Types of Federal Loans - Iowa College Access Network - ICAN

Types of Federal Loans

Stafford, PLUS, Perkins: As you look into federal loans, a lot of confusing terms get thrown around. The federal student loan system is easier to understand if you break it down.

Loan Type Description

Federal Subsidized Stafford Loans

  • Based on financial need.
  • Free Application for Federal Student Aid (FAFSA) required.
  • Government pays interest while you're in school.
  • Interest rate is fixed at 4.45%
  • Repayment begins six months after you graduate, leave college or drop to less than half time.
  • Annual loan limits are set by federal government.
Federal Unsubsidized Stafford Loans
  • Not based on financial need.
  • FAFSA required.
  • You pay the interest
  • Interest rate is fixed at 4.45%.
  • Repayment begins six months after you graduate, leave college or drop to less than half-time.
  • Annual loan limits are set by the federal government.
Federal Parent PLUS Loans
  • Parents can take out this loan on your behalf if you are dependent on them, an undergraduate student and enrolled at least half time.
  • Parents must pass a credit check.
  • Loan money is paid in multiple disbursements.
  • Loans are not based on financial need.
  • Parents pay the interest.
  • Interest rate is fixed at 7%.
  • Loan limit is equal to the cost of attendance minus other financial aid received

Federal Stafford Loan Rates and Limits

The federal government sets the terms and conditions for all federal student loans. The interest rate varies depending on the loan type and (for most types of federal student loans) the first disbursement date of the loan. The table below provides the interest rates for Direct Loans first disbursed on or after July 1, 2016. All interest rates shown in the chart are fixed for the life of the loan.

Interest Rates for Direct Loans First Disbursed On or After July 1.
Loan Type Borrower Type Loans first disbursed on or after 7/1/17 and before 7/1/18 Loans first disbursed on or after 7/1/16 and before 7/1/17
Direct Subsidized Loans Undergraduate 4.45% 3.76%
Direct Unsubsidized Loans Undergraduate 4.45% 3.76%
Direct Unsubsidized Loans Graduate or Professional 6% 5.31%
Direct PLUS Loans Parents and Graduate or Professional Students 7% 6.31%

These interest rates do not affect any prior loans made to borrowers; the terms and interest rates of those loans remain the same.

Annual Stafford Loan Limits for Undergraduate Students
(July 1, 2017 – June 30, 2018)
  Dependent Undergraduate Independent Undergraduate*
Freshman $5,500
(maximum $3,500 in
Subsidized Stafford Loan)
$9,500
(maximum $3,500 in
Subsidized Stafford Loan)
Sophomore $6,500
(maximum $4,500 in
Subsidized Stafford Loan)
$10,500
(maximum $4,500 in
Subsidized Stafford Loan)
Junior and Senior $7,500
(maximum $5,500 in
Subsidized Stafford Loan)
$12,500
(maximum $5,500 in
Subsidized Stafford Loan)

* If you're a dependent student whose parents applied for, but were not approved for, a Federal PLUS Loan (parent loan), you can borrow at the independent undergraduate level. Contact your financial aid office for details.

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