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Federal Direct Student Loans Review


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There are four types of Federal Direct Student Loans available:

  • Direct Subsidized Loans: Available to undergraduate students who demonstrate financial need
  • Direct Unsubsidized Loans: Available to undergraduate, graduate and professional students and not based on financial need
  • Direct PLUS Loans: Available to graduate or professional students and parents of dependent undergraduate students. Eligibility is not based on financial need, but a credit check is required and borrowers who don’t meet credit qualifications need to meet additional eligibility requirements.
  • Direct Consolidation Loans: Allows borrowers to combine all eligible Federal Direct Student Loans into a single loan with a single loan servicer

Federal Direct Student Loans have fixed interest rates only; rates are set by the federal government annually. All borrowers receive the same rate depending on the type of loan.

There are also caps on the amount students can borrow, depending on the year of study and type of loan. Additionally, there are career maximum loan amounts:

  • Dependent undergraduate students: $31,000
  • Independent undergraduate students: $57,500
  • Graduate and professional degree students: $138,500

Because Federal Direct Student Loans are considered a form of federal aid, there is no credit check involved in the application process, and co-signers are not needed for Direct Subsidized and Unsubsidized loans. Instead, Federal Direct Student Loan borrowers must complete the Free Application for Federal Student Aid each year to determine eligibility. However, PLUS loan borrowers must undergo a credit check.

Borrowers or students with parent borrowers must be enrolled at least half-time at a school that participates in the Direct Loan Program to qualify.

The default repayment plan for borrowers is the 10-year Standard Repayment Plan. However, borrowers may opt for a longer term of up to 30 years. Alternative and income-driven repayment plans are also available to borrowers; some are unavailable for certain loan types:

  • Graduated Repayment
  • Extended Repayment
  • Income-Based Repayment
  • Income-Contingent Repayment
  • Pay As You Earn
  • Revised Pay As You Earn

The Department of Education also offers the option to consolidate Federal Direct Student Loans with a Direct Consolidation loan. In fact, consolidation is required to enroll in some of the above repayment plans, though it isn’t available to all borrowers.

Additionally, borrowers may defer loan payments up to three years for reasons such as economic hardship, unemployment or active military service. During deferment, subsidized loans will not accrue interest. However, interest on unsubsidized loans will continue to accrue and be capitalized if not paid. To qualify for deferment, borrowers must submit a request to their loan servicer and demonstrate that they meet eligibility requirements.

Borrowers also have the option to pause payments for up to 12 months at a time on Federal Direct Student Loans by applying for general or mandatory forbearance.

General forbearance is available to borrowers who are temporarily unable to make payments for various reasons and is granted at the discretion of the loan servicer. Federal Direct Student Loans servicers are required to grant mandatory forbearance to borrowers who meet certain eligibility requirements. Interest continues to accrue and capitalize on all types of loans during forbearance.

There are also several instances in which Federal Direct Student Loans may be canceled, forgiven or discharged. These include career-based forgiveness programs such as Public Service Loan Forgiveness and Teacher Loan Forgiveness, discharge in the case of a disability or death, as well as cancellation in the event of a school closure, withdrawal from school or false certification of eligibility.

  • Undergraduate students with limited credit history who want to borrow money for college without a co-signer
  • Borrowers who want flexible repayment options and federal loan protections
  • Parents who plan to borrow money to help their children pay for college



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