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Direct Loans

Article on Direct Loans

The cost of attending college has been rising every year, seemingly with no limit. Many families choose to remove some financial stress by utilizing loans. There are many different types of student loans but direct loans are usually very low interest loans which make them extra appealing to students and their families. Instead of being provided by a banking institution, direct loans are offered directly through the Department of Education. There are three distinct types of direct loans: Direct unsubsidized, subsidized, and PLUS. We will go into detail about each of these loans below so you know which one works best for you. But first you need to know how to get a direct loan!

Applying for Financial Aid

In order to receive financial aid, all students are required to fill out the Free Application for Student Aid (FAFSA). This can be completed on the web or as a physical document and mailed it in. Typically you will need to include information such as verifiable proof of both the student’s and parents’ income as well as personal information such as name, address and social security number. Without filling out the FAFSA you will be ineligible to receive financial aid.

Deadlines and Awards Package

The FAFSA enforces strict submission deadlines in order to be eligible to receive aid for the following year, so it is very important to check FAFSA website for the deadlines and be sure to meet them. You will then be offered what is called an “award package” which will detail the types of loans you are eligible for.

Direct Subsidized Student Loans

These loans are specifically for students who have demonstrated financial need. The benefit of these types of loans is that interest is not charged as long as the student is attending class full time. Interest is basically paid by the government which means less money comes out of your pocket!

Direct Unsubsidized Student Loans

Unsubsidized loans are different that subsidized in that they are not awarded based on demonstration of financial need. Interest accrues while the student is in school, as well as in deferment and repayment. Often to combat excessive student loan fees upon graduating, students and their families will pay back the interest little by little while the student is in school.

Direct PLUS Student Loans

These are student loans that are unsubsidized. They are offered for parents who have dependent students, as well as for students who are attending a graduate or professional program. The PLUS loan will help to pay for all costs of attendance, but just interest still accrues during all periods of the loan.

After accepting a student loan, the student is able to use the funds once dispersed to pay for their college expenses. It is very important that they are used only for school related expenses and nothing more because that is considered a misuse of funds which could lead to the cancellation of your loan. Direct loans are an excellent option to help pay for college when you do not have free cash available, and because interest rates are so low they are considered quite cheap compared to student loans from lending institutions. Be sure to fill out your FAFSA on time before the deadline closes or you will not be able to utilize these loans and many other types of financial aid.