About Direct Loans
About Federal Student Aid in general
The FSA Programs are the largest source of college financial assistance, each year providing billions of dollars in funding through a variety of methods: as gift aid in the form of grants (money that does not have to be repaid) and as self-help aid in the form of work study (job earnings) and loans (money that must be paid back at interest). The FSA programs comprise:
- Pell grants
- Academic Competitiveness grants (ACGs)
- National Science and Mathematics Access to Retain Talent (SMART) grants
- Teacher Education Assistance for College and Higher Education (TEACH) grants
- Subsidized and unsubsidized Stafford loans, available either through the Direct Loan (DL) Program or the Federal Family Education Loan (FFEL) Program
- PLUS loans for parents and graduate/professional students (also available through the DL or FFEL programs)
- Consolidation loans (DL or FFEL)
- Federal Work Study (FWS)
- Perkins loans
- Federal Supplemental Educational Opportunity Grants (FSEOG)
The last three—FWS, Perkins loans, and FSEOG—are known collectively as the Campus-based Programs. Loans through the DL Program come directly from the U.S. government, while loans through the FFEL Program come from private lenders such as banks.
About Direct Loans in particular
As noted above, the Direct Loan Program offers a few types of loans: subsidized and unsubsidized (Stafford) loans for students, PLUS loans for parents and graduate/professional students, and consolidation loans for both students and parents. Borrowing a Direct Loan is simple:
- Students complete one application, the Free Application for Federal Student Aid (FAFSA), for all FSA programs, including Direct Loans. (We encourage using FAFSA on the Web, the online version of the application, because of its advantages.)
- The student's prospective school will draft an aid package, which might include a Direct Loan. If the student decides to accept the loan, he or she must sign a loan agreement called a master promissory note (MPN), which, depending on the school, the student might be able to complete electronically. The financial aid office at the school can say how much a student can borrow.
- Direct Loans are not sold. Since borrowing is directly through the federal government, borrowers make loan payments to the Department of Education for the life of their loans. It's "one-stop-shopping" from loan application through repayment.
- Borrowers have flexible repayment options, and they can change options when they need to without a fee at any time during the life of the loan.Last updated February 25, 2009