Is a Direct Loan the best student loan option?
It is definitely a good loan, and many people choose to accept Direct Loans because they offer favorable terms and a relatively low borrowing cost. However, there is a possibility that it may not be the best for you in your particular situation. Each family must decide that for themselves depending on their circumstances and what they consider to be their best financial aid and borrowing options.
To learn more, read my article on the 11 Things You Should Know About Direct Loans. You can also explore additional loan options by checking out my article on The Best Student Loan Options.
Do all schools offer federal Direct Loans?
Any school that accepts federal financial aid and is approved through the U.S. Department of Education should offer this loan along with any other financial aid. This includes almost all state and private two-year and four-year colleges. You can always call a particular school’s financial aid office to confirm this.
How much will my federal direct student loan interest rate change from year to year?
Your interest rate will not change for money you have already borrowed. However, each year, the government issues a new rate for the coming school year. This new rate is applied to any new money you borrow for that school year. To see the latest rates, check out my Federal Student Loan Interest Rates page. You can also learn more about how student loan interest rates work by consulting the Interest Rates section of 11 Things You Should Know About Direct Loans.
Does the student need to maintain a certain GPA to continue to qualify for a Federal Direct Student Loan?
Yes. Academic progress is required in order to continue to receive a Direct Loan. To learn more, see Academic Progress
When will I receive my loan money?
Technically you will not receive the money since it is paid directly to the college. However, if the loan amount exceeds your college expenses, you may request the balance in a check. To learn more, see Receiving Your Money
Is there assistance for those having difficulty getting their loan paperwork completed?
Yes. You may and should work with the financial aid office at the college where you’re enrolling or enrolled. Feel free to reach out to them by phone or email. The staff are there to help you.
Am I eligible for loans if I’m enrolled in college for five or six years?
You may qualify for a loan in your fifth or sixth year of college if you did not take out loans in one or more of your other four years. There is a loan limit per year and an overall loan limit. If your overall limit has not been met, you may qualify for these extra years.
What if we need to borrow more money?
If your Direct Loan doesn’t cover your expenses and you need more money for college, parents can potentially take out a parent PLUS loan. This is another federal program that allows parents to borrow money for college in their own name.
Private loans through a bank or other private financial institution are also an option. Students or parents can potentially take out a private loan, but if the student is the borrower, parents may need to co-sign, which means they’ll share responsibility for repayment. If parents take out a private loan in their own name, they are solely responsible for repayment.
If a student’s parents don’t qualify for a PLUS loan of their own due to poor credit, a student may qualify for an additional $4000 each year. For more information, see The Two Types of
Direct Loans.
Can I change my mind and decide not to accept loan funds?
Yes. You can call your college and ask it to reverse the loan before it is disbursed. Once the loan is disbursed, you may still have it reversed if you do so within 120 days of the disbursement date. When the loan is reversed, the fee is removed and the interest is dropped to zero.
What happens to my loans if I drop out or don’t graduate?
The loan becomes due six months after leaving school, regardless whether or not you have gained full education. You will need to start making payments once those six months expire.
What if a Direct Loan is not included in my offer letter?
There may be reasons why you don’t qualify for this loan, which are discussed in 11 Things You Should Know About Direct Loans
The financial aid office will advise you if there is a specific reason why you don’t qualify. There are also a few colleges that try to offer financial aid packages without loans. If you suspect this is the case, you may contact the financial aid office, ask if you qualify, and request to have a Direct Loan added. For more information, see sections
What if the Direct Loan offered is not subsidized, and I believe it should be?
Contact the school’s financial aid office and ask them to clarify why your loan is not subsidized. There was either a mistake they can correct, or you don’t qualify for a subsidized loan, and they’ll explain why.
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