Federal Direct Student Loans – Everything You Need To Know

Federal Direct Student Loans

Many youngsters dream of going to college, but for many the cost is simply too high. That’s where federal direct loans come in to help.

Federal direct loans are subsidized and unsubsidized loans offered to undergraduates. In 2018 over 60% of high school students applied for these loans.

While borrowing money and being in debt is never pleasant, if you do find yourself needing financial aid towards your student loan fees, then federal direct loans are often your best option.

Today we will look at the federal direct loan system and explain a bit more into how it works exactly.

What Types Of Federal Direct Loans Are Available?

There are actually several different types of loans available, here are four of the main ones on offer:

Direct Subsidized Loans

Often referred to as Stafford loans, the Department of Education will cover any interest built up as a result of taking out these loans while you’re still studying.  Therefore, no interest will need to be paid after you eventually graduate. To qualify for this loan undergraduates will need to demonstrate a suitable financial need.

Direct Unsubsidized Loans

Slightly different to the loan above, with this loan you will be responsible for paying any interest built up on your loan while still studying. Additionally, the interest itself will capitalize when it remains unpaid, adding further principal to the original loan. It is important to note that direct unsubsidized loans are not given based on financial need. This type of loan is also available to graduate and professional students.

Direct PLUS Loans

The third type on our list are known as direct PLUS loans, if you apply for one of these you will be required to undergo a credit check. These loans are designed for students who have had time to build up their credit ratings, so they are most suitable to graduates and professional students. However, you can still apply for this type of loan if you have a cosigner.

Direct Consolidation Loans

Direct consolidation loans are a useful way of combining multiple loans into one single loan through one provider. This makes making payments less hassle and also means that you can extend your loan repayment tenure plan up to 20 years.

Will I Be Eligible?

As with many loans, they’re never 100% straightforward and certain clauses need to be met to meet the selection criteria. For a federal direct student loan, you will need to tick the following boxes:

  1. Undergraduate students at qualified schools in the scheme.
  2. Demonstrated financial need as determined by the FAFSA (Free Application for Federal Student Aid).
  3. S. citizen or eligible non-citizen.
  4. Successfully achieved a high school diploma or GED.
  5. Enrolled at least half time in a relevant school.
  6. Not in default on any long-standing federal student loans.
  7. Meet general eligibility requirements for federal student aid.

What Is The Max Amount Of Student Loans I Can Receive?

Dependent undergraduate students

  • First year – $5,500 total; $3,500 subsidized
  • Second year – $6,500 total; $4,500 subsidized
  • Third and fourth years – $7,500 total; $5,500 subsidized

Independent undergraduate students

  • First year – $9,500 total; $3,500 subsidized
  • Second year – $10,500 total; $4,500 subsidized
  • Third and fourth years $12,500 total; $5,500 subsidized


  • Annual limit – $20,500
  • Lifetime limit – $138,500

How Do I Apply?

The process itself does take a fair bit of planning to make sure you have all the relevant documents to support your application. Generally, there are five main steps towards applying for your loan.

  1. Create your FAFSA ID.
  2. Gather the documents you will need; these consist of some of the following:
  • Social security number
  • Drivers license
  • You and your parents W-2 forms
  • Your parent’s federal tax returns from the previous year (dependent students)
  • Your federal tax returns from the previous year (independent students)
  • Bank statement
  • Any records of previous income earned
  1. Fill out your FAFSA – the deadline is normally at the end of June each year.
  2. Review your student aid report.
  3. Review and accept your financial aid letter.

While federal student loans present themselves as excellent options for helping funding further studies, there are still loans and will need paying back at some point in time.

Federal student loans definitely have some advantages that you won’t find in a private loan, but there are still plenty of terms and conditions that you will need to follow carefully.

Remember to always see what scholarships and grants you may be eligible for before applying for any form of student loan.