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Direct loan

Information On Direct Loans


Direct Loan is a loan which is provided by the U.S Department of Education to help students pay for their education after high school . Here the department of education acts as a lender providing funds for Stafford loans and PLUS loans in the same amounts as the Stafford and Plus loans offered through the Federal Family Education Loan Program.

How to Apply For Direct Loan

Most students enrolled in the university decide to take loan which provides assistance to their education financing . Direct Loan provides students with a simple, inexpensive way to borrow money to pay for education after high school . Students qualify for the direct loan either subsidized or unsubsidized . The amount of the loan depends upon the students grade level and need. . You can avail the students loan only if a request has been made by submitting a Direct Loan Request Form. Regarding subsidized Direct Loan the interest doesnot accrue until the student graduates or leaves the school . Regarding unsubsidized loan the interest does accrue while the student is in school but in this case payment of the interest can be deferred if the student chooses to pay interest while in school in order to avoid paying interest on interest.

Incase if the school participates in the Direct Loan Program them you will need to complete a master promissory note (mpn) to get a direct Loan . The MPN explains the loan terms and is the legally binding agreement that you will repay the Department.

Loan Counseling

The Direct Loan Servicing site has online entrance and exit counseling tutorials that you can take if you decide be a Direct Loan borrower.

Entrance Counseling

Before receiving the loan you must complete an entrance counselling session . This is a quick and easy interactive counseling session which provides useful tips and tools to help you develop a budget for managing your educational expenses and also to understand your loan responsibilities. This session takes around 20 to 30 minutes to complete .

Exit Counseling

This online exit counseling session has been created to make sure that you understand your rights and responsibilities as a Direct Loan borrower. This session takes around 30 to 40 minutes to complete .


To find out more details regarding direct loan program you can check out the recent publications in the library . These publications will tell you more about how much you can borrow and your rights and responsibilities when you are repaying your loan.

Repayment Plans .

There are usually four types of repayment plans , standard, extended, graduated, and income contingent

Standard Repayment

In the standard repayment plan you will have to pay a fixed amount each month until your loans are paid fully . At least 50 $ you have to pay monthly upto a period of 10 years . The standard plan is good for you if you can handle higher monthly payments because you'll repay your loans more quickly. Under this plan you monthly payment may be higher than it would be under the other plans because your loans will be repaid in the shortest time.

Extended Repayment

Under extended repayment your monthly payment will be at least 50 $ but you can repay it in 20 to 30 years . This is a good plan if you will need to make smaller monthly payment . However you have to pay more interests if you take longer period to repay your loan.

Graduated Repayment

This loan repayment plan allows you to make smaller payments in the beginning and higher payments later on. It is based on the premise that as your income rises, you will be able to take on higher student loan payments.

Income Contingent Repayment

This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income family size, and the total amount of your Direct Loans. If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized. The maximum period to repay this loan is 25 years .

Loan Default

Default occurs when you are unable to pay the loan after a specified period . If in any case you have a problem making your monthly loan payments, you may be able to postpone repayment through deferment or forbearance .


A deferment is a postponement of payment on a loan, during which interest does not accrue if the loan is subsidized .


If you can't make payments on your Direct loan for reasons like personal

problems or poor health and you also don't qualify for a deferment, you may request forbearance of loan payments. In forbearance period you may make either no payments or smaller payments than originally scheduled for a limited period of time. You may request forbearance of principal, interest, or both. But even if you receive a forbearance for the interest, the money will continue to accumulate and will be asked to pay as soon as the forbearance ends .

Direct Loan Servicing

If you already have a direct loan donot forget to do the following :

Make online payments , take online loan counseling, view your account balances and payment history, change your billing options, enroll in electronic services, learn about default management and deferment and forbearance .

Consolidating Applications

Consolidating your loans can be a great way to simplify repayment and lower your monthly payments. If you have a Direct Loan, you can consolidate it with other student loans. The interest rate on a consolidation loan is based on the weighted average of the interest rates on the loans being consolidated, rounded to the next highest one-eighth of one percent. It is a fixed rate that remains the same throughout the life of the loan.

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