Direct loans student loans
A number of students find it difficult to finance their education on their personal basis. However, with the help of a federal direct loan student loan program this can be made possible and provide students with an option that can help them finance their education in a simple way. The direct loan is one of the federal student loan programs offered by the Federal Department of Education. This loan programs provides the students with an inexpensive option of getting finance for education after completing high school.
There are different loan programs that come under Direct Loans. These include:
You can borrow any of these loans, which fit, into your bracket and for which you are eligible. Borrowing a direct student loan is not at all a difficult task. It is the same as borrowing any other federal loan program. Let us see how can you borrow a direct loan and what are the advantages of borrowing these loans.
Applying for the Direct Loan program
The different types of Direct Loan financing can be obtained by, students by filling out a simple application form called as the Free Application for Federal Student Aid (FAFSA). Thee forms can be obtained from the educational institution that you wish to attend "> However, the institution where you are applying should be a part of the federal student aid program.
.If you accept the loan then you are required to sign a master promissory note, which 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 financial aid office in the educational institute can tell you how much you can borrow.
The direct loans are not sold to any private institution and as you are borrowing the money from the federal government you are supposed to make the payments to the Department of Education.
Now before you take the loan you are required to complete the entrance counseling session"> With this counseling session you would get to know useful tips to help you in managing your account and the educational expenses. 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.
Repayment plans for Direct Loan programs
Direct Loan student loan programs offer flexible repayment options. There are four basic repayment plans, which include :
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.
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.
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.
What if you are unable to make the payment?
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.
So, if you are on a look out for a student loan program consider a direct loan which provides you with not only affordable finance but also gives you easier payment options.