Student Financial Aid Direct Loans

Student financial aid Direct Loans are an important source of financial aid provided by the U.S. Department of Education.

Stafford Loans

Stafford Loans are low-interest loans provided to students.

Financial aid low income verification is necessary to receive a subsidized Stafford Loan. This means that the government subsidizes the interest while students are attending school or deferring payment, so they do not have to pay any interest until they start making payments.

Unsubsidized loans are available to any college student who otherwise meets basic eligibility requirements. Interest on this federal financial aid begins to accrue immediately.

PLUS Loans

Parent PLUS Loans are offered to the parents of college students, while graduate PLUS Loans are offered to graduate students looking for assistance to pay for their own education. Need is not a factor in receiving this financial aid, but recipients must have good credit. PLUS Loans are not subsidized, but they do offer competitive interest rates.

Loan Limits

For the 2008-2009 school year, loans are capped at $3,500 for first-year undergraduate dependent students, $4,500 for second-year undergraduates, and $5,500 for third and fourth-year undergraduate students. Independent students can take advantage of an additional $4,000 to $5,000 each year, but this extra amount will not be subsidized. Graduate and professional students can receive up to $20,500, but no more than $8,500 of that may be subsidized.

These amounts may be affected by the overall cost of the student's school and other loans and scholarships. The expected family contribution is also a factor in the final amount of any subsidized loans. Student financial aid direct loans can be consolidated.

Applying for Student Financial Aid Direct Loans

The first step in applying for a Direct Loan is to submit a Free Application for Federal Student Aid (FAFSA). This will allow the government to process the required financial aid low income verification for subsidized loans. After you have accepted a loan, you or your parents must sign a Master Promissory Note. This document explains the terms and conditions of your loan. It is your contract with the federal government, legally binding you to repay the money.

Repaying Your Loan

Students can take advantage of several repayment plans, depending on their individual needs after graduation:

• Standard Repayment Plan: You can make a set payment each month for up to 10 years.
• Extended Repayment Plan: Like the standard repayment plan, you make a set payment each month, but the time frame is extended from 12 to 30 years.
• Graduated Repayment Plan: Payments start lower under this plan and increase over time. Like the extended repayment plan, you will be expected to pay your loans off in 12 to 30 years.
• Income Contingent Repayment Plan: Monthly payments vary depending on your income, and you are given 25 years to pay back the loan. At this point, any outstanding debt is forgiven.

The Direct Loan program offers a 6-month grace period after graduation or other period of ineligibility before a student must begin to make loan payments.

Direct Loans Online Services

After receiving a loan, you can access the following student financial aid Direct Loans services online:

• Your account: Access all of your basic account information at any time, including balances, payment history, and billing options.
• Online payments: It's free and convenient to schedule your monthly payments online.
• Electronic billing and correspondence: You'll never have to worry about filling out a change of address form when you receive all of your loan-related communications electronically.
• Links to entrance and exit counseling: Accessing these required sessions is easy from the Direct Loans site.
• Loan consolidation: Begin the process of consolidating your federal loans to take advantage of lower interest rates and convenient payments.

In addition to these services, online calculators can help you before you apply and after you have accepted a loan. The budget calculator helps you combine income and expenses to create a workable college budget. Repayment calculators help you visualize your future monthly payments and the projected total cost of your loan over time.

As you make your preparations for college, taking the time to learn about your Direct Loan options will help you breathe easier when the college tuition bill arrives.

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