Direct Loans

Definition

The Direct Loan Program provides students and their parents with loans to help pay for both graduate and undergraduate studies.  Direct loans are part of the Federal Student Aid program, which is the largest source of financial aid in the United States.

Explanation

 Under the Direct Loan Program, there are four specific types of loans available:

• Federal Direct Stafford / Ford Loans (Direct Subsidized Loans):  available to students demonstrating financial need.  Interest is not charged on this loan as long as the student is enrolled at least half-time.
• Federal Direct Unsubsidized Stafford / Ford Loans (Direct Unsubsidized Loans):  available to all students, interest accrues on the loan even while the student is enrolled in school.
• Federal Direct PLUS Loans:  loans taken out by the parents of students
• Federal Direct Consolidation Loans:  allows the borrower to consolidate all loans into one monthly payment.

To apply for a Direct Loan, students fill out just one application:  the Free Application for Federal Student Aid (FAFSA).  Parents of students must complete a PLUS Loan application available from postsecondary institutions.

Related Terms

student loans, PLUS loans, Federal Stafford Loans, Federal Perkins Loans, grants, work study