Direct Loan

The Direct Loan Program is one of the Federal Student Aid (FSA) programs provided by the Department of Education that provides students with a way to borrow money to pay for education after high school.
There are four types of Direct Loans:

1. Federal Direct Stafford - Ford Loans (Direct Subsidized Loans)
Students must demonstrate financial need to receive this type of loan. (The school determines financial need based on the information provided on a financial aid application.) The federal government pays the interest on these loans while students are in school at least half time and during certain periods, such as grace and deferment.

2. Federal Direct Unsubsidized Stafford - Ford Loans (Direct Unsubsidized Loans)
Students can get these loans regardless of financial need but will have to pay all interest charges.

3. Federal Direct PLUS Loans For Parents
Parents of dependent students can get these loans to pay for their children's education. Parents are responsible for all interest charges.

4. Federal Direct Consolidation Loans
These loans combine one or more federal education loans in one new Direct Loan. Only one monthly payment is made to the U.S. Department of Education. In certain circumstances, students who have loans under the Federal Family Education Loan Program may consolidate them into Direct Loans.

Students fill out one application, the Free Application for Federal Student Aid (FAFSA), for all department student financial aid programs. They do not submit a separate loan application to a bank. The federal government raises the loan funds through its regular Treasury bill auctions. Direct Loans are loans made with federal capital and owned by the federal government.

Borrowing is direct through the federal government. Borrowers make loan payments to the Department of Education for the life of their loans.

Advantages of a Direct Loan
1. Direct Loans are never sold.
2. You can deduct any interest paid on "higher education loans" during the tax year. (Only payments made during the first 60 months of finishing school qualify for the deduction and the deduction is usually limited to a certain amount).
3. Borrowers have flexible repayment options. There are four repayment plans in the Direct Loan Program:

Standard, Extended, Graduated, Income Contingent
(You can change options when you need to without a fee at any time during the life of the loan.)

For more information about filling out the Free Application for Federal Student Aid (FAFSA)
go to: http://www.fafsa.ed.gov/

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