A Guide to College Direct Loans

A direct loan is basically obtained from the lender without the need of or involvement of a middleman. This provides the lender with more flexibility when providing loans to their customers. College direct loans can help students pay for the cost of their education. The U.S. Department of Education offers a variety of federal direct loans for students and their families. You may require one or more of these loans when funding your college education.


The most common type of federal student loan is the Stafford Loan. The Subsidized Stafford Loan is awarded to students that meet the criteria for financial need. During school attendance (either half or full-time) the student is not charged interest. The student is also not charged interest during repayment grace periods or deferment. Another direct federal loan is the Unsubsidized Stafford Loan, which is a student loan not based on need with interest charged at all times. The amount of funding available through both types of Stafford Loans depends on the student's grade level and whether they are dependent or independent.

PLUS Loans are another type of government loan. These loans feature a low interest rate and are made for parents of dependent students as well as for students who are graduates or professionals. PLUS Loans are subject to credit approval and not based on need. If you already have a variety of loans, a consolidation loan is something to consider. A direct consolidation loan from the government allows you to combine qualifying loans into one loan which may lower your rates or reduce your monthly payments.

Students can apply for college direct loans by completing and submitting a FAFSA, which stands for Free Application for Federal Student Aid. When approved you will be required to sign a Master Promissory Note provided by your school or the U.S. Department of Education. In some cases you can complete your forms online. The Master Promissory Note is important because it specifies the conditions and terms of the loan and is a legal agreement. If at any time you have trouble repaying your loan, there are grace periods and deferments available. Your college financial advisor can explain more about the application and lending process and help you choose the right direct loan.



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