Direct Student Loans

Direct Student Loans are just another name for federal student loans. Before President Obama restructuring of the federal student loan program, many federal loans were funded by third parties, meaning that a large bank would provide the students with their loan funds, and students would repay the federal government in turn. When this was in effect, direct student loans were federal loans that were given out directly by the federal government without a financial institution acting as middleman. Since the restructuring of the program, all federal loans may be considered direct student loans, as funding for all federal loans comes directly from the Department of Education.

Types of Direct Student Loans

There are different types of Direct Student Loans that students can benefit from. These include subsidized and unsubsidized Stafford Loans, Perkins Loans and Direct PLUS Loans. To get subsidized direct Stafford Loans, students need to demonstrate a degree of financial need on their Free Application for Federal Student Aid (FAFSA). Compared to unsubsidized loans, Direct Subsidized Stafford Loan has lower rate of interest. Students are not required to pay interest on the loan while they are enrolled in a program. Additionally, there is a grace period after college which enables students to find a suitable job. Direct Unsubsidized Stafford loans, on the other hand, have higher interest rates, though still are low in comparison to private student loans.

Perkins Loans are another type of Direct Student Loans. These loans are meant for both graduate and undergraduate students. Compared to Stafford Loans, their rate of interest is a somewhat lower, and they are given only to students who demonstrate an extreme degree of financial need. Direct PLUS Loans are another option available to students with financial need. These loans have a somewhat higher borrowing limit and interest rate than Stafford and Perkins loans.

Benefits of Federal Direct Student Loans

The greatest benefit of Federal Direct student loans is that they have a generally low rate of interest. In the case of Direct Stafford Loans,the generous and flexible repayment terms allow students to navigate the process of paying down their debt with greater ease after graduation.

Applying for Direct Student Loans

In order to apply for Direct Student Loans, you need to fill out the Free Application for Federal Student Aid, or FAFSA. It is also very important to understand all the terms and conditions before applying for these loans so that you can maximize your chances of availing these financial aids. Remember, when borrowing money for college, look to federal loans first after looking for grants and scholarships; after that, if you exhaust your federal loan options, you can turn to private student loans as a last source of funding.