The government will pay the interest on federal loans if you qualify based on income while you are in school. When you stop going to school, you must start paying back the loan. There are four types of student loans from the U.S. Department of Education:
- Direct Subsidized loans are loans made to eligible undergraduate students who demonstrate a financial need to help cover the costs of higher education at a college or career school. (Maximum loan is $12,500 per year of schooling)
- Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. (Maximum loan is $12,500 per year of schooling)
- Direct PLUS loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify. (Maximum loan is $20,500 per year of schooling)
- Direct Consolidation Loans allow you to combine all eligible federal student loans into a single loan with a single servicer.
Below, you can find interest rates for each type of loan. All interest rates shown are fixed rates that will not change for the life of the loan. More information on government-sponsored student loans can be found at studentaid.gov.
Table 8.1. Interest Rates for Each Type of Loan
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