The bottom line: Federal direct subsidized and unsubsidized student loans are offered by the federal government. They are the best first option for borrowing money for college.
Federal Subsidized/Unsubsidized Loan
2.75 - 4.30%
Min. Credit Score
Pros & Cons
More flexible repayment options for struggling borrowers than other lenders.
Subsidized loans do not collect interest while in school or during deferment.
Lower interest rates compared with private lenders.
You pay an origination fee.
Compare to Other Lenders
Federal direct 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 student loans at a glance
Undergraduate borrowers can take out two types of direct loans: subsidized and unsubsidized.
Loans offer flexible repayment options, including income-driven repayment.
No credit history, income or co-signer is needed to apply.
How Federal Direct Student Loans Could Improve
Federal student loans are the best option for students, but they're not perfect. They could improve by:
Eliminating student loan origination fees.
Federal direct student loan details
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 2020-21 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 loans 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 student loan 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.