What is a Federal Direct Student Loan?

As most students know, paying for post-secondary education is not easy and usually requires financial assistance from somewhere.


Federal Student Aid provides funding to undergrad students, grad students, and parents of post-secondary students to help cover the ever-growing cost of attending college through the William D. Ford Federal Direct Loan Program.


This is also recognized as the Direct Loan Program. If you’re considering taking out a Federal Direct Student Loan, there’s some important information to learn first.


What is a federal direct student loan?

Federal Direct Student Loans are issued and managed by the U.S. Department of Education. These government-funded student loans provide low-interest loans to college students as well as their parents. This is also the only government-backed student loan program available in the U.S. 


This may sound simple enough, but there are four types of federal direct student loans.


So, how do you know if you’re choosing the right one for your financial situation?


We outline the four types of federal direct student loans so we can help you decide which one is perfect for your wallet.


4 Types of federal direct student loans

1. Direct subsidized loans

This is the only form of need-based aid that is offered through the Direct Loan Program. This need is calculated based on the information you provide in your FAFSA.


If you are an undergraduate student who demonstrates financial need, you may be eligible for loans of up to $5,500 per school year.


Borrowers with Direct Subsidized Loans will have interest subsidy, which means that the interest they repay is lowered. Additionally, these loans are deferred while the borrower is enrolled in college.


Interest charges also don’t apply and are paid by the Department of Education during the time of deferment.


2. Direct unsubsidized loans

These loans are not based on financial need and undergraduate, graduate, and professional students are eligible to receive them.


Dependent undergraduate students can receive up to $7,500 per school year, while independent undergraduate students can receive up to $12,500 per school year.


Graduate students who are working towards a graduate or professional degree may receive up to $20,500 in student loans per school year.  


Photo by Fabian Blank on Unsplash

3. Direct PLUS loans 

These loans are made to professional or graduate students and parents of dependent undergraduate students to pay for education expenses that are not covered by any other financial aid.


Similar to Direct Unsubsidized Loans, Direct PLUS Loans are not based on financial need. However, a credit check is required and the interest rate may be as high as 7%.


4. Direct consolidation loans

A Direct Consolidation Loan allows you to combine all eligible federal student loans into ONE loan with a single loan servicer.


(A loan servicer is a company that handles all billing and payment requirements on your federal student loans. They also perform administrative tasks that are commonly associated with maintaining a federal student loan on the lender’s behalf).


This one single loan calculates the new interest rate based on the collective average of interest rates on loans being consolidated.  


How do I apply for a federal direct student loan?

  1. Create an FSA ID – this is required to file your FAFSA
  2. Complete and submit your FAFSA
  3. Meet the requirements
  4. Review the financial aid award sent by the college
  5. Claim your direct student loans


Want to learn more about financial aid and how it works?


College Life Today is here to help!

what is a federal direct student loan
what is a federal direct student loan
what is a federal direct student loan

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