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 | | | | | | If you have questions like what is the difference between (FFEL) and (EFC) or subsidized and unsubsidized the Loan Glossary will explain the terms. The Federal programs are also listed below. Good Luck! |
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William D. Ford Federal Direct Loan Program
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The Direct Loan Program is almost identical to the Federal Family Education Loan Program (FFEL) except that with the Direct Loan Program your lender is the Federal Government and not a private bank or organization. Your school will either have one of these types of loans available but it cannot have both programs. The difference between the Direct Loan Program and the FFEL is: 1) the interest rates 2) borrowing from the private banks or lenders backed by the Federal Government or by the U.S. Department of Education itself. With the exception of repayment options, the Direct Loan Program and FFEL Program is exactly the same.
- Direct Stafford Loan Program
a. Subsidized
b. Unsubsidized
- Direct Plus Loans - PLUS - Parent Loan for Undergraduate Student
- Direct Consolidation Loans
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Types of Direct Stafford Loans
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1. Direct Stafford Loan Program
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The most common type of loan, as this loan is not based on extreme financial need. What will be based on need is if the Stafford loan will be subsidized or unsubsidized. Anyone can apply and receive this type of loan money for college. Stafford loan borrowers will be charged fees, which cannot exceed 4% of the borrowed amount. The amount of interest will vary from year to year on the Stafford loan, but will never exceed 8.25%. Normally, 10 years are given to repay the loan and as of July 1, 2006 the interest rate on the Stafford Loan is 6.8%. You can receive both a subsidized and unsubsidized Stafford Loan for the same academic year. The maximum yearly amount borrowed through each program varies per individual. Depending on if you are a first-year student, a dependant student or independent student, the amount a student can borrow will increase.
Subsidized - With a subsidized loan, the interest begins to accrue six months after you leave school (or stop attending.) That means the government picks up the tab on the interest for your loan as you move through school. As with most other loans, whether you get the subsidized student loan depends in the financial need you show through your Estimated Financial Contribution, calculated by the Federal Government.
Unsubsidized - The unsubsidized loan is a loan not based on need. You will pay interest from the time the loan is given until it’s paid in full. If you choose not to pay the interest on this loan as you move through school, it will be added to the principle of your loan and additional interest will be based on the amount plus the interest.
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2. Direct Plus Loans
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The Direct Plus Loan allows parents and guardians to help pay their child’s education. People of all income levels can apply and credit check will be done. All plus loans are unsubsidized and not based on need. The interest rate is a fixed interest rate of 7.9% and may not exceed 9%. The same fees, as with the Stafford loan - no more than 4% of total loan, apply to the PLUS loans and interest on the PLUS loans begins to accrue 60 days after the loan is disbursed. There is between a 10 and 25-year repayment option given on this loan and it cannot be transferred into the child’s name after graduation.
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3. Direct Consolidation Loan
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Most federal loans are eligible for the Direct Consolidation Loan. To be eligible for this type of loan consolidation, the student must have either a Direct Stafford Loan or a FFEL Stafford loan to be included in the consolidation Federal loans included with the Stafford Loans could be PLUS loans, Perkins Loans, and Federal Nursing Loans, including a few others. However, private loans are not eligible for this type of consolidation and you may be subject to a credit check. Also, it used to be a student could request to consolidate and start repayment while they were still attending school. Now, students must start the payments 6 months after the date school attendance has ended. No longer is one allowed to begin repayment early.
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