Direct Student Loan

Direct Student Loan

The U.S. Department of Education hosts the Direct Student Loan program in an effort to provide students with a simple and inexpensive way to borrow money to pay for college. The Direct Student Loan program is one of several different programs offered by the federal government. This particular program provides various types of student loans – Stafford loans for students, PLUS loans for parents, PLUS loans for graduate students, and consolidation loan packages for students and parents.

To borrower from the government through the Direct Student Loan program the student must fill out a Free Application for Federal Student Aid (FAFSA). Parents pursuing a PLUS loan must apply through their students who are required to submit a FAFSA as well. Based on the extensive data collected on the FAFSA, the Department of Education generates a Student Aid Report (SAR). The report is sent to the student’s school of choice and to the student. The SAR features an EFC number – estimated family contribution.

Based on the SAR and EFC, the student’s prospective school drafts a student aid package. The packages depends heavily on the student’s personal and financial situation and they type of aid the student marked as being interested in on the FAFSA.

Student aid packages that include a Direct Student Loan offer require the borrower to sign a master promissory note (MPN). The MPN details the amount of the student loans being taken out. These amounts are determined by the school and take into consideration the student’s cost of attendance (COA).

A Direct Student Loan is one of the few loans that is not sold to an outside lender. Instead, the borrower repays the loan directly the government and the government handles all of the loan servicing. Upon completion or exiting of school, the borrower has four flexible repayment plans to pay off the loan. The borrower also has the option to switch plans at his or her discretion with incurring a fee.

For more information on Direct Student Loan packages, visit the DOE website located at StudentAid.Ed.Gov