William D. Ford Student Loan

William D. Ford Student borrowerIt is almost impossible to make it through college without student loan debt these days. In fact, the credit reporting company Experian reports that 40 million Americans have some form of college loan debt. Usually the most cost-effective loans with the lowest, fixed interest rates and flexible repayment plans are loans funded by the U.S. Department of Education through the William D. Ford Direct Loan (Direct Loan) Program. With Direct Loans, the federal government is your lender.

Loan Terms and Types

There are four types of Direct Loans offered through the William D. Ford Direct Loan Program:

Subsidized loans are based on financial need and only offered to undergraduate students, while unsubsidized loans do not depend on financial necessity and are available for graduate and professional students as well. The federal government pays the interest on a subsidized loan; with an unsubsidized loan, you the borrower are responsible for the interest, which generally accrues during all periods of the loan.

Depending on what year of college you are in and whether you are considered an independent or dependent student, Direct Subsidized and Unsubsidized Loans have maximum borrowing amounts for undergraduates between $3,500 to $12,500, with a lifetime maximum range of $23,000 for Direct Subsidized Loans, $31,000 for dependent students with an Unsubsidized Direct Loan, and $57,500 for Unsubsidized Direct Loans for independent students. Graduate students may be eligible to borrow up to $20,500 each year with a Direct Unsubsidized Loan, up to a cap of $138,500. Current interest rates for the 2016-2017 academic year are 3.76 percent for undergraduate students and 5.31 percent for graduate and professional students with either an Unsubsidized or Subsidized Direct Loan.

Direct PLUS loans require a credit check, as they are based on your credit history. Parents can borrow on behalf of their dependent children as young people may have negative credit or no credit history. Direct PLUS Loan maximum amounts are based on subtracting the amount of other financial aid received from your total cost of attendance at your chosen school. Interest accrues during all periods of a Direct PLUS Loan, and the interest rate for the 2016-2017 academic school year is 6.31 percent.

Direct Consolidation Loans combine all of your loans into one loan and one monthly payment for a more convenient way to repay your loans. Interest rates on a Direct Consolidation Loan are calculated by finding the average interest rate between all your loans and rounding that amount up to one-eighth of 1 percent.

Eligibility and Application

In order to apply for a Direct Loan, you need to fill out a Free Application for Federal Student Aid (FAFSA). To do so, you will need your Social Security number, name, date of birth, and current income tax information. The FAFSA calculates your Expected Family Contribution, or EFC,  along with your total cost of attendance (COA) at your chosen school, in order to determine how much and what type of aid you might qualify for. To be eligible for federal student loans, you must meet the following criteria:

You have to reapply for federal financial aid every year. You can apply online by creating a FSA ID, which grants you access to your federal financial aid information. When you are looking for financial aid for college, one of the first things you should do is apply for federal student aid. For more information on the types of student financial aid that you may qualify for, continue browsing our site.


Types of Student Loans

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