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Direct Student Loan

direct student loan

One type of student loan you may hear referred to is a direct student loan. The world of finances when it comes to student loans can oftentimes be vague and confusing. There are so many different loan types it can be hard to keep them separate.

This is a loan in which the funds are provided directly from the government to the student borrower. This can be a very simple and inexpensive way for students and parents alike to obtain the funds necessary to pursue the dream of a college education.

Such a loan may be either subsidized or unsubsidized. The difference between the two is that with a subsidized student loan, there is no need to worry about the interest charges while the student is still in school. The government handles all of this. After graduation, or leaving school; however the student will begin to incur interest while the loan is paid back.

With an unsubsidized student loan, the student incurs interest and must make the interest payments even while attending school. Regardless of which option you choose, you will be able to select from four different repayment options: standard, extended, graduated and income contingent.

In order to receive a direct student loan, you must meet a few simple requirements:

  1. Complete a Free Application for Federal Student Aid (also known as FAFSA)
  2. Ensure that the school you plan to attend participates in the Direct Loan Program

When considering a direct loan, there are a few important factors that you should consider:

Typically, a 6 month grace period applies to direct loans following graduation. The amount of the payment will normally depend on the budget of the student as well as the type of loan that was taken.

While parents can qualify for a direct student loan, it should be noted that a grace period does not apply to this type of loan when take out by parents.

Furthermore, parents are normally responsible for making payments even while the student is in school.

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