Federal Student Loans Guide for 2023 – There have been changes to the federal student loan program as a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that passed in Congress on March 27, 2020, to help those affected by the Coronavirus.
Note about changes due to COVID-19
Until June 30, 2023, borrowers have the option to suspend payments without penalty, if needed. Payments made on federal student loans during this time will first apply to unpaid interest accrued before March 13, 2020, then directly towards the principal balance. In addition, no interest will accrue during this time—effectively setting the rate at 0%.
The same is true for borrowers working to meet student loan rehabilitation requirements.
Lastly, the government will not garnish tax refunds or money from other federal benefits of borrowers who are behind on student loan payments during this time.
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Types of Federal Student Loans
All new federal student loans are made through the William D. Ford Federal Direct Loan Program. Students and parents who qualify can borrow directly from the Department of Education and their proceeds can be used at any qualifying school.
There are several variations of Direct Loans that you may be eligible for depending on your level of schooling and how much you need to borrow, all with different interest rates and fees.
| Loan | Eligible Students | |
| Direct Subsidized | Undergraduates with financial need | Learn more |
| Direct Unsubsidized | Undergraduates, graduates, and professional students | Learn more |
| Parent PLUS | Parents of dependent undergraduate students with no adverse credit history | Learn more |
| Grad PLUS | Graduate and professional students with no adverse credit history | Learn more |
| Consolidation Loans | Most borrowers with federal student loans | Learn more |
Check out our guide to student loan repayment and find out more about how student loans work.
Direct Subsidized Loans
- Eligible Students: Undergraduate Students with Financial Need
- Interest Rate for ’22/’23 School Year: 4.99%
- Origination Fee: 1.057%
- Grace Period: 6 months
Direct Subsidized Loans are a type of Stafford Loan and are designed for undergraduate students who have clear financial need as determined by the FAFSA.
With this type of Direct Loan, the school determines the amount of each loan per student based on the cost of tuition and other related expenses. However, the amount provided through a Direct Subsidized Loan cannot exceed the total financial need of each student.
This makes them the most beneficial type of federal student loan and you should always maximize subsidized federal student loans before turning to subsidized loans or private loans.
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Direct Unsubsidized Loans
- Eligible Students: Undergraduate, Graduate, and Professional Students
- Interest Rate for ’22/’23 School Year: 4.99% (undergrad), 6.54% (graduate & professional degrees)
- Origination Fee: 1.057%
- Grace Period: 6 months
Direct Unsubsidized Loans differ from subsidized loans in that there is no requirement to show financial need to be eligible, but the government does not pay accrued interest during periods of deferment and while you are in school.
During these periods, interest will continue to accumulate unless you make payments on it.
The amount you can borrow stems from the total cost of attendance, minus other financial aid received, up to the federal student loan limits. This amount, however, is still determined by the school you are attending.
Parent PLUS Loans
- Eligible Students: Parents of Dependent Undergraduate Students with No Adverse Credit History
- Interest Rate for ’22/’23 School Year: 7.54%
- Origination Fee: 4.228%
- Grace Period: No Grace Period Typically but Parents May Request Deferment for 6 Months After Child Leaves School
The borrower must be the biological or adoptive parent or stepparent in some cases. Guardians are not eligible.
Parent PLUS Loans differ from other federal student loans in that the government will perform a credit check to make sure there is no adverse credit history (such as bankruptcy).
Parent PLUS Loans are first paid to the student’s school, with any remaining amount sent to the parent.
You can compare Parent PLUS Loans to other options in our Student Loans for Parents Guide.
Grad PLUS Loans
- Eligible Students: Graduate and Professional Students with No Adverse Credit History
- Interest Rate for ’22/’23 School Year: 7.54%
- Origination Fee: 4.228%
- Grace Period: 6 Months After Leaving School
Graduate students who are attending school at least half-time may qualify for a Grad PLUS Loan. Graduate students must be enrolled in a program that leads to an advanced degree or a professional certificate to qualify.Unlike Parent PLUS Loans, Grad PLUS Loans do not require immediate repayment while in school.
Grad students should first max out their limits on Direct Unsubsidized Loans before turning to Grad PLUS Loans because of the lower interest rates.
Before taking out a Grad PLUS Loan, be sure to compare it to other graduate student loan options.
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Consolidation Loans
- Eligible Students: Most Borrowers with Federal Student Loans
- Fee: None
- Grace Period: 60 Days After the Loan is Disbursed (If any of the loans are in their grace period, you may request to delay repayment until it is up)
Direct Consolidation Loans are for students who already have several federal student loans and want to combine them into one.
In doing so, borrowers streamline their repayment to a single monthly amount, and they may then qualify for different repayment plans or loan forgiveness in the future.
Consolidating federal student loans does not require a credit check or a cosigner, but it may result in a slightly higher interest rate overall than keeping the loans separate.
Note that parents with Parent PLUS Loans may not consolidate those loans with their children’s federal student loans.
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