Direct Loans

Understanding Direct Loans

The United States has programs designed to help student with college called a direct loans. From federal funding through the school where they would like to attend without use of bank financing. School becomes like the lending company and can control the funds of the loan.

Your direct loans options include the federal direct Stafford plan where a student will fill out an application with the school that they wish to attend. The school will then determine if the student is in need of financial assistance. With this type of loan the Federal Government pays the interest in certain situations, like if the student is in school, or during the time they are in school if on a part-time enrollment.

Federal Direct Unsubsidized Stafford/Ford Loans: This type of direct loan is for any student with no concern of financial need. But, the student will have to pay all interests on this loan.

Federal Direct Consolidation Loans: This type of direct loan combines all federal loans into one monthly payment.

How much you can borrow on a direct loan depends on whether you are a dependent or independent student. An independent student is defined as “at least 24 years old, married, a graduate or professional student, a veteran, an orphan, a ward of the court, or someone with legal dependents other than a spouse.” A dependent student is defined as “any student who doesn’t meet the definition of an independent student is dependent. The parents’ income is included in calculations of need.”

You can still qualify for direct loans even if you’re still in school. The interest rate on a direct loan Consolidation for which an application is received between February 1, 1999 and June 30, 2003 is based on the weighted average of the interest rates on the loans being consolidated rounded to the next highest one-eighth of one percent. This rate shall not exceed 8.25 percent. It is a fixed interest rate that remains the same throughout the life of the Direct Consolidation Loan. You may pay figured on your income with more choices of repayment and you may change them at any time.
There is no penalty for early payoff. Some other things about direct loans are no minimum or maximum amount you must consolidate. By consolidating your education loans, you will have only one payment, one place to send your monthly payment and only one phone call to report a change of address or phone number, request a deferment or forbearance, or ask a question about your loans.

Direct Loans have different ways in which to repay the loans. For Direct Subsidized Loans or Direct Unsubsidized Loans there are four different ways you can repay these loans. For Direct PLUS Loans you may not use the last option below. Here is a list of options you have available to repay your direct loans. Repayment Plan (Standard)
This plan has monthly payments that can not be changed; the lowest payment would be $50 per month. It also is set for a certain amount of time up to 10 years. Since this plan is usually paid in a shorter amount of time than other direct loans you will usually pay less total interest. Repayment Plan (Extended)
According to how much money is borrowed this loan can be extended to as long as 12 to 30 years. You will still pay the same monthly payment without it changing but they can be less than what you pay with the above plan but not less than $50 per month. The interest rates will probably be higher since the loan is for a longer period of time. Repayment Plan (Graduated)
This type of direct loan will allow you to start out with low monthly payments that will increase gradually every two years. The repayment period is the same as the plan above depending on the amount of money you borrow. Again the interest will probably be higher since the loan is for a longer period of time. Repayment Plan (Income Contingent)
This plan is based on the amount of your direct loan and your monthly income. If your income decreases the monthly loan payment will also decrease, the same with increases, if your income increases so will your monthly loan payments. You will have up to 25 years to pay the loan any money left owed after that time will be released. You may still have to pay taxes on the money that was released.