Four Types of Direct Student Loans

The federal government doles out financial assistance to student borrowers through what are referred to as, direct students loans, and this kind of assistance is given without mediation. These direct loans fall under the government’s William D. Ford Federal Direct Loan (Direct Loan) Program. The Department of Education also gives out direct loans to students who apply for financial aid, but these loans are subject to a particular agreement that schools have with the department.

When a school opts to take part of the Federal Family Education Loan Program (FFELP), a student who is enrolled in this school is not eligible for a direct loan. A student can’t forward an application for a loan under the FFEL program if his or her school participates in the Federal Direct Loan (FFDL) program. These are the cases since the primary lenders are not the same for the two programs, the FFEL and the FFDL.

There are four kinds of direct loans, namely, the Federal Direct Subsidized loan; the Federal Direct Unsubsidized loan; the Federal Direct Parent Loan for Undergraduate Student (PLUS); the Federal Direct Grad Plus loan. The fixed rates of interest for these direct loan programs are as follows: 5.6 % for both subsidized and unsubsidized loans from the government; 8.5% for Federal Direct Plus loans; 6.8 % for Federal Direct Grad Plus loans.

Subsidized and unsubsidized loans from the government are open to students who have completed half of their academic load at their respective schools or universities. Subsidized direct loans are given to students based on their financial needs while the financial capacities of students are not computational factors when unsubsidized direct loans are granted to student applicants.

Those who have qualified for subsidized direct student loans are not required to pay the amounts for the rate of interest on their debts until these students begin to remit their repayments. Those who have been granted unsubsidized loans will be charged for their interest rates from the time that their loan was awarded to them until they have completely paid their debts.

Parents whose undergraduate child still qualifies as being a dependent or whose undergraduate children still qualify as dependent, can apply for federal PLUS loans. Undergraduate students who are no longer dependent on their parent or parents can’t apply for PLUS loans. The PLUS loan program is strictly for parents of students who are not living independent of their families. PLUS loan recipients can defer on repayments of their debts half of the time that their child or children has been enrolled in school and up to an added six months after this period.

GradPLUS loans beneficiaries are able to seek financial aid for all their tuition needs. Graduate students who have received direct student loans don’t have to worry about their repayments until after they’ve completed their graduate degrees. While the other direct student loans from the government require of borrowers, a cosigner for the loan application, this is not a requirement of the GradPLUS loan program. For most graduate students, the rate of interest affixed to their GradPLUS loan is tax-deductible.

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