Your Practical Guide to Federal Direct Loans for College

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Federal direct loans are an important form of student aid that can help college students cover their costs and complete their degrees.

If you’re considering taking out a federal direct loan, learn more about how this type of federal student loan works — and how you can use it to fund your education.

What are federal direct loans?
How to get a federal direct loan in college
Can you get a federal direct loan without filing a FAFSA?
How do federal direct loans compare to private loans?

What are federal direct loans?

Federal direct loans are government-funded student loans offered through the William D. Ford Federal Direct Loan Program, also known as the Direct Loan Program.

Through this program, the Federal Student Aid Office offers funding to undergraduate students, graduate students and parents of college students. These loans help students cover costs while they are enrolled in college.

Federal direct loans commonly mean subsidized and unsubsidized loans for undergraduates. These types of direct loans also might be referred to as Stafford Loans.

Types of federal direct loans

The Direct Loan Program is the most common way for students in the U.S. to borrow for college.

The total outstanding balance of all federal direct loans is about $1.2 trillion, accounting for about 80% of funded federal student loans, according to our student loan debt statistics.

What’s more, two other federal student loan programs — Perkins loans and Federal Family Education Loan (FFEL) loans — are no longer available. That means all new federal student loans are made under the Direct Loan Program.

Here’s an overview of the five types of federal direct loans and their basic features:

Type of direct loan Who can use it Interest rate (2019-20) One-time loan fee Annual loan limit
Subsidized Undergraduate students with a demonstrated financial need 4.53% 1.059% Up to $5,500 per school year
Unsubsidized Undergraduate students 4.53% 1.059% Up to $7,500 per school year for dependent students and up to $12,500 per school year for independent students
Unsubsidized (for graduate students) Students working toward a graduate or professional degree 6.08% 1.059% Up to $20,500 per school year
PLUS Graduate students and parents of undergraduate students 7.08% 4.236% Cost of attendance after all student aid is applied
Consolidation Student loan borrowers in repayment Weighted average of interest rates on loans being consolidated

Direct subsidized loans provide borrowers with an interest subsidy that lowers the interest they repay. The loans are deferred while the student is enrolled in college, and interest charges don’t apply. Instead, the interest is paid by the Department of Education during deferment.

However, direct subsidized loans are the only form of need-based aid offered through the Direct Loan Program. Students must have a demonstrated financial need, which is calculated based on the information they provide in the Free Application for Federal Student Aid (FAFSA).

The Direct Loan Program also provides an option for borrowers who are amid repayment to modify their student loans. Direct consolidation loans combine different federal student loans into one and give borrowers a chance to simplify and even lower their monthly payments.

How to get a federal direct loan in college

Students who plan to take advantage of the Direct Loan Program will need to take some steps to be eligible for and receive a direct loan.

1. Meet federal aid eligibility requirements

The laws and policies that set up the Direct Loan Program and other federal student aid require that students meet certain guidelines to participate. So, to find out if you’re eligible, ensure you meet federal student aid requirements.

2. Create your FSA ID

As a general rule, you’ll need to submit a FAFSA to access federal direct loans.

To file a FAFSA, you’ll need to create an account with the Federal Student Aid (FSA) Office. When you do, you’ll also create an FSA ID, which you’ll use to log in to your account and submit your FAFSA.

3. Complete and submit your FAFSA

Visit to start a new FAFSA. It takes about an hour or less to complete the FAFSA. If you’re a dependent student (most unmarried college students under age 24 are), your parents also will need to complete forms to submit with your FAFSA.

4. Review your financial aid award

After you submit your FAFSA, the college you’re enrolled in or accepted to will use the information to evaluate you for student aid. The college will send you a financial aid award letter that will outline all the student aid that can be extended to you, including direct loans.

You’ll then need to evaluate your college costs and figure out how much you’ll need to borrow to cover them. From there, you can choose which direct loans to use.

Typically, you’ll want to use direct loans for which you qualify in this order:

  • Subsidized direct loans, as they include an interest subsidy
  • Unsubsidized direct loans, which do not have a subsidy but carry some of the lowest federal student loan rates
  • Unsubsidized direct loans for graduate students
  • PLUS loans, as they carry the highest interest rates and fees

5. Claim your direct loans

Next, you’ll claim the direct loans you want to use and the amounts you intend to borrow through your college’s financial aid office. You’ll have to sign a promissory note, which is your agreement to repay and honor the terms of your direct loans.

From there, your student loans will be disbursed to your college, which will apply the funds to any outstanding charges, such as tuition or on-campus living costs. The remaining funds will then be disbursed to you at your request.

Can you get a federal direct loan without filing a FAFSA?

Submitting a FAFSA is the fastest and simplest way to get federal direct loans.

However, the parents of some dependent students might refuse to submit a FAFSA. Or you might encounter other obstacles to submitting a FAFSA and getting subsidized or unsubsidized loans. Without a parent’s FAFSA, however, these students can’t be evaluated for or awarded federal student aid.

There might be a workaround if you talk to your college’s financial aid office. These financial aid administrators might be able to authorize students to borrow unsubsidized direct loans without a complete FAFSA from a parent. Depending on your situation, they might also be able to connect you with other forms of aid.

How do federal direct loans compare to private loans?

Private student loans, which are offered by banks or other private lenders instead of the federal government, can be an alternative for some students or parents. Here’s a comparison of some key differences between federal direct loans and private student loans:

Direct Loans Private Student Loans
Qualifying for the loan Easy to get. You won’t need an income, good credit or a cosigner to qualify. PLUS loans are an exception and will require a non-adverse credit history. However, it’s easier to get PLUS loans than private student loans. Borrowers must qualify, so you’ll need a decent income and job history as well as good credit. These requirements will be hard for many students to meet, and most who take out private student loans will have a cosigner.
Student loan rates Interest rates are fixed and determined by law. All borrowers receive the same rate regardless of their personal circumstances. Interest rates can be variable or fixed, and each borrower will pay a rate based on their creditworthiness. Well-qualified borrowers receive the best private student loan rates, which might be lower than direct loan rates.
Loan protections Federal student loans come with many ways to pause or adjust payments: deferment and forbearance, including automatic deferment while enrolled in college; income-driven repayment plans; student loan forgiveness in some cases; subsidized direct loan interest paid during any period of deferment. Private student loans have fewer protections than federal student loans. Each private lender sets its own rules for forbearance and deferment, but private lenders rarely offer options as robust as those available for federal student loans.

Private student loans can be worth considering for some students and their parents. For example, those facing the high interest rates of PLUS loans might find a private student loan that offers savings with a lower rate.

As a general rule, though, federal direct loans are the better choice for most students. These student loans are accessible for most students in college, and they offer expansive protections during repayment.

Other students might hit their federal student loan limits and still have costs to cover; private student loans could help with this funding gap.

Carefully compare your options in your own situation to make sure you understand how each choice could affect you both during college and when you enter repayment. Shop around for private student loans that suit your needs.

Andrew Pentis contributed to this report.

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1 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

(1)All rates shown include the auto-pay discount.  The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.

2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Important Disclosures for Discover.

Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit for any applicable reward terms and conditions.
  2. View Auto Reward Debit Reward Terms and Conditions at
  3. Aggregate loan limits apply.
  4. Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit for more information about interest rates.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

4 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

  1.  Rates are as of July 1, 2019 and include auto-pay discount. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment. Variable rates may increase after consummation.

5 Important Disclosures for Citizens.

Citizens Disclosures

Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of February 1, 2020,the one-month LIBOR rate is 1.66%. Variable interest rates range from 4.22% – 7.81% (4.22% – 7.81% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.36% – 7.95% (4.36% – 7.95% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown for eligible, creditworthy applicants with an undergraduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discount of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit We also have several resources available to help the borrower make a decision at,including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review. 

Citizens Bank Student Loan Eligibility: Borrowers must be enrolled at least half-time in a degree-granting program at an eligible institution. Borrowers must be a U.S. citizen or permanent resident or an international borrower/eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For borrowers who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank- participating school. 
Please Note: International Students are not eligible for the multi-year approval feature.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. 

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.

Undergraduate, Graduate, and Parents

Visit College Ave

2.75% – 10.65%*,2Undergraduate and Graduate

Visit SallieMae

Undergraduate and Graduate

Visit Discover

3.52% – 9.50%4Undergraduate and Graduate

Visit CommonBond

4.22% – 7.81%5Undergraduate and Graduate


Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.