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- Direct subsidized loans. Available to undergraduate students who demonstrate financial need.
- Direct unsubsidized loans. Available to undergraduate, graduate and professional students. Eligibility is not based on financial need.
- Direct PLUS loans. Available to graduate or professional students and parents of dependent undergraduate students to pay for costs that can’t be covered by other financial aid. 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. Allow borrowers to combine all eligible federal student loans into a single loan with a single loan servicer.
How Do Federal Direct Student Loans Work?
To apply for any type of federal student loan, you must complete and submit a Free Application for Federal Student Aid form. If you’re a first-time borrower, you must complete entrance counseling before you can access your loan money – however, this does not apply to parents with PLUS loans.
Interest rates on federal student loans are set by federal law. For loans disbursed after July 1, 2022, and before July 1, 2023, federal rates are as follows:
- The interest rate is 4.99% for undergraduates with direct subsidized and unsubsidized loans.
- The interest rate is 6.54% for graduates or professionals with direct unsubsidized loans.
- The interest rate is 7.54% for parents, graduate or professional students with PLUS loans.
For direct subsidized and unsubsidized loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023, the origination fee is 1.057%. For direct PLUS loans, the origination fee is 4.228%.
Under the Standard Repayment Plan, borrowers have 10 years to pay off their loans. However, other payment plans with extended terms are available. Borrowers can change repayment plans at any time for free as long as they qualify.
What Discounts Are Available for Federal Direct Student Loans?
If you sign up for direct debit, the Department of Education offers a 0.25-point interest rate reduction.
In order to be eligible for a direct loan, you must meet a few requirements:
- Be enrolled at least half time at a school that accepts direct loans.
- Be enrolled in a program that leads to a degree or certificate.
- In the case of subsidized loans, demonstrate financial need.
Your school will review the information in your FAFSA and send a financial aid offer, which may include federal student loans. Your school decides what loan types you qualify for and how much you can borrow for the academic year.
There are limits on the amount of financing you can receive each year as well as on the total amounts you’re allowed to borrow for undergraduate and graduate study.
- Undergraduate students may borrow a maximum of $5,500 to $12,500 per year in direct subsidized loans and direct unsubsidized loans, depending on a few factors.
- Graduate or professional students may borrow up to $20,500 each year in direct unsubsidized loans. Graduate PLUS loans can also be used to pay for the rest of your college costs that aren’t covered by other financial aid.
- Parents can receive Parent PLUS loans for the remainder of their child’s college costs that aren’t covered by other financial aid.
What Credit Score Do You Need?
There is no credit check required to borrow direct subsidized or unsubsidized loans. For PLUS loans, a credit check is required to determine eligibility, but there is no specific credit score requirement.
Where are Federal Direct Student Loans Available?
Federal loans are available to U.S. citizens in all 50 states, as well as certain U.S. territories. Some noncitizens who meet certain conditions may also qualify.
Are Federal Direct Student Loans Reputable?
Federal loans are not directly managed by the Department of Education, but instead assigned to a company that will service the loan on its behalf.
How Is Customer Service for Federal Direct Student Loans?
Though federal direct student loans are issued by the Department of Education, they are managed by third-party student loan servicers that handle billing, repayment program enrollment and any other tasks related to your federal student loans. The customer service for each servicer varies.
What Are Some Online Features of Federal Direct Student Loans?
The Department of Education offers a federal student aid website the place debtors can create an account and organize their scholar loans – together with reviewing assist quantities, managing bills and updating private knowledge. The website online additionally gives assist with finishing the FAFSA and a wealth of similar knowledge.
Debtors who battle to pay off their federal scholar loans can request both a mortgage deferment or forbearance. Mortgage deferment lets in debtors to briefly forestall making bills, whilst forbearance lets in debtors to pause bills or scale back bills for as much as twelve months.
Notice that every one federal scholar loans are in an automated forbearance duration, all over which hobby accrual may be paused, tentatively finishing June 30, 2023.
There are lots of methods that provide focused mortgage cancellation to federal scholar mortgage debtors, together with Closed College Discharge, Overall and Everlasting Incapacity Discharge, Borrower Protection to Compensation and extra. Debtors will have to achieve out to their mortgage servicers to determine what discharge choices would possibly practice to their scenario.
- Undergraduate scholars with a restricted credit score historical past.
- Students who need to borrow cash for varsity and not using a co-signer.
- Debtors who desire a fastened rate of interest, versatile reimbursement choices and federal mortgage protections.
- Oldsters who plan to borrow cash to assist their kids pay for varsity.