Are you interested in learning about direct student government loans? While the terminology used to describe different types of loans may be confusing, direct student government loans can be easy to understand when looked at closely. Continue reading for clarity on the topic.
What Is a Direct Student Loan?
A direct student loan is a loan given directly to a student (or a student's family) to help with the cost of college. These loans come from several federal sources and in many cases have low interest rates (that--in certain cases--are fixed rates) and do not require a co-signor. All incoming or continuing college students who file the Free Application for Federal Student Aid form (commonly known as the FAFSA application) automatically apply for consideration for these loans.
Benefits of Direct Student Loans
As the Federal Student Aid official website points out, there are several perks to direct student loans:
- Ease of use. You are borrowing from a single source rather than multiple sources. This is especially important in the event a student transfers schools (perhaps from a community college to a four-year institution).
- No credit check. Instead of being a loan from a financial lender, direct student loans come from the United State Department of Education and as a result, do not require a co-signor.
- Interest. In certain cases, direct student loans have fixed interest rates and interest is paid by the government while the student is in college.
- Payment options. There are multiple payment plans for students when the loans go into repayment and it is simple to switch between different options.
Types of Direct Student Government Loans
There are four main types of direct student loans given by the government to students or their families:
- Subsidized Stafford Loans
- Unsubsidized Stafford Loans
- PLUS Loans
- Consolidation Loans
Subsidized Stafford Loans
A Subsidized Stafford Loan is available to students who present financial need. Interest for these loans is not charged when the student is enrolled at least half-time. Interest is also not charged during the loan's grace period or any deferment periods. These loans are available through either the Direct Loan Program (DL) or through the Federal Family Education Program (FFEL). Both of these are programs through which the government allocates money for these funds.
Unsubsidized Stafford Loans
Unsubsidized Stafford Loans are available to students with or without financial need. Interest on these loans accumulates during all periods of time and the student is responsible for all acquired interest. Unsubsidized Stafford Loans are also available through the Direct Loan Program (DL) or through the Federal Family Education Program (FFEL).
A PLUS Loan is a low-interest yielding loan that is given to either a graduate or professional student. These loans can also be provided to a dependent student's parents in order to alleviate the cost of college.
A Consolidation Loan allows students or their families to combine all federal loans into a single loan. This can be especially helpful when a student has left college and is starting to repay student loans.
Anything Else I Should Know?
Stafford loans (both subsidized and unsubsidized) have loan limits that are based on the student's year of schooling. These loan limits are also dependent on whether a student is a dependent or independent student. The loan limits are as follows: