Direct Student Loans

By Sam Ferdi

direct student loan

Direct loans are loans that are made directly between lending institutions and individuals requesting for the loan. Such loans do not involve a third-party company or intermediary to process the loan. Due to this, direct loans are frequently less expensive in comparison to some other loans.

Direct loans are available to employees, business owners, students, and senior citizens. You can secure direct loans either from the federal government, private lending companies and nonprofit organizations that lend to a specific demographic location.

When considering potential loans, it is always imperative for borrowers to find out if the loan is coming directly from the bank or company that they are dealing with.

Sometimes, a company might offer loans at a lower rate of interest but charge a high processing fee, neutralizing the effect of any discount. On the other hand, a company may claim to have no processing fee, yet attach a higher rate of interest or higher monthly payments. So learn thoroughly the terms and conditions that are being offered by your lender.

When you involve a third party that is in business to make money normally you get more of a personal touch. Also, because the lender will make no money if they are not able to extend you credit they will work harder to get you approved for the loan. Government agencies are normally not as personal or as accommodating.

Direct loans are one of the easiest, most rewarding financial aid programs available today. Students about to embark on the college education would do well to check into direct loans thoroughly, because they do have something to fit every student’s financial needs.

The direct student program is one of the Federal Student Aid (FSA) plans provided by the Department of Education, and it offers students with an easy, economical way to borrow money to pay for education after high school. Students can apply for direct loans by filling out the Free Application for Federal Student Aid (FAFSA).

If a school takes part in the direct student loan program, then its students need to complete a master promissory note (MPN) in order to get a direct loan. The MPN explains the loan conditions and is the lawfully binding contract that students will repay the Department.

There are four major types of repayment plans:

1. Standard Repayment Plan. This plan allows you a fixed monthly payment for up to 10 years depending on the amount you owe.

2. Extended Repayment Plan. You can be allowed up to 30 years in an extended repayment plan.

3. Graduated Repayment Plan. This plan usually has a repayment period between 12 and 30 years and the amount of your monthly payment will increase every two years.

4. Income Contingent Repayment Plan. If you have a job, then this plan may be what you are looking for. Based on your gross annual income, a monthly payment plan will be set for you. The repayment period it offers is usually 25 years.