Government Student Loans

The federal government here in the United States provides students with an efficient way to fund their education through government-sponsored student loans.  But that's just one way to pay for college.  The government provides students with three different programs to help pay for school:  loans, grants, and work study.

Government Loans

Since government loans are borrowed money, they must be paid back with interest.  Federal loans are available to both undergraduate and graduate students.  The amount received depends on the student's grade level (freshman, sophomore, junior, senior).  Unlike grants, students do not have to demonstrate financial need to qualify for a government loan.

There are two types of student loans offered by the federal government:  Federal Perkins Loans, and Direct Loans

Federal Perkins Loans

Students demonstrating the greatest financial need will be awarded Federal Perkins loans.  These loans are repaid to the student's college or university, and they are available to full and part-time students.

Undergraduate students can get a Perkins loan up to $5,500 each school year. Graduate students can borrow up to $8,000 annually.  Current interest rates on these loans are 5.00% in 2016 / 2017.

FFEL Stafford Loans and FFEL PLUS Loans

As a result of the Health Care and Education Reconciliation Act of 2010, FFEL Stafford Loans and FFEL PLUS loans are no longer made by private lenders. Instead, all new federal student loans come directly from the U.S. Department of Education under the Direct Loan Program.

Direct Student Loans

Direct loans are available to undergraduate and graduate students through the William D. Ford Federal Direct Student Loan Program.  This program is run by the Department of Education, and the school will typically administer the program.  With Direct Student Loans, repayment is made to the Department of Education.

Students must be enrolled at least half time to qualify for Direct loans.  The awards under this program depend on enrollment status, and do not depend on financial need.  The interest rate on these loans in 2016 / 2017 was 3.76% for loans in repayment.  Students can take between 10 and 30 years to repay a Direct Loan.  Finally, the table below outlines the maximum annual loan amounts for both subsidized and unsubsidized loans.

Direct Loans
  Dependent Student Independent Student Graduate Student
1st Year $5,500 $9,500 $20,500
2nd Year $6,500 $10,500
3rd and 4th Year $7,500 $12,500
Maximum     $138,500

Direct PLUS Loans

Parents of dependent students are eligible for Direct PLUS Loans.  Award amounts are calculated using the school's cost of attendance minus other aid the student receives.  The interest rate on these loans change annually, but the 2016 / 2017 rates are 6.31%.

Federal Grants

The second way the federal government helps to make college costs more affordable is through Federal Grant programs.  Federal grants are money that does not have to be repaid; unless the student suddenly withdraws from school.  There are two types of federal grants available to students: Federal Pell Grants and Federal Supplemental Educational Opportunity Grants (FSEOG).

Federal Pell Grants

Federal Pell Grants are awarded based on financial need.  The amount received depends on the cost of the school and status as a student (full or part time).  The size of the grants in 2016 / 2017 range from $400 to $5,815.


Federal Supplemental Educational Opportunity Grants (FSEOGs) are awarded to undergraduate students demonstrating exceptional financial need.  Those students already eligible for Pell Grants are given priority with FSEOGs.  In 2016 / 2017, these grants range from $100 to $4,000.

Federal Work Study Programs

The final option offered by the federal government to help students pay for college is work study programs, which are available to undergraduate and graduate students that are either full or part-time students.  These are part time jobs, which allow students to earn money to pay for their education.  In this type of program, the student can be an hourly worker or salaried employee.

The work can be located either on-campus or off-campus, and the school will pay the student directly at least once each month.

On-Campus Work Study

Working on campus usually means the student is working directly for their school.  Jobs of this type can range from campus security to laboratory and cafeteria assistants.  All jobs will take into consideration the student's academic progress and field of study.

Off-Campus Work Study

Some colleges and universities will offer students work study that is located off campus.  This will usually be for a non-profit or not-for-profit organization.  The work performed by this organization must be in the public interest.  The work hours will take into consideration the student's class schedule, and the work should be related to their field of study.

About the Author - Government Student Loans (Last Reviewed on July 13, 2016)