Understanding the Direct Loan Program

A direct loan is offered directly from the government organization you are applying with. An indirect loan, on the other hand, is given through a private organization and then guaranteed by the government. This means the government promises to buy the loan out of default if you cannot make your loan payments. While a guaranty will reduce the cost of your loan, a direct loan is still cheaper if you qualify.

Direct Loans are Need Based

In order to get any student loan from the government you will need to prove you are credit worthy. For a direct loan, though, you will also need to show you qualify for a high level of need. This generally means you are not getting assistance from a family member or benefactor. It also means you cannot secure a loan on your own through a private lender.

Direct Loans may be Subsidized

Subsidies on direct loans make it possible to delay payments until after graduation. To qualify for a subsidy, you must show you are among the neediest applicants in a given semester. You will still have the opportunity for an unsubsidized loan if you do not qualify. In this case, you are required to make payments on the loan while you attend school.

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