By: Yara Zakharia, Esq.
In today's economy and more than ever before, students need loans to pay for college education. Affordable federal student loans are making higher education a reality for millions of students nationwide. Direct student loans help students bridge the gap between the cost of education and available resources.
Direct student loan programs offer a number of direct student loans, including 1) Stafford loans for students, 2) PLUS loans for professional/graduate students, and 3) consolidation loans for both students. Direct student loans are provided by the U.S. government directly to students and are administered by "direct lending schools". Instead of borrowing through commercial lenders, students borrow from the federal government. Direct student loan programs share the following common features:
- Loan periods may not extend beyond a nine-month academic year.
- Loans can only cover consecutive terms of at least part-time enrollment.
- Loan restrictions include summer term.
The William D. Ford Student Loan, one of the Federal Student Aid (FSA) programs offered by the Department of Education, provides students with an easy and inexpensive avenue for borrowing post-secondary education funds. The steps involved in applying for these direct student loans are as follows:
- Students must first complete the Free Application for Federal Student Aid.
- Upon acceptance of the William D. Ford student loan, students must sign a master promissory note (MPN), which is basically a loan agreement.
- Repayment of the direct student loans typically starts six months after students receive their degree, terminate enrollment, obtain approval for a leave of absence, or enroll for less than half-time. Direct student loans are not sold; therefore, students will continue making payments to the same direct loan servicer, even if they receive direct student loans at different institutions. Since borrowing is directly through the U.S. government, students send their loan payments to the Department of Education for the duration of the student loan.
Deferments on direct student loans are available for those enrolled at least half-time, unemployed (maximum three years), facing economic hardship (up to three years), attending an approved graduate fellowship program, or participating in a rehabilitation training program for the disabled.
Students can also avail themselves of the William D. Ford student loan program's direct student loan consolidation option, provided for by the Higher Education Act (HEA). A direct student loan consolidation combines the student's Federal education loans (that may have different repayment schedules and terms or may have been offered by different lenders) into one new loan. The interest rate may be lower than on one or more of the individual loans. By utilizing direct student loan consolidation, students will likely have a lower monthly payment and be able to extend the repayment period beyond what would have been available under the individual loans.
In conclusion, the value of a college education is priceless, and the statistics corroborate this reality: According to the U.S. Census Bureau, high school graduates earn an average of one million dollars less than college graduates over their lifetime. Direct student loans are an indispensable tool for those preoccupied by the high cost of post-secondary education. By easing the financial transition, direct student loans make a college education within every college hopeful's reach.
