What is a Direct Loan?
It is a type of a Federal Students Aid (FSA), where a loan is offered by the government directly through the Department of Education (DoE) to the students who have a need to fund their college education. This scheme is highly beneficial to the students.
Who are eligible for Direct Loan?
All students are eligible to participate in this program provided the school/ institution in which they are interested in pursuing their studies are enrolled for Direct Loan program.
Direct Loan Procedure
Students who are interested in participating in Direct Loan program are first required to apply for this loan by submitting the Free Application for Federal Student Aid (FAFSA). On application the students become eligible to a number of Direct Loan Programs. The DoE offers guidance and counseling to students who are interested in the best program that would serve their requirement.
The students are made accountable under the scheme by requiring them to sign a promissory note accepted the disbursement and repayment terms. This is a legally binding contract. Hence, it becomes important to ensure that the student is fully aware of the information and the terms used in the promissory note before signing the document.
The students are offered several repayment options to choose from. The Direct Loan scheme always aims at helping the students not only in obtaining the loan but also in their repayment. The repayment can be made by way of
- standardized payments at regular intervals,
- graduating payments from minimum to higher amounts over a period of time and upon the stability of the financial condition,
- repayment periods that are extended beyond the accepted term or
- based on income earned by the borrower
In order to ensure that the repayment does not go beyond affordability of the individual and ruin the credit score of the borrower.
Direct Loan Consolidation
After graduation you end up having multiple loans to repay. The DoE offers the DoE Direct Consolidation Scheme, where the loans are consolidated into one single liability, at a lower interest rate and single lower monthly repayment amount. |
