What you need to Know About Direct Student loans

Tired of chasing banks and private lending firms? Why not try borrowing directly from the U.S. Department of Education? These are called Direct Student Loans, where you don’t have any third parties to deal with when getting a federal loan. All you need to do is contact a single servicing center for all your direct student loans’ needs. This simple! Not only will you have access to your account information 24 by 7 from the Direct Loans website, but you also get to choose how you will repay your loans in the future. First, you need to fill out your FAFSA ( Free Application for Federal Student Aid ) form, which will be used to assess your financial need.

Direct Student Loans: Types of Award Packages

1. Subsidized – is for those who are in dire financial needs. No interest rates will be charged while you are attending school ( even half-time ), or even during deferment or grace periods.

2. Unsubsidized – is not based on your financial needs. Sadly, you will have to pay for interest rates at all times.

3. PLUS – is for parents who need money to send their kids off to school. It doesn’t only pay for the cost of education, but for the cost of studying as well. Interest rates apply at all times.

4. Consolidation – is for those who want to combine all their federal student loans into a Direct Consolidation Loan.

Direct Student Loans for First-Timers

Taking out a direct loan for the first time? You need to complete your MPN ( Master Promissory Note ) which will be given by your school or department. You can also apply online. MPN is a legal form where you state your promise to repay your loans and its interests. It also gives you the terms and conditions of your loans. To fill out an MPN online, you need to request for a PIN ( personal identification number ) from your school or department. Once you fill out your MPN, you don’t have to do it again for future loans. You’ll also receive a disclosure statement about the details of your loans.

Direct Student Loans While You’re In School

Your direct loan will cover the whole school year, and your school will get the payment twice each year. It can be in the beginning and middle of your academic year. This payment will cover your tuition fee, room and board, and other school fees. What happens if there’s an over payment? Simple – You get to keep that extra. Your school will send you a check or some other forms of payment. You can also use this extra for your studies, like buying a new PC. If you’re under an unsubsidized direct loan, you can choose to pay interest rates while you’re in school.. or face a big balloon of interest rates after you graduate. You don’t want the latter to happen. Better pay your interest with time, than have a one-time, big-time surprise.

How to Repay Your Direct Student Loans

Graduating, Withdrawing, or Dropping? No sweat! You can still have your 6-month grace period to get all the funds you need to repay your direct loans after this leeway expires. You can have this grace period under a Direct Unsubsidized or Subsidized Loan, but NOT on your Direct PLUS Loans where repayment starts as early as 60 days after the last loan was disbursed. Unless you are called to report to duty with the U.S. Armed Forces where your days of active service won’t be counted, you don’t have much luck. You will truly need a repayment option, which allows you to settle your loans in 10 – 25 years. You can have these payments automatically taken from your debit account. If you’re lucky enough, you can even be consider for a deferment or forbearance. Whatever happens, never let default smear your direct student loans or you’ll really have a bad time with your credit score. If you have too much loans, why not try to mix them up through loan consolidation? It can give you lesser worries ( not to mention a break from sleepless nights ).

As a rule of the thumb, always get in touch with the Direct Loan Servicing Center, specially when you change address, telephone number, or name. You need to inform them if you’re dropping from school or if you’re not even able to make it to school half-time. Contact them if you are transferring schools or when are already a graduate. Better Stay in Touch… than Be Sorry!

READINGS:

http://www2.ed.gov/offices/OSFAP/DirectLoan/student.html

http://www2.ed.gov/offices/OSFAP/DirectLoan/applying.html

http://www2.ed.gov/offices/OSFAP/DirectLoan/inschool.html

http://www2.ed.gov/offices/OSFAP/DirectLoan/leaving.html

http://www2.ed.gov/offices/OSFAP/DirectLoan/inrepayment.html