You can take out a direct student loan to finance your education after high school. Such loans may help you complete your college or professional education. Direct loans are actually low-interest loans that students as well as the parents of dependent students can take out. These loans are offered by US Department of Education. Go through this article to know about types of direct student loans and how you can take out one to cover the education cost.
Types of direct student loans
You can take out the following 3 types of loans under the Direct Loan Program.
1. Unsubsidized loan – Such a loan is not offered to a student on the basis of financial need. So, a student has to pay the interest right from the time that loan is offered.
2. Subsidized loan – As the name suggests, this loan is offered on the basis of financial need as per the federal regulations. The students don’t have to pay interest while they’re in school or during the deferment and grace periods.
3. PLUS loans – Apart from parents of dependent students, the students pursuing graduate or professional education can also take out a PLUS loan. These are unsubsidized loans so the borrower needs to pay interest during all periods. Apart from above, you can also take out a consolidation loan under the Direct Loan Program. By taking out such a loan, you can combine all your eligible federal student loans by a single Direct Consolidation Loan.
How to take out a direct student loan
To apply for direct student loans, at first you need to fill out a FAFSA (Free Application for Federal Student Aid). The information that you provide in FAFSA is then transmitted to the schools that you’ve mentioned in your application. The schools than assess your financial need and offers a package to help you meet the cost of education. The package may also contain other financial aid as well. Before taking out a direct student loan, you should evaluate the financial aid offered to you. This is because you have to pay back the amount you borrow along with interest. So, evaluate your living expenses and decide whether or not it is lower than what is mentioned in the package. If it is, then you can take out the amount that is sufficient to cover your education and living costs. Each year, the maximum amount you can borrow in direct student loans (both subsidized and unsubsidized) depends on your grade level along with whether or not you’re a dependent student. If you’re an independent student, you can borrow an amount that is comparatively higher in comparison to what you can borrow if you are a dependent student.
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