What are Federal Direct Loans?

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Direct federal loans are student loans that a U.S. government (namely the U.S. Department of Education) provides. If you decide to take a federal student loan or consolidate your loans, you will apply for federal direct loans. There are four types of federal direct loans:

  1. Direct Subsidized Loans
  2. Direct Unsubsidized Loans
  3. Direct PLUS Loans
  4. Direct Consolidation Loans

Learn the difference between subsidized and unsubsidized loans.

The benefit of this kind of a loan is that all federal direct loans are a part of some loan forgiveness and other beneficial programs. For instance, some direct federal loans offer the opportunity to become a part of the Public Service Loan Forgiveness (PSLF) and income-driven repayment plans.

There are other options such as Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE). The benefit of these new income-driven plans is that borrowers can apply for lower monthly payments.

If a student looks for affordable terms, he should consider a federal direct subsidized loan that is more beneficial than a traditional federal direct loan or unsubsidized loan. In this case, the U.S. Department of Education pays an interest for a student when he is at school, when a student leaves a school (during five or six months) and during a so-called deferment period.

Speaking of the unsubsidized loans, a student is responsible for paying interest during all stages.

P.S.: Also check private student loans online.