Federal Student Loan Basics: Subsidized, Unsubsidized, and PLUS

Every school cost page on this site notes that loans must be repaid and do not reduce your net price. This page explains what the federal loan lines in an aid offer actually are. It describes federal programs as they exist; it does not recommend borrowing or any particular loan. The authoritative source for all of it is Federal Student Aid, the U.S. Department of Education’s official site, and figures below can change by academic year, so confirm current amounts there.

The two Direct Loan types for undergraduates

Direct Subsidized Loans are available to undergraduates with demonstrated financial need. The government pays the interest while you are enrolled at least half time, during the six-month grace period after you leave school, and during deferment periods. Need is determined by your FAFSA.

Direct Unsubsidized Loans are available to undergraduates regardless of financial need. Interest accrues from the day the loan is disbursed, including while you are in school. Unpaid interest is added to the principal when repayment begins.

Both types come from the same federal program, use the same fixed interest rate set annually for new loans, and carry the same borrower protections: income-driven repayment plans, deferment and forbearance options, and discharge provisions that private loans generally do not match.

Undergraduate borrowing limits

Federal limits cap what an undergraduate can borrow in Direct Loans, by year in school and dependency status. As of the 2025-26 award year, dependent undergraduates can borrow up to $5,500 as first-year students, $6,500 as second-year students, and $7,500 per year after that, with at most $23,000 of the $31,000 aggregate total being subsidized. Independent students and dependent students whose parents cannot get PLUS loans have higher limits, up to $57,500 aggregate for undergraduates. Confirm current-year limits on studentaid.gov, because they are set by law and do change.

These limits are why an aid offer’s federal loan line is usually a few thousand dollars, not the full remaining balance. Federal Direct Loans alone frequently do not cover the gap between a school’s net price and what a family can pay from income and savings.

What PLUS loans are

Parent PLUS Loans let a parent of a dependent undergraduate borrow up to the school’s full cost of attendance minus other aid received. They require a credit check, carry a higher interest rate and origination fee than Direct Loans for students, and are in the parent’s name, not the student’s. When an aid offer shows a large “PLUS” line filling the whole remaining gap, that is a loan the school is noting a parent could apply for, not aid the student has been awarded.

Grad PLUS Loans are the equivalent for graduate and professional students borrowing in their own name.

How this connects to the cost figures on this site

The average net price figures on our school pages already subtract grant and scholarship aid, which never has to be repaid. They do not subtract loans. If an aid offer reaches a low out-of-pocket number only by including loans, the real price of attendance has not changed; the timing of when you pay it has. When you compare offers, compare the grant totals and the resulting net price, then look separately at what mix of loans would cover the rest.

For the aid side of the picture, see paying for college as an adult, Pell Grant eligibility, and FAFSA for independent students.