Buhata
Login Start for Free

Home › Life Terms

Debt and credit

Federal student loan

A student loan made by the U.S. Department of Education, with a fixed rate set by law and federal repayment plans and protections.

What It Means

A federal student loanStudent loanMoney borrowed to pay for college or career school, repaid with interest after you leave school; it comes from the federal government or a private lender. See more is a loan for college or career school made by the U.S. Department of Education. Its interest rateInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more is fixed for the life of the loan and set each year by a formula in federal law, and it comes with federal repayment plans, defermentDefermentA formal pause on federal student loan payments for a qualifying reason, during which subsidized loans don't build interest. See more and forbearanceForbearanceA temporary pause or reduction in loan payments that a lender or servicer allows, while interest usually keeps building on the balance. See more options, and forgiveness programs. The main kinds are Direct Subsidized Loans, Direct Unsubsidized Loans and Direct PLUS Loans, and the kind decides whether interest builds while you're in school.

Try It: Subsidized vs Unsubsidized Interest in School

Same loan, two kinds. Change the amount, an example rate, or the months from first payout to the end of the grace period.

Months: 54

Direct Subsidized: interest you're charged$0Not charged while you're enrolled at least half-time or in the six-month grace period.
Direct Unsubsidized: interest built up, about$1,485Builds from the day the loan is paid out.

That's 27.0% on top of what was borrowed, before the first payment is due. A rough estimate: amount times rate times years.

How People Say It

  • "Half my aid package was subsidized and half unsubsidized."
  • "My federal loans went to a new servicer."
  • "I'm maxed out on federal loans, so I need something else for the rest."

The Breakdown

Worked example. A student borrows $5,500 as a first-year student, at an example rate of 6%, and the grace periodCredit card grace periodThe time between a card statement and its due date when purchases collect no interest, as long as you pay the full statement balance. See more ends 54 months later (four years of school plus six months).

Direct SubsidizedDirect Unsubsidized
Based on financial needYesNo
Interest charged in school and grace$0About $1,485
Owed when repayment starts$5,500$5,500 plus about $1,485 of interest

The unsubsidized figure is a rough estimate ($5,500 × 6% × 4.5 years). Paying that interest while in school means it doesn't pile up for later.

How rates are set. Rates for new federal loans are set each year from the high yield of the 1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more-year Treasury note sold at the last auction before June 1, plus an add-on in the law that differs by loan type. A loan keeps the rate it started with. The current year's rates are on studentaid.gov's interest rates page.

New limits from July 1, 2026. The Department of Education says new graduate students can borrow up to $20,500 a year ($100,000 in total) and new professional students up to $50,000 a year ($200,000 in total). Grad PLUS closed to new borrowers on that date. Students enrolled in a program by June 30, 2026, who had a Direct Loan for it and stay continuously enrolled there, keep their old terms for up to three academic years or the rest of the program, whichever is shorter. Parent PLUS borrowing is capped at $65,000 per dependent student from the 2026-27 award year.

Good to Know

Studentaid.gov says a Direct Loan is in defaultLoan defaultFailing to repay a loan as the contract requires, usually after missed payments, which lets the lender use stronger ways to collect. See more once a payment is 270 days or more past due, and default can lead to your tax refund being withheld or part of your paycheck being garnished. Repayment choices also changed in 2026: studentaid.gov's One Big Beautiful Bill Act page lists the Repayment Assistance Plan and the Tiered Standard plan as available from July 1, 2026. Your loan servicer and your account on studentaid.gov show your loan types, rates and balances.

FAQ

What's the difference between subsidized and unsubsidized federal loans?

Subsidized loans are based on financial need, and you aren't charged interest while you're in school at least half-time, during the six-month grace period, or during a deferment. Unsubsidized loans aren't based on need, and interest builds from the day the money is paid out.

Are federal student loan rates fixed?

Yes. Each new loan gets the rate set for the year it's first paid out, and that rate stays for the life of the loan. The rate for new loans changes every July 1.

Can graduate students still get Grad PLUS loans?

Not as new borrowers. Grad PLUS closed to new borrowers on July 1, 2026. The Department of Education's interim exception lets students enrolled by June 30, 2026 who had a Direct Loan for that program keep their old terms while continuously enrolled, for up to three academic years or the rest of the program, whichever is shorter.

Do It in Buhata

Reminders, Countdown

Set a Reminder in Buhata for the month your grace period ends, and add the first payment date to Countdown so it doesn't catch you off guard.

Open Buhata

Related Terms and Categories

  • Student loan

    Money borrowed to pay for college or career school, repaid with interest after you leave school; it comes from the federal government or a private lender.

  • Private student loan

    A student loan from a bank or other private lender, priced by your credit and governed by its contract rather than federal student loan rules.

  • Income-driven repayment

    A federal student loan repayment plan that sets your monthly payment from your income and family size instead of from your balance.

  • Loan forgiveness

    A program that cancels some or all of a loan's remaining balance once you meet its rules, most often a federal student loan program.

  • Deferment

    A formal pause on federal student loan payments for a qualifying reason, during which subsidized loans don't build interest.

  • Loan default

    Failing to repay a loan as the contract requires, usually after missed payments, which lets the lender use stronger ways to collect.

Debt and credit

Sources

studentaid.gov, "Subsidized and Unsubsidized Loans"; studentaid.gov, "Top 4 Questions: Direct Subsidized Loans vs. Direct Unsubsidized Loans"; FSA Partner Connect, "Interest Rates for Federal Direct Loans First Disbursed Between July 1, 2026 and June 30, 2027"; studentaid.gov, "Interest Rates and Fees for Federal Student Loans"; U.S. Department of Education, "Fact Sheet: The Trump Administration is Making College More Affordable"; FSA Partner Connect, "Frequently Asked Questions: Loan Limits" (May 20, 2026); studentaid.gov, "Student Loan Delinquency and Default"

Last updated .