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If you've started researching colleges, you'll notice that most schools have one thing in common: They're expensive. For a single year at an in-state public college, the average student will need $30,990, while those attending private schools will pay $65,470 annually, according to the College Board.
Few families have enough money saved to cover that cost, which is why so many students end up taking out student loans. Nearly half of bachelor’s degree recipients graduated with student loan debt during the 2023-24 academic year, owing an average of $29,560.
If you have to borrow money, federal student loans are an excellent starting point due to their relatively low rates and borrower protections. See the different types of student loans available and how to apply for federal student loans.
What are federal student loans?
Federal student loans are the most common type of student loan, accounting for more than 90% of outstanding student loan balances nationwide, according to Enterval Analytics.
The U.S. Department of Education is the lender behind federal loans, and it's the largest provider of education loans in the country. Currently, federal loans are issued under the William D. Ford Federal Direct Loan Program (Direct Loans).
Federal student loans offer fixed interest rates, which are standardized for all eligible borrowers. Interest rates are competitive, especially for undergraduate students. And unlike private student loans, most federal loan programs don't require a credit check to get approved.
Read more: Federal or private student loans? Here’s what the difference is.
Types of student loans issued by the federal government
Within the federal Direct Loan program, there are four different types of student loans:
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Direct Subsidized: These loans are designed specifically for undergraduate students who need substantial financial assistance. These are one of the most beneficial types of loans since the government waives the interest that accrues while you're in school, during the loan grace period, and any periods of deferment.
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Direct Unsubsidized: These loans are for undergraduate and graduate students. Unlike Subsidized Loans, the borrower is responsible for all accrued interest.
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Direct PLUS: PLUS Loans are split into two categories:
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Grad PLUS: Grad PLUS loans are for graduate and professional students. Note that this program is ending on July 1, 2026. Students with existing federal loans can continue to utilize the Grad PLUS program for up to three academic years.
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Parent PLUS: Parent PLUS loans are for parents who want to borrow money to help a dependent child pay for their undergraduate education. The loans are solely in the parent’s name.
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Direct Consolidation: Used after a student graduates and their loans enter repayment. It allows borrowers to consolidate their federal loans into a single loan, simplifying their payments and potentially giving them access to other payment plans and forgiveness options.
Read more: Student loans will look different in 2026. Here's what's changing.
How to apply for federal student loans
To apply for federal student loans (and other financial aid, including grants), you must complete the Free Application for Federal Student Aid (FAFSA) for each year you plan to attend school.
The FAFSA asks about your household income, family size, and assets to determine your financial need. It's what colleges use to create your financial aid package, which may include federal student loans. You can complete the FAFSA online at FAFSA.gov.
The federal FAFSA deadline is June 30, but states and schools may have different deadlines. It’s recommended to complete the FAFSA as soon as you can after it's released each year in October. You can see what deadlines apply at StudentAid.gov.
If you're a graduate student or parent applying for a PLUS Loan, you'll need to fill out a separate application after submitting the FAFSA, which you can usually do through your StudentAid.gov account.
Important: Many families don't fill out the FAFSA because they think they earn too much. However, there's no income limits; even if you don't qualify for grants, you may be eligible for federal student loans or other forms of aid from your school.
Benefits of federal student loans
Federal student loans are the first choice for most students who need help paying for college for the following reasons.
1. There is no minimum credit score or income requirement
For students from low-income households or those with no credit history, federal student loans provide financing they couldn't otherwise obtain.
Unlike private student loans, federal loans have no minimum income requirement, nor do they require a certain credit score. For Direct Subsidized and Direct Unsubsidized Loans, there’s no credit check at all.
For PLUS Loans, there is a credit check, but the Education Department is only looking to see if you have an adverse credit history — recent serious credit issues like foreclosure or repossession — rather than a specific credit score.
2. You don't have to make payments while you're in school
With federal student loans, students don't have to make payments while they're in school or for six months after they graduate or leave college. Without payments due, you can focus on your education and get yourself financially secure before you have to worry about repaying your loans.
PLUS Loans don't come with a grace period, though graduate and professional students receive an automatic deferment for six months after they leave school or drop below half-time status. Parents, on the other hand, must request deferment while your child is in school, but you can request deferred payments until your child falls below half-time status, leaves school, or graduates.
Related: How to make your first student loan payment
3. There are multiple repayment plans available
Federal student loans have a default 10-year repayment plan. But if you can't afford your payments, you can switch to another plan.
With a graduated or extended repayment plan, for instance, you can push your repayment term to up to 30 years. The federal government also offers a few income-driven repayment (IDR) plans, which you can use to significantly reduce your payments. IDR plans determine your payments using a percentage of your discretionary income. Depending on your income and family size, you could qualify for a payment as low as $0.
Plus, if you have a loan balance at the end of the IDR term, the government will forgive the remaining account balance.
Keep in mind, though, that on July 1, 2026, three of the four currently available IDR plans will be eliminated. Going forward, new borrowers will be able to choose between the Income-Based Repayment (IBR) plan and the Repayment Assistance Plan (RAP) — though current borrowers in other IDR plans will have until July 1, 2028, to transition.
Read more: What student loan repayment will look like after Trump's budget bill
4. Federal borrowers may qualify for loan forgiveness
One major perk of federal student loans is that they are eligible for forgiveness programs. The best-known program is Public Service Loan Forgiveness (PSLF).
Under PSLF, nonprofit workers and employees of government agencies who work full-time for at least 10 years and make 120 qualifying monthly payments are eligible for forgiveness of 100% of their outstanding federal loans.
That said, changes may be coming to the PSLF program, which could eliminate eligibility for employees of certain nonprofit organizations that the federal government has deemed to engage in activities with a substantial illegal purpose.
Related: Will I be taxed on student loan forgiveness?
5. Interest rates are fixed
Federal student loans have fixed rates that stay the same for the entirety of your repayment term. That's different from some private student loans, which come with variable rates that can change over time.
A variable rate means your monthly payment can fluctuate. And depending on the economy and market conditions, the interest on variable-rate loans can start low but then dramatically increase. We found that variable-rate student loans can have rates as high as 18%.
Federal loan borrowing limits, rates, and fees
The federal government sets strict limits on how much students can borrow with most federal loans, and the maximum allowed is based on your year in school and whether you qualify as a dependent or independent student. Most undergraduate students, with rare exceptions, are classified as dependent students for financial aid purposes.
Loan rates and fees vary by loan type. Federal loan interest rates are set by Congress, and they're fixed, so the rates stay the same for your entire loan term. Federal student loans also have disbursement fees, which are deducted from the loan amount when the loan is disbursed.
Read more: What’s a good student loan interest rate?
Below are the current borrowing limits, rates, and fees for the different types of student loans for the 2025-26 academic year:
For current and incoming students, it's important to note that the One Big Beautiful Bill Act (OBBBA) changed loan limits, effective July 1, 2026. Here's a quick summary of what to expect:
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Graduate and professional Unsubsidized Loans: Annual loan limits will be capped at $20,500 for graduate students and $50,000 for professional students. The aggregate limit will be $100,000 for graduate students and $200,000 for professional students. Current students with loans made before July 2026 will be able to borrow under current limits for up to three academic years.
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Grad PLUS loans: This loan program will be eliminated, though existing federal loan borrowers will still be able to use it for up to three academic years.
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Parent PLUS Loans: The new limit for all parents will be $20,000 per year per dependent student, with an aggregate limit of $65,000 per dependent student.
The Education Department will also set a lifetime loan limit of $257,500 (excluding parent PLUS loans), though current students with loans made before the effective date will be able to use the current loan limits for up to three academic years.
It also allows colleges and universities to set their own program-specific loan limits, even if they're lower than the federal maximums.
Federal student loan FAQs
Who is eligible for federal student loans?
To qualify for federal student loans, you generally must:
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Be a U.S. citizen or qualifying permanent resident.
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Have a valid Social Security number (Students from the Republic of the Marshall Islands, Federated States of Micronesia or the Republic of Palau are exempt from this requirement).
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Have earned a high school diploma, General Educational Development (GED), or an approved homeschooled equivalent.
Check out the full list of basic eligibility requirements from the Education Department.
Are undocumented or DACA students eligible for federal student loans?
Undocumented students, including those with Deferred Action for Childhood Arrivals (DACA) status, aren't eligible for federal student loans. To complete the FAFSA and apply for federal loans and other forms of federal financial aid, you must have a valid Social Security number; undocumented and DACA students do not meet that requirement.
However, undocumented students may be eligible for other financial aid, including grants and scholarships issued by their state of residence, nonprofit organizations, and private companies.
Read more: How to pay for college without taking out student loans
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