Skip to main content
Financial Aid

Word of the Day Wednesday: Federal Student Loans

Each Wednesday, MEFA features a Word of the Day, where we highlight a word (or sometimes a phrase) related to the college planning process. This month, we're focusing on vocabulary related to the components of the financial aid offer.

Today's Word of the Day is: Federal Student Loans

Federal student loans are sums of money provided by the federal government to help college students pay for college costs. Students apply for federal student loans by submitting the Free Application for Federal Student Aid (FAFSA®). Colleges let students know of their eligibility to borrow federal student loans by listing them on the financial aid offers.

There are two types of federal student loans:

    • Federal Direct Student Loans, officially named William D. Ford Federal Direct Loans, are by far the most common federal student loans, as every student who submits a complete FAFSA is eligible to borrow one. Freshmen can receive up to $5,500 in Federal Direct Student Loans. These loans can be subsidized (meaning no interest accrues while the student is in college) or unsubsidized (meaning interest does accrue while the student is in college). The fixed interest rate on Federal Direct Student Loans is set each year in May for the upcoming academic year. Some colleges use the former name of Stafford Loans when referencing the Federal Direct Student Loans.

    • Perkins Loans are another type of student loan offered by the federal government. Perkins Loans are subsidized, have a 5% fixed interest rate, and are offered to students who demonstrate significant need for financial aid. Not every school has Perkins Loan funding, so they are found less frequently on financial aid offers.



Students need to complete a basic loan tutorial, called entrance counseling, and sign a promissory note before borrowing a federal student loan. Once these requirements are completed, the federal government will deposit the loan funds into students' accounts by the beginning of the academic year.

Though all loan funds must be repaid, students don't need to begin repayment until after graduating or leaving school. The Federal Direct Student Loan program offers several different types of repayment to ensure that students can manage their loan repayment regardless of their post-college financial situation.

Why does this matter to you?

If you're a federal student loan borrower, you need to make sure you understand the details of your loans before borrowing. While federal student loans are a helpful way to cover some of your college costs, you'll need to make sure you're prepared to repay your loans – with interest – when they come due.

For more information about federal student loans, including eligibility, borrowing limits, and repayment plans, visit the Federal Student Aid website.







Share FacebookTwitterLinkedinEmail