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This post is from Grown and Flown.

There are different types of undergraduate student loans to help pay for college

1. The single best loan an undergraduate can borrow is the federal Direct Loan, and it’s not just for students with financial need. Any student, regardless of need, can borrow up to the maximum: $5,500 as a freshman, $6,500 as a sophomore, $7,500 as a junior, and $7,500 as a senior. To qualify for a federal student loan, a student’s credit rating and FICO score are not considered.
2. Most students receiving financial aid will see two federal Direct Loans in their award letter. One will be a Direct Subsidized Loan, which will total $3,500 for a freshman. The federal government pays the interest while the student is in college. The other is a Direct Unsubsidized Loan, which for a freshman will be $2,000. Interest accrues from the date of disbursal on unsubsidized loans. Both loans have the same low fee and low interest rate (see #5 below). Even though repayment on these loans doesn’t begin until six months after graduation, I highly recommend paying off the unsubsidized loan interest monthly so the amount owed doesn’t balloon.
3. Even students who do not qualify for need-based financial aid are entitled to borrow up to the maximum in Direct Unsubsidized Loans.
4. IMPORTANT COVID UPDATE: By executive order on January 21, 2021, President Biden has instructed the Acting Secretary of Education to extend the pause on student loan repayments until September 2021, and to set the current interest rate at 0%. No interest will accrue during this time, and no repayments need to be made by anyone with any outstanding student loans.
5. The interest rate on federal Direct Loans disbursed between July 1, 2020 and June 30, 2021 is 2.75% (though temporarily at 0% due to executive order). Interest rates are set annually by Congress in late May or early June and are based on the yield of the 10-year Treasury note. The fee for these loans is about 1%.
6. To begin the process of applying for financial aid and federal loans, the student must submit the FAFSA (Free Application for Federal Student Aid). The FAFSA becomes available on October 1 of the student’s senior year. The form is completed online, and submitted once to the Department of Education, who processes it and distributes it to each school the student has listed on the form. Institutional financial aid deadlines vary—some may be as early as November 1 of the student’s senior year. So it is crucial that the FAFSA is submitted prior the earliest deadline.

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