What is a student loan?
Student loans are installment loans that cover the costs of higher education, including tuition, fees, books and living expenses. They can be either federal or private, and the type of loan determines the interest rate calculation, repayment options, and consumer protections. Like other loans, they must be repaid, including any interest and fees.
What is the difference between a private loan and a federal student loan?
Student loans can be obtained from banks, credit unions, and online lenders. Federal student loans have fixed interest rates and maximum loan amounts, while private student loans do not. To qualify for a private student loan, borrowers typically need a good or excellent credit score which can be difficult for undergraduates with shorter credit histories, requiring them to use a co-signer. However, some private student loans can be obtained without a co-signer.
It's important to note that private student loans do not offer the same borrower protections as federal loans, such as income-driven repayment plans, forgiveness for public service fields, or financial hardship programs. Therefore, it's recommended to exhaust federal loan options first before resorting to private loans.
For now we will talk about federal student loans and the difference between them.
William D. Ford Federal Direct Loan (Direct Loan) Program
| Year in College | Students | Independent Students |
| First-Year Undergraduate Annual Loan Limit | $5,500-No more than $3,500 of this amount may be in subsidized loans | $9,500-No more than $3,500 of this amount may be in subsidized loans. |
| Second-Year Undergraduate Annual Loan Limit | $6,500-No more than $4,500 of this amount may be in subsidized loans. | $10,500-No more than $4,500 of this amount may be in subsidized loans |
| Third Year and Beyond Undergraduate Annual Loan Limit | $7,500 per year-No more than $5,500 of this amount may be in subsidized loans. | $12,500-No more than $5,500 of this amount may be in subsidized loans. |
| Graduate or Professional Student Annual Loan Limit | N/A (all graduate and professional degree students are considered independent). | $20,500 (unsubsidized only). |
| Subsidized and Unsubsidized Aggregate Loan Limit | $31,000-No more than $23,000 of this amount may be in subsidized loans. |
57,500 for undergraduates-No more than $23,000 of this amount may be in subsidized loans. $138,500 for graduate or professional students-No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study. |
Loan interest rate change from year to year. The interest rates for Direct Subsidized Loans and Direct Unsubsidized Loans first disbursed on or after July 1, 2022 and before July 1, 2023 are shown in the chart below.
| Undergraduate Borrowers | Graduate or Professional Borrowers |
| 4.99% | 6.54% |
| Direct Subsidized Loans and Direct Unsubsidized Loans | Direct Unsubsidized Loans |
How do I get a federal student loan?
To apply for a federal student loan, you must first complete and submit a Free Application for Federal Student Aid (FAFSA®) form. Based on the results of your FAFSA form, your college or career school will send you a financial aid offer, which may include federal student loans. Your school will tell you how to accept all or a part of the loan.
Before you receive your loan funds, you will be required to