What are education loans and who offers them?

There are two main types of education loans: federal and non-federal.


The U.S. Department of Education offers loans to families for undergraduate education. These typically appear on your financial aid offer.

For students:

Federal Direct loans are for students enrolled in college or a training program at least half-time. There are two types:

  • Subsidized (based on financial need)
  • Unsubsidized (not based on financial need)

For parents:

Federal Direct PLUS parent loans are for up to the full remaining cost of attendance. PLUS loans are available through your school. 

Learn more at studentaid.gov/loans.


These loans, often called alternative loans or private loans, go by all sorts of brand names, depending on the lender. Available through:

  • VSAC and other nonprofit state agencies
  • your college
  • commercial lenders (banks, credit unions)

For students & parents:

Families can use these loan types to cover costs that remain after students borrow federal Direct loans. 

Non-federal loans are NOT created equal—each lender sets its own terms, and they have different benefits, interest rates, and repayment options than federal loans.

Sub or Unsub?

Federal Direct Subsidized loans, for students with greater financial need, do not accrue interest while a student is in school or in a deferment period. Your school will determine whether you’re eligible.

Federal Direct Unsubsidized loans, available for all students regardless of financial need, start accruing interest when the loan is disbursed (while you’re still in school).



Remember, all loans are borrowed money that need to be repaid with interest, so it’s important to compare all of your options and understand costs and terms. It’s your choice whether to accept some or all of the loan amounts offered in the student's financial aid award. Think carefully about how much you really need.


Next: Before You Borrow >