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Direct Loan Program

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The Direct Loan Program offers low-interest loans, from the U.S. Department of Education, to students and parents to help pay for a student's college education.

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Contents

Overview

The William D. Ford Federal Direct Loan Program[1] is run by the U.S. Department of Education. Low-interest loans are offered directly from the U.S. Department of Education to both students and parents in order to help pay for a student's college education.  Students and/or parents can begin the student loan process by completing a FAFSA application.

There are three main types of loans provided:

  • Direct Stafford Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans

Direct Stafford Loans

There are two types of Direct Stafford Loans[2] which students can apply for. These include:

  • Direct Subsidized Loans

The Direct Subsidized Loans are student loans offered to those students with financial need. Interest is not charged while the student is in school at least part-time and during grace/deferment periods.

  • Direct Unsubsidized Loans

Those students requesting student loans via Direct Unsubsidized Loans are not required to demonstrate any financial.  The school will determine how much the student can borrow.  The interest on these loans begins to accrue as soon as the loan is first paid out.  The interest can be paid off while the student is still in school and during grace/derferment periods.  Unpaid interest actually increases the total of the loan.

Direct PLUS Loans

There are two types of Direct PLUS Loans that can be applied for. They include:

  • Direct PLUS Loans for Parents[3]

Direct PLUS Loans for parents of dependent students are unsubsidized federal loans that parents of a dependent student can acquire for the student's college education. Direct PLUS Loans provide for the cost of attendance minus all other financial assistance received. To be eligible for this loan, the parents cannot have adverse credit histories. The interest for the loan is charged throughout the life of the loan.

  • Direct PLUS Loans for Graduate and Professional Degree Students[4]

Graduate and professional degree students have the opportunity to obtain unsubsidized federal loans through Direct PLUS Loans.  As with the PLUS loan for parents, these loans are available to those students without an adverse credit history.  Additionally, the interest for the loans is charged throughout the life of the loan.

Direct Consolidation Loans

Those federal student loans that are eligible can be combined into a single Direct Consolidation Loan.[5]  Reasons to take advantage of student loans consolidation includes:

  • unmanageable monthly payments

If students are having trouble paying the amounts due every month, consolidation can help decrease the amount required for payment each month.

  • too many monthly payments

Consolidation allows a single payment to be paid directly to the U.S. Department of Education on a monthly basis.

  • multiple interest rates on loans

If there are varying interest rates among the student loans, consolidation takes the average of the loan interest rates and fixes that rate throughout the life of the cosolidated loan.  The interest rate cannot be above 8.25%.  Unsubsidized interest benefits are not changed with consolidation[6].

In order to be eligible for a Direct Consolidation Loan, a student needs to have at least one direct loan with a status of either grace, repayment, derment or default.

References

  1. http://www2.ed.gov/programs/wdffdl/index.html
  2. http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp
  3. http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp
  4. http://studentaid.ed.gov/PORTALSWebApp/students/english/PlusLoansGradProfstudents.jsp
  5. http://www.loanconsolidation.ed.gov/
  6. http://debtpro.co/

External Links

Related Resources on FindLaw

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See Also

Contributors

FindLaw Michelle, Jenifferhomes