College Life

Federal Student Loans 101

Federal student loans can be tricky if you don’t know what’s available, and the advantages or disadvantages of different types of loans. We’ll help you navigate through federal student loans so you can maximize your reward from your FAFSA.

First Things First

To find out what federal financial aid a student is eligible for, a FAFSA (Free Application for Federal Student Aid) needs to be completed. To fill out the application visit A FASFA can be completed as early as October 1st of a student’s senior year and must be done by June 30th. As part of the FASFA, a student lists colleges they’re interested in and that gives those colleges access to the information provided on the FASFA to determine what a student is eligible to receive in financial aid. A college will put together a financial aid award letter and typically sends it out at the time of admissions acceptance letters

Types of Financial Aid Available

The US Department of Education provides financial aid to college students in the form of grants, work-study and loans.

  • Grants – these are given out based on need and generally don’t have to be repaid. (This is the best kind of money to get, the free kind!)
  • Work-study – this gives students an opportunity to work on a part-time basis to cover some of the cost of their education.
  • Loans – money that’s available for students to borrow and repay with interest upon graduation.

Understanding the different federal loan options.

There are three types of federal loans available to students and/or their parents.

  • Direct Stafford Loan – this is offered to eligible students enrolled in an accredited American institution of higher education and demonstrating a financial need to be able to attend. These loans can be subsidized or unsubsidized. (We’ll explain the difference below.)
  • Perkins Loan – loan is a low rate loan for undergraduate and graduate students with exceptional financial need.
  • Direct PLUS Loan – this is available to graduate or professional students and parents of dependent undergraduate students. These types of loans are always unsubsidized.

Subsidized vs Unsubsidized

Whether a student is awarded a subsidized or an unsubsidized loan is based on financial need.

  • Subsidized – with a subsidized loan, the federal government pays the interest while a student is in college or while the loan is in deferment.
  • Unsubsidized – with this type of loan a borrower is responsible for all accrued interest.

What should a student do if financial aid doesn’t cover the cost of college?

For most students, the total cost of college is not covered by federal financial aid. You still have options.

  • Apply for scholarships! Not only can you apply for scholarships through your university, there are also tons of scholarships online and in communities. Check out our recent post with tips on where to find scholarships.
  • A student may be eligible for other forms of financial aid, click the link to find out what’s available.
  • Consider a private student loan with iHELP. If a student needs to cover the extra expenses of college after scholarship and federal financial aid, private student loans are available. iHELP offers competitive rates and personalized service you’ll appreciate. You can apply online.
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