Federal Student Loans

Federal Student Loans offer the best interest rates and terms for college loans. Most college students will need some type of student loan, so you will want to look at these guaranteed federal government loans as part of your financial aid package.

Student loan interest rates vary each year based upon the 10 year treasury note, but there are caps on the rate.

Federal Student Loans

The US Direct Federal Student Loan program offers federal loans that can be used at most accredited colleges, including online and for-profit schools. The interest rates are lower than most other student loans, you get a grace period before repayment is required, and there are options to defer, or consolidate loans after graduation.

These loans were previously knows as Stafford Loans, so sometimes you will hear that same term used to describe federal student financial aid.

Note: Due to the historic COVID-19 pandemic, interest rates on federal student loans is temporarily reduced to 0% from Mar 13, 2020 until December 31, 2022. In addition, you may elect administrative forbearance, which means have the option to temporarily stop making these monthly payments without penalty if you choose. Also, President Biden is proposing new loan repayment plans that will limit the student loan payments based upon income. Some federal loan amounts may be forgiven based upon income level ($10,000 loans per student or $20,000 loans for Pell Grant recipients).

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Federal Student Loans

Federal Student Loans are federal student loans for university and college students. These loans are intended to supplement college savings, family contribution, scholarships, grants and work-study. Nearly all students are eligible to receive student loans, and they do not depend upon your credit rating.

Federal student loans help you establish credit history, so even if you don't need to take out a student loan, you may want to as a way to establish credit.

Federal student loans for undergraduates may be subsidized by the U.S. government for low-income students with demonstrated need based upon their FAFSA federal student loan application, or unsubsidized student loan.

Currently, the rate for the student loans will vary each year based upon the 10 year treasury note interest rate in the June auction. They will be capped. In addition, a loan origination fee may apply.

Here are the student loan interest rates for 2022 - 2023 school year:

Undergraduate Student Borrowers - 4.99% interest rate (subsidized and unsubsidized)

Graduate or Professional Student Borrowers - 6.54% interest rate

Parent Plus Loan - 7.54% interest rate

Here are the student loan interest rates for 2021 - 2022 school year:

Undergraduate Student Borrowers - 3.73% interest rate (subsidized and unsubsidized)

Graduate or Professional Student Borrowers - 5.28% interest rate

Parent Plus Loan - 6.28% interest rate

Here are the student loan interest rates for 2020 - 2021 school year:

Undergraduate Student Borrowers - 2.75% interest rate (subsidized and unsubsidized)

Graduate or Professional Student Borrowers - 4.30% interest rate

Parent Plus Loan - 5.30% interest rate

Here are the student loan interest rates for 2019 - 2020 school year:

Undergraduate Student Borrowers - 4.53% interest

Graduate or Professional Student Borrowers - 6.08% interest

Parent Plus Loan - 7.08% interest

are the student loan interest rates for 2018 - 2019 school year:

Undergraduate Student Borrowers or Undergraduate Stafford Loan - 5.05% interest rate (subsidized and unsubsidized)

Graduate or Professional Student Borrowers or Graduate Stafford Loan - 6.6% interest rate

Parent Plus Loan - 7.6% interest rate

Here are the student loan interest rates for 2017 - 2018 school year:

Undergraduate Student Borrowers or Undergraduate Stafford Loan - 4.45% interest rate (subsidized and unsubsidized)

Graduate or Professional Student Borrowers or Graduate Stafford Loan - 6.00% interest rate

Parent Plus Loan - 7.00% interest rate

Subsidized Federal Government Student Loans

With subsidized student federal government student loans, the U.S. government pays the interest while you are in school. The rates are listed above on this page, and vary each year for both undergraduate student loans and graduate students loans (unsubsidized only). These are awarded based upon financial need. About 2/3 of federal student loans go to students with family Adjusted Gross Income (AGI) under $50,000. A high income does not necessarily exclude you, as ~10% go to students with family AGI over $100,000.

Loan Amounts depend on year of school, and if you are a Dependent Students (dependent upon parents for support) or Independent Student (self-supporting).

Dependent Student Subsidized Loan Maximum

1st year - $3,500 (additional $2,000 loan may be unsubsidized)

2nd year - $4,500 (additional $2,000 loan may be unsubsidized)

3rd and 4th year - $5,500 (additional $2,000 loan may be unsubsidized)

Preparatory work (to prepare to enroll in undergraduate program) - $2,625

Preparatory work (to prepare to enroll in graduate or professional program) - $5,500

Teacher certification coursework - $5,500.

Independent Student Subsidized Loan Maximum

1st year - $3,500 (additional $6,000 loan may be unsubsidized)

2nd year - $4,500 (additional $6,000 loan may be unsubsidized)

3rd and 4th year - $5,500 (additional $7,000 loan may be unsubsidized)

Graduate and professional students - up to $20,500 per year and $138,500 total ($224,000 for certain medical school students) in unsubsidized Stafford loans.

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Unsubsidized Federal Student Loan

Unsubsidized federal student loans are federally guaranteed loans are not based on financial need. Interest accrues when the loan funds are disbursed to the school. The unsubsidized student loan rate for undergraduate students and graduate students varies each year and is listed above.

Payments on an unsubsidized Stafford loan are due to start six months after graduation, or six months after you drop below half-time status.

Paying off Student Loans

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How Big of a Loan?

How much loan should you take out? Here is some advice from some of our readers:

Only Take What You Need

Holly, Glencoe, MN USA

When I began my college career I was unsure of the unknown expenses there might be. When I received my Financial Aid Award letter I took the extra money that wasn't need to pay for school and opened a savings account. I kept the extra money as a cushion in case I needed it for an expense I had not foreseen. I promised myself I would never use the money in this account for anything except school expenses. I know of many students who use this money to go on vacation for spring break, to go shopping, etc. Once I completed my first year I took the money in my savings and paid it back so that my borrowed amount was reduced. I followed the same rule throughout my college career and it has reduced my student loans by several thousand dollars.

For additional advice from other students, see Paying off Student Loans

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