If you're applying to college or currently attending college, you or your parents may be eligible for a Direct Loan. These are government loans that will help defray the cost of your education. They must be repaid, but they can help people afford an education which would otherwise be unaffordable. If you're considering applying for a Direct Loan, here are some steps to take in the process:
- Get to know what a Direct Loan is. A Direct Loan is a loan for students wherein the college gets money directly (no pun intended) from the federal government. Not all colleges participate in this program. Direct Loans for students are usually called Stafford Loans. When the parent of the student takes out the loan, it's called a PLUS Loan. (Note: there's another similar loan called the FFEL Stafford Loan.)
- Differentiate between a subsidized or unsubsidized loan. There are two categories of these loans: subsidized loans and unsubsidized loans.
A subsidized loan means you aren't charged interest until it comes time to pay the loan back. You get a subsidized loan if you qualify on the basis of need. The government calculates "need" as what your family can contribute, plus other sources of payment (scholarships, etc) plus Pell Grant Eligibility all subtracted from what it will cost you to attend.
Unsubsidized loans, on the other hand, will cost you interest right from the start until you pay it off in full. You don't need to qualify on a need basis for an unsubsidized loan, rather, you just need to be a regular student (in school to earn a degree or certificate) in an "eligible program" (school that is in the Direct Loan Program) and meet some other eligibility requirements and things like "dependent" vs. "independent" student status.
- See if you meet additional eligibility requirements. According to the Federal Government website, to apply for a Direct Loan, you also have to meet some basic requirements other than being enrolled as a regular student in an eligible program. These include: being a US Citizen or eligible non-citizen, having a Social Security number, meeting your colleges academic standards, being free of drug convictions, having a high school diploma or GED, not being in default with another loan, and be registered with Selective Service as applicable. Check the site for more specifics.
- Fill out the FAFSA or FAFSA Renewal form. As with applying for any other kind of financial aid, you must fill out the FAFSA form or renew your past form. This form is available online (FAFSA) and you can apply online as well. There's also a hard copy form available from most schools' Financial Aid or guidance departments.
To fill out the FAFSA or have someone fill it out for you, you need your social security number, any W-2 forms, tax return forms from the previous year and any other information the form requests. Basically, you are proving what your income level is. After your FAFSA is processed and the loan is granted, the loan officers will decided whether or not you can get a Direct Loan. If you accept the loan, you will have to sign a promissory note for the loan.
- Complete Entrance Counseling. According to The Direct Loan site, all applicants must take entrance counseling. This program gives borrowers information and suggestions on wise money management. This counseling is available online. Full details are provided on the site. The counseling takes 20-30 minutes. After you graduate (or leave for other reasons), you will be asked to take exit counseling which explains repayment responsibilities and options, etc.