Direct Loan Program

Answer 1

Paying for college is a major concern for almost every college student. The cost of college attendance continues to rise, while the value of investments decreases, and the ability to fully work one's way through seems almost impossible. For students who are unable to currently fully fund their education, there is help available, with direct student loans.

Types of Loans

The direct student loan program is unique in that loans are made directly through the federal government, rather than through private lenders. Student loans do not depend on credit approval, but one must apply for financial aid by completing the FAFSA, the free application for federal student aid. For students, there are two types of direct student loans available, subsidized and unsubsidized.

Subsidized Loans

Subsidized student loans have the interest subsidized by the government, while the borrower is still a student and during a six month grace period after graduation, or leaving school. They are based on financial need. The total amount that can be borrowed each year depends on the student's classification. Amounts for first year students are limited, with the amount available to borrow increasing each year. Students who do not have enough financial need to receive a subsidized student loan may borrow with an unsubsidized loan.

Unsubsidized Loans

Unsubsidized student loans are available regardless of financial need. The interest begins to accrue immediately, and students are responsible for paying that interest while in school. One will receive quarterly statements reflecting the current interest due, and can choose not to pay it at the time, but unpaid interest will be added to the principal amount, increasing the total loan amount. Unsubsidized student loans also have borrowing limits, depending on the student's year in school, and are made after the student has borrowed the full amount of subsidized loans to which they are entitled.

Paying for college is expensive, and may seem to be out of reach for many, but with the responsible use of direct student loans, that dream can become a reality.