Federal student loans: borrow these first, and to the limit
Federal student loans are the foundation of smart borrowing for school: rates set by Congress rather than your credit, no credit check for most, and protections — income-driven repayment, forgiveness, deferment — that no private lender matches. The rule is simple: take these first, and to the limit, before anything else.
There are three main types. Direct Subsidized loans are need-based and the cheapest, because the government pays the interest while you are in school. Direct Unsubsidized loans are available regardless of need, but interest accrues from disbursement. Direct PLUS loans — for graduate students and parents — carry the highest rate and are the only federal loans that check credit.
Borrow in that order: subsidized first, then unsubsidized, then PLUS only if needed. Every federal loan is identical at every school and requires no cosigner (except PLUS), and the fixed rate is set by law for the year you borrow — it does not change with your credit or the market.
What makes federal loans worth taking even at a higher headline rate than some private offers is what comes attached: forgiveness pathways, income-driven repayment that caps your bill at a share of income, and deferment when you cannot pay. Reach for a private loan only to fill a gap federal aid leaves.
Questions people ask
What are the types of federal student loans?
Direct Subsidized (need-based, interest paid by the government in school), Direct Unsubsidized (available to all, interest accrues immediately), and Direct PLUS (for grad students and parents, higher rate, credit-checked). Borrow subsidized first.
Do federal student loans require a credit check?
No — subsidized and unsubsidized Direct loans require no credit check and no cosigner. Only PLUS loans check for adverse credit history, and even then the standard is lenient compared with private lenders.
How much can I borrow in federal student loans?
Annual and aggregate limits depend on your year in school and dependency status — for example, dependent undergraduates are capped at $5,500–$7,500 per year up to a $31,000 total. PLUS loans can cover up to the full cost of attendance.
Why take federal loans before private?
Because the protections — income-driven repayment, forgiveness, deferment, and discharge — apply only to federal loans. A slightly lower private rate is not worth surrendering the safety net that keeps the loan manageable if your income drops.