Direct Loan Program Vs National Student Loan Program
Federal Direct Consolidation Loans is a way for students who are still in school to get money to pay their educational costs while they are in school. Interest can start building immediately after the end of the period of study period or after six months from graduation, but student loan borrowers start repaying their federal student loans six months following graduation or later. For example, if a student gets a Stafford loan and graduates in August, he or she will have to start repaying the loan six months from graduation or later. This six-month grace period is referred to as the “ause” period.
Students do not just stop getting grants to graduate from college; continuing to receive federal loans is usually required as well. To determine eligibility for continued financing, there are several criteria that must be met. First, most loans require that borrowers be US citizens or legal residents, studying at an approved college, and demonstrate consistent full or part-time enrollment. Borrowers with at least a “B” average (about a 3.0 GPA) also typically have an easier time getting federal student grants. Those with a “C” average or better usually need to take more advanced courses. In addition, some federal loans only allow students who already have financial aid status to continue receiving them.
The government offers two types of student loans: government guaranteed and private. Government guaranteed student loans carry more federal funding and usually require lower interest rates than private loans. Government guaranteed loans are made by the United States Department of Education through loan programs managed by the Department of Education. These are one of the easiest loans to qualify for and to obtain. Some private student loans do carry government funding. Private student loans generally are made by banks, credit unions, or other third party financial institutions, so it is best to research those options as well.
A student loan servicer is someone who processes federal student aid applications. These are third party agencies that facilitate the loan process. They collect application information from applicants, conduct background checks to ensure accuracy, and then present a recommendation to the lender. The agency is paid by the federal government, but they receive payment from the applicant, their family, and their school if they accept the loan. Loan servicers are very important to the loan process. Without them, loan applications would not be processed as efficiently as they are.
There are two types of direct loan program offered by the federal government. The first type is Direct Loans, which are offered directly by the government and run by the Department of Education. Direct loans are made directly to the applicant. They are much like a grant, with no need to repay the loan once awarded. The second type of program is Expected Family Contribution (EFC) programs which are made to the family members of an applicant after approval of the loan.
If you apply for federal student loans and are assigned a loan servicer, you will have a chance to choose the servicer yourself. This will mean that you are responsible for keeping your account current and in good standing with the Department of Education. A borrower can only change his/her loan servicer once he/she has received notice that the loan has been approved. Your loan servicer is also responsible for providing you with all of your education financial aid documents and reporting to the Department of Education on a timely basis. Finally, your server is also responsible for communicating information to the Department of Ed student loans borrowers regarding loan and repayment options.
The Direct Loan Program is much more expansive than its sister programs. Direct loans allow a borrower to borrow any amount of money from the government, school, or private sector at a subsidized interest rate through the federal student aid office. Unlike private sector loans, federal student aid does not require collateral or any kind of down payment. Also unlike private loans, federal student loans can be consolidated with any number of lenders so that multiple loan balances can be combined.
Another key difference between the Direct Loan Program and the National Student Loan Program is the availability of subsidized Stafford loans for parents who have dependent children who are full-time students. The National Student Loan Program is only for parents who have dependent children who are full-time students. These loans are available through the ED’s Direct Loan Program website. Although the federal loan program is open to all students, the requirements for eligibility, as well as the amount and frequency of payments, do differ for each program. For more information on either loan program or for more options for federal loans, check out the website below.