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Direct loans are provided by the U.S department of Education to students to pay off their educational expenses after high school. The department of education serves as the lender that would provide PLUS loans and Stafford Loans in the same manner as through the Federal Family Education Loan Program.
Most of the students that go in for higher education require some sort of funding for financing their education. With the help direct loans students can borrow money to finance their education in an inexpensive way. Students can qualify either for subsidized or unsubsidized direct loans. The amount of loan that the student gets depends on the grade level of the student and his or her needs. The student loan can be availed only if the student has filled in the Direct Request Form. With the subsidized loans the interest rate is not charged till the time the loan repayment period starts. But with unsubsidized loans the interest rates on the loans are charged as soon as the loan is given out.
In cases where the school in which the student seeks admission takes part in the Direct Loan Program then the student is required to complete a master promissory note in order to get a direct loan. The Master Promissory Note explains the terms of the loan and is the agreement that you have to sign in which you promise to pay the amount back to the Department of Education. The site for Direct Loan Servicing has online entrance and exit counseling classes that can be taken by the borrower who decides to take the Direct Loan.
Before the borrower takes the loan he or she is required to complete the entrance counseling session. With this counseling session the borrower gets to know useful tips to help them in managing their accounts and the educational expenses. The borrower is made aware of his responsibilities. The session lasts for about 20-30 minutes. There is also an exit counseling session that has been created to make sure that the borrower has understood all the rights and the responsibilities when he borrows the Direct Loan. The exit session lasts for about 30-40 minutes.
To get more details about the Direct Loan Program you can check out the recent publications that would be available in the library. These publications give full details about how can one borrow the direct loan and what are the rights of the borrower when the repayment period starts.
When the repayment period starts the borrower is supposed to know that there are typically four repayment plans. These plans are discussed below.
Standard Repayment: with the standard repayment plan you are supposed to make fixed payments every month till the amount is paid off fully. You would have to pay a minimum amount of $50 every month for 10 years. In case you can handle higher amount of payments every month then the standard repayment plan is a good option as you can repay the loan quickly. With this plan your monthly payments would be higher as compared to the payments with any other plan because the loans are paid of in a shorter duration of time.
Extended Repayment: with extended repayment the monthly payments would be $50 minimum but the repayment period ranges from 20-30 years. In case you want to make smaller payments every month then this is the ideal plan for you. But with this option you would have to pay more interest as the period of repayment is longer.
Graduated Repayment: with this payment plan you are required top make smaller payments in the beginning and the payments become higher later on. This is based on the fact that your income would rise with time and you would be able to meet the higher payments towards the direct loans.
Income Contingent Repayment: with this plan you can meet the payments towards the direct loans without causing much burden. With this option your monthly payments are calculated every year based on your adjusted gross family income and the amount of Direct Loan that is remaining to be repaid. In case the payments that you make are unable to meet the interest that has accumulated on the loan then the unpaid amount is capitalized once every year. However the capitalization would not exceed 10% of the original amount that you were supposed to pay. The interest would accumulate but would not be capitalized. The maximum repayment period with this option is 25 years.
The loan is considered as default in case you are unable to pay the loan even after the specified period gets over. But in case you are unable to make the monthly payments then you can postpone the repayment either through loan deferment or forbearance. With loan deferment you can postpone the loan payment and if the loan is subsidized then the interest rate is not accrued during the extension.
In case you cannot keep up with the payments towards the direct loans and in case you dont qualify for the deferment then you can make a request for forbearance of the loan payments. In the forbearance period you can either make no payments or little payments that the scheduled payment. You can request for forbearance of the interest, principal or both. But despite the forbearance on the interest the money would keep accumulating and you would have to pay it as soon as the forbearance period ends.
With the help of direct loans the financial difficulties of the people can be met easily and at convenient and flexible repayment terms.
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