Blog | Min Read 2

Understanding Federal Loan Program Options

Many college-bound families look to federal student loans provided by the U.S. Department of Education to bridge the gap between what they have saved or what funds have been gifted (through scholarships or grants) for college and what their cost of attendance will be. There are three different student loan options through the federal government: 

  1. Federal Direct Student Loan (Subsidized)
  2. Federal Direct Student Loan (Unsubsidized)
  3. Parent PLUS Loan

Each of these loans has different pros and cons, and college-bound families should carefully consider all of their options before applying for funding.

Federal Student Loan Programs Overview

*information directly from the Studentaid.gov

Subsidized V. Unsubsidized Loans

Subsidized and Unsubsidized Federal Student Loans is typically where all families should begin their borrowing journey. This program is the only loan that does NOT require a parental co-signer. It is strictly a loan agreement between the federal government and the student which maxes out at $27,000 over the four years.

There are a few key differences between subsidized and unsubsidized federal student loans. First and foremost, subsidized loans are offered to families who demonstrate financial need. If awarded the subsidized portion of the loan will be interest FREE until the student graduates and begins payments. This isn’t the case for unsubsidized loans where the interest will accrue upon disbursement in college. No payments are required on these loans while the student in  school. Payment begin typically 6 months after graduation.  

Parent PLUS Loan

Parent PLUS loans are uniquely designed for parents with dependent students. These loans are taken on by the parent directly (not as consignors) and can cover the full cost of attendance at yoru student’s chosen school. Parents must have a good credit history to qualify. Learn more about the Parent PLUS loan by clicking here.

Don't Just Take Our Word For It

Sign Up for Your Free MyCAP Account

Related Articles

If you’re the parent of a rising high school junior or senior, this blog is for you.  With college only a short time away, we’re going to guide you through...
Need to solve your college funding gap? Here’s everything you need to know about borrowing loans for your college investment.
Many college-bound families look to federal student loans provided by the U.S. Department of Education to bridge the gap between what they have saved or what funds have been gifted...