Direct Student Loan Types
Direct Student Loan Types
By Student-Loans.Net
A Direct student loan serves as a funding source for borrowers to pay for their postsecondary education. The federal loan program is hosted by the United States Department of Education and features attractive interest rates and payment options.
Subsidized Direct student loans are the best student loans available to students. Though personal student loans aren’t bad. Direct loans, based on financial need, the government pays the loan’s interest while the borrower is in school and during the first six months after the student exits school (also known as the grace period). The government also subsidizes the interest charges if the borrower requests and qualifies for a deferment or forbearance during loan repayment.
There is also the Unsubsidized direct student loan. This type of loan is for students who do no have financial need, but still need help paying for their schooling expenses. Unsubsidized loans are the exact opposite of subsidized. The borrower is responsible for interest charges accrued during their studies, grace period, and any other deferments on the loan. As interest accumulates, the borrower has the option to pay it off. In the long run, this helps to reduce the student loan debt accrued while in school. If the interest is not paid off during deferments or grace periods, it will be capitalized.
Students can borrower both a subsidized and unsubsidized Direct student loan. The main requirement is that combined, the loans do not exceed the maximum borrowing limits. The borrowing limits are as follows:
Dependent/Undergraduate Students
Freshman year - $3,500
Sophomore year - $4,500
Junior & Senior years - $5,500
Independent/Undergraduate Students
Freshman year – $7,500 (no more than $3,500 subsidized)
Sophomore year – $8,500 (no more than $4,500 subsidized)
Junior & Senior years - $10,500 (no more than $5,500 subsidized)
Graduate Students
Per year - $20,500 (no more than $5,500 subsidized)
To learn more about Federal direct student loans, visit the Department of Education’s website ED.gov
An alternative to the Federal loans, in case you do not receive as much Federal monies to cover all cost associated with your education, are direct private student loans. Direct private loans are sent directly to borrower and are based on credit. Students without a credit history will likely need a cosigner. To learn more about private loans visit student loans.net
