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Understanding Federal Direct Student Loans Program

Direct student loans are federal educational loans with low interest rates. These loans are provided by the US Department of Education with the intention to help students and their parents to pay for postsecondary educational expenses and usually cover tuition costs as well as additional expenses like transport, books, food, accommodation, etc. Direct Student Loans should not be confused with uncertified student loans, which are regularly characterized as direct-to-consumer loans.

The main benefits of Direct Student Loans are following:

  • Low interest rates;
  • Student borrows money directly from the federal US government, without third-party lender such as bank or financial institution;
  • Borrower have the opportunity to choose from numerous repayment plans which can be switched at any time, if the borrower needs a change;
  • Borrower has online access to his or her Direct Student Loan account information via his servicer’s website.

As it was mentioned before, the lender of Direct Loans is the Department of Education. Before the passing of SAFRA (Student Aid and Fiscal Responsibility Act) in 2010, federal loans for students could be offered as a part of the Direct Loan Program or the FFEL (Federal Family Education Loan) program, but SAFRA basically eliminated FFEL Program, and now most federal student loans are offered through the Direct Loan Program.

The four main types of federal student loans are:

  • The Subsidized Stafford Loan
  • The Unsubsidized Stafford Loan
  • The Direct Consolidation Loan
  • PLUS Loans

The Subsidized Stafford Loan

The Subsidized Stafford Loan is offered as a financial aid for students in who are proved to be in financial need, and it can be obtained without charge of interest during the time student is enrolled in school and during grace period and approved deferment periods after graduation.

The Unsubsidized Stafford Loan

Unsubsidized Loan is not based on student’s financial need. This loan option offers a choice to borrow of paying the interest while still is enrolled in college or university as well as during grace period and deferment period or can choose to accept for the interest to be added to the principal amount of his student loan.

For the both of the Stafford Loans student can apply via the completion of FAFSA.

The Direct Consolidation Loan

The Direct Consolidation Loan is category of loan which allows borrower to replace multiple student loans with just one. The Federal Direct Consolidation Student Loan Program lets borrower to consolidate most federal loans.

The Direct PLUS Loan

The Direct PLUS Loan is federal student loan for parents of the depending students intended to assist parents to pay for their child’s school expenses. To be eligible for the Direct PLUS Loan parent and student must meet certain requirements: must be the U.S. citizens or eligible non-citizens, parent must be the biological or adoptive parent, and in good standing with earlier loans and the student-depending child must be enrolled at least half-time at school participating in the Direct Loan Program.

Student loans provided under the Direct Loan Program will also require that applicants sign a Master Promissory Note (MPN) that will serve as a guarantee of their ability to repay the loan.

To sum up, the Direct Student Loans are federal education loans offered by the US Department of Education. Therefore, loan comes directly from the federal government, without involvement of third-party lenders like banks or financial institutions.

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