Federal Government Loan Types and Terms

U.S. Department of Education Seal

Direct Stafford Loans

Eligibility

You may qualify for a Stafford loan if you:

  • Are a U.S. citizen or eligible non-citizen.
  • Have a high school diploma or its equivalent.
  • Enroll at least half time in a postsecondary institution that participates in the Direct Loan program.

Subsidized loans are available to undergraduate students who meet certain financial need criteria. If you qualify for this type of loan, the federal government will pay the interest on the loan while you are in school at least half time and during periods when you are authorized to defer your loan payments. Note: Due to recent changes in federal law, the government no longer subsidizes interest during the six-month post-school grace period for new subsidized Stafford loans first disbursed between July 1, 2012, and June 30, 2014. In addition, effective for periods of enrollment beginning July 1, 2012, graduate and professional students no longer are eligible for subsidized Stafford loans.

Unsubsidized loans are available to undergraduate, graduate and professional students regardless of financial need. You are responsible for the interest that accumulates on an unsubsidized loan from the date the funds are disbursed until the funds are repaid in full. You have the option to pay the interest during school or postpone payment. If you postpone payment, the interest will be added to your principal balance. This addition of interest to your principal balance is known as capitalization.

Interest Rates and Fees

Effective for loans first disbursed July 1, 2012, through June 30, 2013, the interest rates on Direct Stafford loans are fixed at 6.8 percent. Note: Legislation has been introduced in the U.S. Congress, but not yet passed, to extend for one year the current lower 3.4 percent fixed interest rate on Direct Subsidized Stafford loans to undergraduates. View the current interest rates on Direct Loans.

An origination fee of 1 percent will be deducted from the amount you borrow in Direct Stafford loans. If the first disbursement of your Direct Stafford loan is prior to July 1, 2012, you also qualify for an upfront interest rebate of 0.5 percent, which you will retain as long as you make your first 12 monthly payments on time. As a result, the net origination fee deducted from your loan disbursement will be 0.5 percent. Recent federal legislation eliminates this interest rebate for Direct Stafford loans first disbursed on or after July 1, 2012. The origination fee is used to offset some of the administrative costs of the federal student loan program. 

Loan Limits

Federal law specifies annual loan limits on Stafford loans based on your year in college and your dependency status.
If you are a dependent undergraduate student, you can borrow up to the following amounts each year:

  • $5,500 if you are a first-year student enrolled in a program of study that is at least a full academic year. (Up to $3,500 may be in subsidized loans.)
  • $6,500 if you are a second-year student enrolled in a program of study that is at least a full academic year. (Up to $4,500 may be in subsidized loans.)
  • $7,500 if you are enrolled in your third or subsequent year of a program of study that is at least a full academic year. (Up to $5,500 may be in subsidized loans.)

If you are an independent undergraduate student or a dependent student whose parents are unable to obtain a Direct PLUS loan, you may be able to borrow up to the following amounts each year:

  • $9,500 if you are a first-year student enrolled in a program of study that is at least a full academic year. (Up to $3,500 may be in subsidized loans.)
  • $10,500 if you are a second-year student enrolled in a program of study that is at least a full academic year. (Up to $4,500 may be in subsidized loans.)
  • $12,500 if you are enrolled in your third or subsequent year of a program of study that is at least a full academic year. (Up to $5,500 may be in subsidized loans.)

If you are a graduate or professional student, you may borrow up to the following amounts each year:

  • $20,500. (Higher limits may apply to students pursuing certain health professions.)

In addition to annual loan limits, the total amount of all Stafford loans that you take out for all years of enrollment may not exceed the following aggregate limits:

  • $31,000 for dependent undergraduate students.
  • $57,500 for independent undergraduate students.
  • $138,500 for graduate or professional students.
  • $224,000 for graduate or professional students enrolled in approved health professions programs. 

Grace Period

You are entitled to a grace period of six months after you leave school or drop below half-time enrollment before you must begin repaying your loans.

Direct PLUS (Parent) Loans

Eligibility

You may qualify to take out a PLUS loan if:

  • You are the parent of a dependent undergraduate student.
  • You are a graduate or professional student.
  • You, or the dependent undergraduate student for whom you are taking out a PLUS loan, are enrolled at least half time at a postsecondary institution that participates in the Direct Loan program.
  • You — and in the case of a PLUS loan taken out by a parent, the dependent child for whom you are obtaining the loan — are U.S. citizens or eligible non-citizens.

To qualify to borrow a PLUS loan, a parent must be the student’s birth parent, adoptive parent or stepparent, if the stepparent’s income and assets were taken into account when calculating the student’s Expected Family Contribution. The parent applying for the loan is responsible for repaying the loan. Parents may take out a PLUS loan for more than one dependent student at a time, although a separate promissory note is required for each student. PLUS loans are available without regard to financial need. To qualify for a PLUS loan your credit will be checked to verify that you do not have an adverse credit history. You also must submit a Free Application for Federal Student Aid to qualify to borrow a PLUS loan.

Interest Rates and Fees

New Direct PLUS loans carry a fixed interest rate of 7.9 percent. An origination fee of 4 percent of the loan amount will be deducted from your PLUS loan proceeds.  If the first disbursement of your Direct PLUS loan is prior to July 1, 2012, you also qualify for a 1.5 percent interest rebate, which you will retain, as long as you make your first 12 monthly payments on time. As a result, the net origination fee deducted from your Direct PLUS loan disbursement will be 2.5 percent. Recent federal legislation eliminates this interest rebate for Direct PLUS loans first disbursed on or after July 1, 2012.

Loan Limits

Parents and graduate and professional students may borrow up to the student’s full cost of attendance, less any other financial aid.

Post-Enrollment Deferment

For PLUS loans first disbursed on or after July 1, 2008, parents may defer principal payments on their PLUS loans for up to six months after the parent-borrower or the student for whose benefit the loan was issued drops to less than half-time enrollment.  Payments on PLUS loans to graduate and professional students also qualify for six-month post-enrollment deferment after the student no longer is enrolled at least least half time.

Direct Consolidation Loans

Direct consolidation loans allow you to combine all your eligible federal education loans into one new loan — even if your loans are of different types and have different lenders. Loan consolidation is a debt-management strategy that can benefit both student- and parent-borrowers, although it is not the best strategy for every borrower.