Direct Student Loan – Overview & Loan Options

August 30, 2011

Direct Student Loan

A direct student loan is a great resource to use when your other financial aid options like scholarships and grants are not providing you with enough money to complete your education. There are many benefits to taking our a direct student loan, which if you are not familiar with the term, direct student loans are federal loans that provide you with loans that are lower interest than private loans and can either be taken out by the student, or by the parent of a student.

To get you more familiar with the different direct student loan options, the next section will provide you with information on each one of them as well as the pros and cons to taking out a direct student loan so that you can make the descision if they are a good choice or not.

Student Loan Repayment

Direct Student Loan – Loans Offered

Below will be all the options you can choose from when it comes to direct student loans:

  1. Stafford Direct Student Loan – A direct student loan with Stafford can be found in two categories, subsidized which is a needs based loan,as well as unsubsidized which is not needs based, so it is easier to qualify for. The subsidized has an interest rate around 4.5 percent interest and the government pays your interest while in school, and the unsubsidized has an interest rate around 6.8 percent and interest starts from day one which you can pay while in schol or when you get out.  It is provided for under grads ad grad students alike and have low fixed interest rates meaning they will never change once your establish your loan program. For both options, there is a 6 month grace period, meaning that afer your graduate, you don’t have to pay monthly dues until after 6 months.
  2. Perkins Direct Student Loan – These loans are also offered to undergraduate and graduate students and all of your finances are dealt with by your schools office. Interest rates will these direct student loans are offered at slightly higher interest rate than Stafford loans. Perkins loans are dedicated to those who need it the most, like the subsidized Stafford loan, so you must prove that you are either low income, unemployed or similiar to prove that you are qualified. A Perkins direct student loan is given at 4000 a year for undergraduate students and 8000 a year for postgraduate students.
  3. Direct PLUS Loans – This direct student loan options has two that you can choose from: The Parent PLUS Loan and the Direct Graduate PLUS Loan. The Parent PLUS is for parents to take out a loan for their children and the Graduate PLUS is for graduate students shooting for a higher degree, which is not attainable by parents, only directly to the applicant. Both options allow you a 6 month grace period and have a fixed interest rate that starts at 7.8 percent. This option allows you to borrow up to the cost of your education minus any other funding you are receiving from other sources.

It should be known that not all schools accept direct student loans so it is best to inquire through your school to see if they do or not. Being that these are all federal loans, in order to qualify for any of them, you must fill out a Free Application for Federal Student Aid (FAFSA) which can be completed online or at the school that you attend.

Direct Student Loan – Pros & Cons

Now that you know all the loan options, here are a list of pros and cons so you know what you are dealing with by taking out a direct student loan.

PROS

  1. Fixed interest rate.
  2. You do not have to provide a good credit score to get a loan.
  3. 6 month grace periods

CONS

  1. With the Perkins and Stafford, you are very limited to what you can borrow.
  2. You need to apply each year for federal direct student loans.
Category: Direct Student Loans

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