Federal Student Loans: 2024 Review

New undergraduate and graduate private student loans

Students who need help with the cost of college or career education should start by filling out the Free Application for Federal Student Aid (FAFSA) to get access to free federal aid and loans. Federal student loans are easier to qualify for than private student loans. They don't require a credit history, cosigner or income verification in most cases.

Depending on their financial needs, students may be eligible for direct subsidized and unsubsidized loans. And if you meet specific requirements, the U.S. Department of Education pays interest on direct subsidized loans. 

Federal loans also come with many more repayment options than private student loans. Some are even based on income, giving you a lower monthly payment to offset lower paychecks for entry-level jobs after graduation. 

Despite the payment and qualifying flexibilities, rates are higher for federal student loans. Lifetime loan limits on some types may not give you enough funds to cover the average cost of a four-year college degree. 

• Standard repayment: All federal loan types can opt for this payment option, which requires a 10-year repayment period. The term can be extended to 30 years with an eligible consolidation loan.
• Graduated repayment: This option allows you to make lower payments at first, with an increase every two years to allow for a 10-year repayment, or 30 years with an eligible consolidation loan.
• Extended repayment: This option is only for borrowers with more than $30,000 in outstanding Direct or FFEL loans and allows for a 25-year repayment plan.
• Income-based repayment (IBR) plan: Monthly payment is based on 10 to 15 percent of your income but never exceeds what you would pay under the 10-year standard repayment plan.
• SAVE plan: Under this plan, your payment would be based on 10 percent of your discretionary income but never exceeds what you would pay under the 10-year standard repayment plan.
• Deferment: In-school deferment is usually automatic. Other deferments require written notice to your loan servicer. Special deferments of up to three years may be available for special circumstances, including cancer treatment, military service or unemployment.
• Forgiveness: If you're a government employee or work for an eligible non-profit, you may be eligible to have all or some of your loan balance canceled or discharged. 

The grace period for repayment varies depending on the type of loan you apply for. Direct subsidized, unsubsidized, and Federal Family Education Loans are eligible for a grace period of 6 months, while Perkins loan grace periods are 9 months.

Refinance student loans

There are no refinance programs for Federal Student Aid loans. However, students with higher loan balances can opt for a consolidation loan, which allows for extended terms of up to 30 years However, students with higher loan balances can opt for a consolidation loan, which allows for extended terms of up to 30 years.

The interest rate is based on a weighted average of the loans being consolidated, rounded up to the nearest eighth of a percentage point. The consolidation loan can be combined with income-driven repayment options to keep the payment as low as possible.

Federal student loans vs. Earnest

Federal student loans don't require a minimum credit score — most don't require a credit check — while Earnest has a minimum credit score of 650. Earnest also doesn't offer an income-driven repayment option. However, it is one of few private lenders to offer a 30-year extended term for students who can't afford its standard maximum 20-year term.

Earnest offers minimum annual percentage rates (APRs) below 4 percent for qualified undergraduate borrowers, much lower than the over 6 percent rates currently offered for Financial Student Aid loans. You'll also be eligible to finance up to the total cost of your education with an Earnest loan, which may be helpful if you're attending a private institution.

Federal student loans vs. SoFi

SoFi student loans are only available to borrowers with a minimum credit score of 640. It also doesn't offer income-driven repayment options, which may make the payment unaffordable if you earn a low wage after graduation.

While it may not have the same benefits as a federal student loan, SoFi does offer a wide range of refinancing options and doesn't charge any origination fees for its loans. You can also finance the full cost of attendance, making it a better choice if federal student loan limits don't cover your tuition costs.

How Bankrate rates federal student loans

The Bankrate team uses a 16-point system to evaluate student loan lenders. This scoring criteria measures how lenders perform across three main categories.