Federal student loans are available in addition to grants. Loans must be repaid but still offer many financial aid-based advantages to students looking to advance their education. Federal student loans offer lower fixed interest rates than most private loans.

These types of loans also offer repayment flexibility, which is important for students post-graduation when seeking their first real jobs. What are some of the major advantages provided by student loans?

In addition to lower fixed APRs, the best federal student loans allow for repayment flexibility. For example, it is possible to change the method used to repay your student loan debt. It is also possible to pause or defer payment during periods of financial hardship. 

Deferment/forbearance of student loans is a big advantage to students post-graduation still searching for their first jobs. Another advantage provided by federal student loans is the ability to put a ceiling on your repayment plans using a scale based on your income level.

Direct subsidized, direct unsubsidized and direct PLUS loans are all available. Direct subsidized and unsubsidized loans, also referred to as Stafford loans, offer interest rates of 2.75 percent to undergraduate students. Graduate and professional students are charged 4.3 percent interest. Direct subsidized loans are only available to undergraduate students exhibiting significant financial hardship. 

The government absorbs the interest charges while students are still in school and while loans are deferred. Direct unsubsidized loans are available to students whether financial hardship is a factor not. Direct unsubsidized loans are also available to graduate students and the government does not absorb the interest charges.

Direct PLUS loans are available to graduate students and the parents of undergraduate students only. Qualifying for these loans is partially dependent on credit ratings. Direct PLUS loans charge an interest rate of 5.30 percent.

The borrowing ceiling on direct PLUS loans is also higher, however, and loans are available to cover the full cost of tuition and attendance. Direct PLUS loans also offer some repayment flexibility although the terms are slightly more restricted than those of the direct subsidized/unsubsidized student loans.