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