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Federal Subsidized and Unsubsidized Student Loans: 2019 Review

Federal direct student loans don’t require credit or income to apply. They are the most widely used college lending option.
Sept. 19, 2018
Loans, Student Loans
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5.0 NerdWallet rating

Federal direct subsidized and unsubsidized student loans are the best option for students who need to borrow money to pay for college.

Unlike private student loans, federal direct student loans don’t require credit history or a co-signer. They also offer borrowers more repayment options and protections to prevent default. And federal loans are the only way to get Public Service Loan Forgiveness.

Use federal student loans before you consider taking out private student loans.

Federal direct subsidized and unsubsidized student loans at a glance

  • Offers flexible repayment options, including income-driven repayment.
  • No credit history, income or co-signer is needed to apply.
Reviewed loanFederal undergraduate student loan
Loan terms10 to 25 years once repayment begins, depending on the plan
Loan amountsDependent undergraduate: Up to $31,000 for a borrower's undergraduate career; $23,000 can be subsidized*

Independent undergraduate: Up to $57,500 for a borrower's undergraduate career; $23,000 can be subsidized

Graduate: Up to $20,500 per year and $138,500 for a borrower's entire college postsecondary career, including undergraduate loans.
Grace period6 months
Related productsPLUS loans for graduate students and parents
*Subsidized loans do not accrue interest while a borrower is enrolled in school and during the 6-month grace period.

Federal direct student loan details

  • Application or origination fee: 1.066% origination fee.
  • Prepayment penalty: None.
  • Late fees: Yes.
  • Interest rates remain the same through the life of the loan: 4.53% for direct subsidized loans and direct unsubsidized loans for undergraduate students; 6.08% for direct unsubsidized loans for graduate or professional students; 7.08 for PLUS loans.



  • Citizenship: U.S. citizens and eligible noncitizens.
  • Location: Available in all 50 states.
  • Must be enrolled half-time or more: Must be enrolled half-time or full-time.
  • Must attend a Title IV-accredited school: Yes.

In-school repayment options

    Federal direct student loan payments are automatically deferred while borrowers are enrolled at least half-time in school and for the six-month grace period after leaving school. However, there is no penalty for making payments while in school, so you may opt to make immediate or interest-only payments to reduce your debt.

Post-school repayment options

    Borrowers are automatically enrolled in the standard 10-year repayment plan. To change your repayment plan, you must contact your loan servicer. You can use the federal student aid office’s Repayment Estimator to find out which plans you might be eligible for and to get monthly and overall payment estimates.
  • Standard repayment: Your payments are fixed in order to pay off the full loan in 10 years.
  • Graduated repayment: Your payments are initially lower and will increase, typically every two years, in order to pay off the full loan in 10 years.
  • Extended repayment: Your payments are fixed or graduated in order to pay off the full loan in 25 years.
  • Revised Pay-As-You-Earn (REPAYE): Any borrower with an eligible federal direct loan can qualify for payments set at 10% of your discretionary income. Your loan term increases from the standard 10 years to 20 or 25 years.
  • Pay As You Earn (PAYE): Your qualifications depend on your income and amount of outstanding debt. If you qualify, your payments will be set at 10% of your discretionary income and your loan term increases from the standard 10 years to 20 years.
  • Income-based repayment (IBR): Your qualification is based on your income and amount of outstanding debt. If you qualify, your payments are set at 10% or 15% of your discretionary income and your loan term increases from the standard 10 years to 20 or 25 years.
  • Income-contingent repayment (ICR): Your qualifications depend on your income, tax filing status and the number of people in your household. Your payments are capped at 20% of your discretionary income or the amount of your fixed monthly payments on a 12-year loan term, whichever is less. Your loan term increases from the standard 10 years to 25 years.


    You can request a deferment from your loan servicer in several situations:

  • While enrolled at least half-time at an eligible college or career school, graduate fellowship program, rehabilitation training program for the disabled.
  • While experiencing economic hardship, up to three years.
  • While unemployed or unable to find full-time employment, up to three years.
  • While serving in the Peace Corps, up to three years.
  • While on active military duty or for 13 months after the conclusion of that service or until you return to a college or career school.


    General forbearance

    You can request forbearance if you have financial difficulties, medical expenses, change in employment or other reasons your loan servicer deems acceptable. However, interest will continue to mount during any period of forbearance. If possible, you may consider making interest payments to prevent the total amount you have to repay from growing.

    General forbearance is granted for no more than 12 months at a time. If you are experiencing hardship at the end of a 12-month period, you can request another. Your loan servicer may set a limit on the maximum period of time you can receive a general forbearance, but the Education Department has no limit.

    Mandatory forbearance

    Your loan servicer is required to give you forbearance, up to 12 months at a time, in a few situations:

  • You are serving in a medical or dental internship or residency program and meet requirements.
  • The total amount you owe each month is 20% or more of your total monthly gross income, for up to three years.
  • You are serving in an AmeriCorps position for which you received a national service award.
  • You are performing teaching service that would qualify you for teacher loan forgiveness.
  • You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
  • You are a member of the National Guard and have been activated by a governor, but you are not eligible for military deferment.

    Loan servicer: Your loan is assigned to a loan servicer after it is disbursed. You may have one of nine servicers: CornerStone; FedLoan Servicing (PHEAA); Granite State – GSMR; Great Lakes Educational Loan Services Inc; HESC/Edfinancial; MOHELA; Navient; Nelnet; or OSLA Servicing.

Contact your servicer:

  • Public Service Loan Forgiveness: Borrowers who make 120 payments on an eligible repayment plan (income-driven repayment) while employed full-time for a qualifying public service employer may qualify for loan forgiveness.
  • Teacher Loan Forgiveness: Teachers who teach full-time for five complete and consecutive academic years in a low-income school or educational service agency may be eligible for loan forgiveness of up to $17,500 in direct loans.
  • Loan forgiveness for income-driven repayment: After the loan term ends on any of the four income-driven repayment plans, the remaining balance is forgiven.
  • Borrower Defense to Repayment loan forgiveness: If a borrower’s school misled or engaged in any other misconduct or illegal activity, borrowers may be eligible for loan forgiveness.
  • Closed School Discharge: You may be eligible for 100% discharge of your direct loans if your school closes while you’re enrolled and you do not complete your program, or if your school closes within 120 days after you withdraw.

How to apply for a federal direct student loan

If you’re ready to borrow a federal student loan, you can apply by submitting a FAFSA. The form is available to complete online, with your Federal Student Aid ID. You can also submit a paper FAFSA by mail.

» MORE: NerdWallet’s FAFSA Guide

To apply, you’ll need all documents included on the 2019-20 FAFSA checklist, according to your dependency status.

After you submit the FAFSA, you’ll receive a Student Aid Report, which summarizes the information you included in the FAFSA as well as your expected family contribution. That’s the amount the government says your family can afford to pay out of pocket for college.

When you receive your college acceptance letters, you’ll also receive a financial aid award letter that details all free money you may be eligible for (grants, scholarships and work-study) as well as the federal direct loans you can borrow.

Accept all free aid first before taking out federal loans. Also, you may not need all of the loans offered. Your school will tell you how to turn down a loan or request a lower loan amount.

If you have a payment gap to fill after you maximized all grants, scholarships, work-study and federal loans, you may consider borrowing a private loan.

Compare private student loan options to make sure you’re getting the best rate you qualify for. In addition to interest rates, look at lenders’ repayment alternatives and the flexibility they offer to borrowers who struggle to make payments.

Student loan ratings methodology

NerdWallet believes the best student loan is one you can repay at the lowest interest rate you can get. That’s why NerdWallet’s federal and private student loans ratings reward lenders that offer a variety of loan terms, limit their fees and penalties, and extend borrowers multiple options to avoid default. Points are also awarded for soft credit checks, underwriting transparency and other consumer-friendly features. Use these ratings as a guide, but we encourage you to shop around for the lowest interest rate you can qualify for. NerdWallet does not receive compensation for its reviews. Read our editorial guidelines.

5 stars out of 5 — Among the very best for consumer-friendly features

4.5 stars out of 5 — Excellent; offers most consumer-friendly features

4 stars out of 5 — Very good; offers many consumer-friendly features

3.5 stars out of 5 — Good; may not offer something important to you

3 stars out of 5 — Fair; missing important consumer-friendly features

2.5 stars out of 5 — Poor; proceed with great caution

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