A Direct Loan is a type of student loan that is available to students that are searching for additional financial aid. Direct Loans are offered through the federal government and is administered by the Department of Education. The direct loan consists of the Stafford Loan, which is mainly for undergraduate students attending a post-secondary institution, as well as the Plus loan, which is mainly for graduate students and parents.
The Direct Loan is part of the William D Ford Federal Direct Loan Program, which was established in 1993. The Direct Loan Program was created to lend students financial aid directly. Prior to this program, only banks were allowed to lend money to students wanting financial aid. By establishing a direct lending practice, the government had more control over the lending practicing and procedures, which lowered administration and lending costs. These lower costs ultimately led to lower direct loan interest rates and more favorable repayment options then many of the banks.
The Direct Loan consists of both the
All direct loan payments are sent directly from the Department of Education, who administers the Direct Loan program. Students usually receive their student loan payments in the beginning of the school semester through their schools financial office.
Once a student completes their program and starts the repayment process, all payments will be made directly to the Department of Education. The direct loan program offers many favorable repayment options based on financial status.
In order to be eligible for a direct loan, you must complete the FAFSA or Free Application for Federal Student Aid. This application takes into consideration your current financial status and college expenses to determine how much you are expected to contribute to your education. The lower your EFC, expected family contribution, score the more likely you will receive a Direct Loan.