Preheat the oven to 350 F. Cook pasta according to package directions. Drain and place into a large bowl. Melt the butter in a large saucepan over medium heat.
Add in flour, and cook for a minute to brown. Pour in milk, 2 cups shredded cheddar cheese, salt, and pepper. Continue to whisk over medium heat until the cheese has completely melted and the sauce has thickened.
Mix the cheese sauce with the cooked pasta. Spread the mixture into a greased baking dish. Top with the remaining one cup cheese. Bake for 20-25 minutes.