Direct Unsubsidized: A federal loan that any undergraduate or graduate student can get (as long as you haven't reached your lifetime borrowing limit).
Direct Unsubsidized Loans
Unlike direct subsidized loans, unsubsidized loans are available to both undergraduate and graduate or professional degree students. To be eligible, borrowers must be enrolled at least part time at a college that participates in the direct loan program.
While there are many ways to pay for college, federal student loans are one of the most popular options. These loans offer flexible payment options and often have low interest rates. The federal Direct Loan Program offers a few loan types.
Federal student loans are broken down into four categories: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Within those categories, there are loan options for undergraduate students, graduate students, professional students and even parents.
A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college. Here are the types of student loans.
The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory in nature due to outrageously high interest rates and fees.
Offered by the U.S. Department of Education, the federal Parent PLUS loan is available to parents of undergraduate students who are enrolled at least half-time in an eligible school. To qualify, you must not have adverse credit, which is defined as one of the following: You have delinquent debts of $2,085 or higher.
Most college students can qualify for student loans, but some programs and lenders may not be available to you based on your situation. Understanding the requirements upfront can help you determine which loans to apply for.
Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it's paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (that is, added to the principal amount of your loan).
Most student loans — about 92.5% — are owned by the government. Total federal student loan borrowers: 43.2 million. Total outstanding federal student loan debt: $1.60 trillion.
Two common types of loans are mortgages and personal loans. The key differences between mortgages and personal loans are that mortgages are secured by the property they're used to purchase, while personal loans are usually unsecured and can be used for anything.
Interest rates are generally lower because the collateral offers a lower risk to the lender. The most common types of secured loans are auto loans and mortgages. You'll typically borrow the appraised value of the home or car minus any down payment you make on it.
Direct Subsidized Loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. Direct Unsubsidized Loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based upon financial need.
Federal Loans
There are four types of Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. Direct Subsidized Loans are made to eligible undergraduate students based on financial need.
The government doesn't always lend money directly. In some cases, it guarantees loans made by banks and finance companies. The most common government loans are student loans, housing loans, and business loans. Other loans include those for veterans and disaster relief.
Ultimately, it's best to use subsidized student loans if you qualify, as you will pay less over time than with unsubsidized loans.
However, borrowers must demonstrate financial need to qualify for subsidized student loans. Unsubsidized student loans are still a good option since they typically offer better rates and terms than private student loans — plus anyone can get an unsubsidized loan, regardless of income.
Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan.
At the end of 2023, 43.2 million Americans have federal student loans. Approximately 13% of all Americans had federal student loan debt in 2021.
Lenders may look at your employment history, credit score, debt-to-income ratio, and enrollment status at your school. One of the most common reasons why a student might not qualify for a private student loan is because they don't meet their lender's FICO® Credit Score criteria.
There are several different types of student loans available, but each falls into one of two buckets: federal or private. Federal student loans typically offer lower interest rates and enhanced borrower protections, so it's a good idea to apply for those first.
“Dependent Versus Independent” Student Loan Options
Whether the student is considered a dependent or independent student on the FAFSA affects federal student loan limits. If the student is independent, parental information is not required on the FAFSA, and the loan limits on the Federal Direct Loans are higher.
To find out if you have a FFEL Program loan, log in to your StudentAid.gov account using the link below. Under the “Loan Breakdown” section, select “View Loans” to see the list of loans you've received.
When comparing federal loans vs private loans, the key difference is that federal loans are provided by the government and private loans are provided by banks, credit unions, and other financial institutions. Each has its own student loan eligibility criteria, application process, and terms and conditions.