pay off your student loans early that’s a wonderful thing. There’s never an early payment penalty fee.

  • Help!

    Free help is always available at 1-800-Fed-Aid.


  • Repayment

    You’ll likely have to begin repaying any private loans while you’re still in school.

  • Interest Rates

    Interest rate may be variable & significantly higher than federal loans.

  • No Breaks on Interest

    You’ll always be responsible for your loan interest.

  • Credit Check

    You’ll likely have to go through a credit check and an established credit record. The interest rate your offered may depend on your credit score and history.

  • Cosigner?

    You may be required to have a cosigner, especially if you don’t have an established (or good) credit score and history.

  • Tax Deductible?

    Interest may not be tax deductible.

  • Loan Postponement

    May not offer postponement or lowering of loan payments.

  • Prepayment Penalty Fees = Maybe

    If you’re considering a private student loan be sure to check into this.

  • Loan Forgiveness = Unlikely!

    Enough said.