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Direct Loan School (The Direct Loan School Program)
The Direct loan school program was set up by the government to help students and parents finance higher education. The loans are offered by the federal government’s Department of Education and can be repaid directly to the government of the Direct loan school depending on the loan you choose. There are great benefits that come with choosing a Direct loan school. They include:
- A Direct loan school will handle a variety of loan programs from the government. Having many loans at your disposal means that you will have the opportunity to choose the loan that best suits your needs.
- The Direct loan school will be able to guide you through the process of applying, disbursement and repayment. They also provide you with assistance in understanding the loans and whatever information you may need. You will also be introduced to the loan servicing center located online.
Loan Types
A Direct loan school may handle a wide array of loans, each depending on the school size and preference. There are some loans that are offered at almost every school, whether or not the are considered a Direct loan school. These include:
- Subsidized Stafford loans – issued according to financial need, no interest during enrollment or deferment, repayment begins six months after graduation or dropping below half time enrollment
- Unsubsidized Stafford loans – not based on financial need, interest accrues from disbursement, repayment begins six months after graduation or dropping below half time enrollment
- PLUS loans – issued to parents of undergraduate and graduate students, immediately enter repayment period and can be consolidated (the Direct loan program also offers this service)
Repaying
As with any type of loan, the loan you receive form a Direct loan school must be repaid. Once you sign the promissory note you are required by law to pay back all the money you borrowed with the interest you agreed to in the loan contract. If you decide to reenter an education program or if you have financial trouble, you can apply for a deferment or forbearance and postpone paying the loan. If you simply are late making payments or make none at all, you will default on the loan. If you default, the Direct loan school or the government can take legal action against you to have the loans repaid. This can come in the form of tax return revoking, wage garnishment or even court proceedings. In addition, the stain of default will immediately show up on your credit report which can negate your eligibility for home or automobile loans.
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