Money · Paying for college
Federal student loans, explained
Federal student loans come from the U.S. Department of Education. With a subsidized loan, the government pays the interest while you're in school at least half-time. With an unsubsidized loan, you pay all of it. For 2026–27 the undergraduate rate is 6.52%, fixed, and a 1.057% fee comes out before you get the money. Interest adds up daily, so borrowing less and paying interest while in school both save real money.
You'll need
- Your aid offer
- Your StudentAid.gov login
What to know
- Apply with the FAFSA. Your school uses it to decide what you can borrow, and loans are usually part of your aid offer. Source: Federal Student Aid1
- Know the two kinds. Direct Subsidized Loans are for undergraduates with financial need. The government pays the interest while you're in school at least half-time, for the six-month grace period after you leave, and during deferment. Direct Unsubsidized Loans don't require need, and you pay all the interest, in every period. Source: Federal Student Aid1 If you're offered both, the subsidized one is the better deal.
- Know the rate. Undergraduate Direct Loans first paid out from July 1, 2026, through June 30, 2027, have a fixed rate of 6.52% for the life of the loan. For graduate students, unsubsidized loans are 8.07%, and PLUS loans for parents and grad students are 9.07%. Source: Federal Student Aid2 Rates are set by federal law, not by your school. Source: Federal Student Aid2
- Know the fee. Direct Subsidized and Unsubsidized Loans first paid out before Oct. 1, 2027, carry a 1.057% fee (4.228% for PLUS loans). The fee comes out of the money before you get it, but you repay the full amount you borrowed. Source: Federal Student Aid2
- Borrow only what you need. Your school decides the amount, which can be less than the annual limit. Source: Federal Student Aid1 Before the money is paid out, you can cancel all or part of a loan by telling your school. Source: Federal Student Aid1
- Before your first loan, you'll complete entrance counseling and sign a Master Promissory Note, the loan contract. Source: Federal Student Aid1
- Watch where the money goes. The school applies it to tuition, fees, room and board and other charges first. Anything left is returned to you, and it must be spent on education expenses. Source: Federal Student Aid1
- Repayment starts after a six-month grace period once you graduate, leave school or drop below half-time. Your servicer contacts you with your first due date. Source: Federal Student Aid1
See it done
2013 · Checked October 3, 2026
It's from 2013. The borrowing advice still holds, but this year's rates, fees and loan types are in the steps.
Video won't load at school or work? No problem. Everything you need is in the steps; the video's just a bonus. Watch it on YouTube later.
If it doesn't work
- Can't make a payment later? Contact your loan servicer right away. They can explain a plan change, deferment or forbearance, and their help is free. Source: Federal Student Aid1
- Someone offers to lower your payment for a fee? You never have to pay for help with federal student loans. Source: Federal Student Aid3
- Don't know who your servicer is? Log in to StudentAid.gov and check "My Aid". Source: Federal Student Aid1
- Took more than you needed? After the money is paid out, you can still cancel all or part of a loan within certain time frames. Your promissory note explains how. Source: Federal Student Aid1
Good to know
The details, if you want them. Tap a line to open it.
Do the math (made-up example)
Direct Loans charge interest daily: balance × (rate ÷ 365.25) × days since your last payment. Source: Federal Student Aid2 On a made-up $5,500 unsubsidized loan at 6.52%, that's about $0.98 a day, about $29 a month, or about $359 a year while you're in school. The 1.057% fee means about $58 comes off the top, so roughly $5,442 reaches your school, but you owe $5,500.
Federal first, private last
Interest rates and fees are generally lower for federal student loans than private ones. Source: Federal Student Aid2 Federal loans also offer income-driven repayment, which private loans typically don't. Source: CFPB4
Limits changed in 2025
The One Big Beautiful Bill Act, signed July 4, 2025, changed annual and total loan limits. Limits depend on your year in school, whether you're dependent or independent, full- or part-time enrollment and your program. Source: Federal Student Aid1 Ask your financial aid office for your numbers.
Must be at least half-time
To get either loan, you must be enrolled at least half-time at a participating school, generally in a program that leads to a degree or certificate. Source: Federal Student Aid1
Take it with you
Printable cardDownload card (PDF)Sources
- U.S. Department of Education (Federal Student Aid) Direct Subsidized and Direct Unsubsidized Loans
- U.S. Department of Education (Federal Student Aid) Interest rates and fees for federal student loans
- U.S. Department of Education (Federal Student Aid) Avoiding student aid scams
- Consumer Financial Protection Bureau Your financial path to graduation
Lesson M7.4 · Last checked October 2, 2026 against the sources listed.
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