Direct Student Loans & How to Apply
In addition to Perkins Loans, the U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Student Loan (Direct Loan) Program. Both the FFEL and Direct Student Loan programs consist of what are generally known as Stafford Loans (for students) and PLUS Loans (for parents).
Schools generally participate in either the FFEL or Direct Student Loan program but sometimes participate in both. Under the Direct Student Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lender that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans differ somewhat.
The Direct Student Loan Program is one of the Federal Student Aid (FSA) programs offered by the Department of Education, and it provides students with a simple, inexpensive way to borrow money to pay for education after high school. You apply for FSA by filling out the Free Application for Federal Student Aid; you can use the paper FAFSA, but I recommend using the online version, FAFSA on the Web.
If your school participates in the Direct Student Loan Program, you will then need to complete a master promissory note (MPN) to get a Direct Student Loan. The MPN explains the loan terms and is the legally binding agreement that you will repay the Department.
The Direct Student Loan Servicing site has online entrance and exit counseling tutorials that you can take if you are or will be a Direct Student Loan borrower.
To find out more about the Direct Student Loan Program, check out the internet. You will find libraries of publications for borrowers, including the new entrance and exit counseling guides and the basics brochures. These publications will tell you more about how much you can borrow and your rights and responsibilities when you are repaying your loan.
Use a budget calculator to enter your estimated income and expenses and find out how much money you will need for the school year. Then use a repayment calculator to compare the initial monthly payment amounts you would make under the various repayment plans. These calculators can also be found online.
There are four types of repayment plan - standard, extended, graduated, and income contingent - so you can choose the one that is best suited for your situation.
Because the financial consequences for default are severe, you should do all you can to avoid it. Deferment and forbearance are options that might help you as you repay your loans. Also, as mentioned above, you can choose the repayment plan that is best suited for your financial situation.
If you already have a Direct Student Loan, you can find a servicing site for your one-stop center for managing your loan. Make online payments, take online loan counseling (as noted above), view your account balances and payment history, change your billing options, enroll in electronic services, learn about default management and deferment and forbearance, and more.
Consolidating your loans can be a great way to simplify repayment and lower your monthly payments. If you have a Direct Student Loan, you can consolidate it with other student loans. To find out more, visit a consolidation website.
