The direct loan is a low interest federal student loan that helps students and parents pay for the cost of college.  All direct loans are through the Department of Education, which means there are no private banks involved.  The direct loan consisted on three different types of federal student loans, which include the Subsidized Stafford Loan, the Unsubsidized Stafford Loan, and the Plus Loan.  Both the subsidized and unsubsidized Stafford loan is for undergraduate students attending an approved post secondary institution.  The Plus loan is for parents looking to borrow for their children’s education or for graduate students looking for additional money to pay for school.

In order to qualify for a subsidized/unsubsidized Stafford direct loan, students/parents must complete the FAFSA, which is the Free Application for Federal Student Aid.  This direct loan application determines how much your family is able to contribute to your college education based on current income and total family assets.  It also takes into account if other dependent family members are attending a post-secondary institution.  The direct loan application is the only way to apply for a subsidized/unsubsidized Stafford direct loan. 

Once you’ve completed and submitted the FAFSA, the Department of Education will send the SAR (Student Aid Report) indicating if you are eligible for federal financial aid.   Within the SAR, you will see an EFC score.  The expected family contribution or EFC determines how much your family should be able to contribute to your post-secondary education.  The lower the score, the higher the chances are that you will receive a Direct Loan.  If you are eligible for federal financial aid, your college’s financial aid office will send an award letter indicating the dollar amount you qualify to receive.

Parents that are applying for a Parent Plus Loan must complete a Direct PLUS Loan application and promissory note, contained in a single form that you get from your schools financial aid office.  Also, your parents generally will be required to pass a credit check.  Your parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist.  Your parents will receive an award letter indicating how much money they are eligible to receive from your schools financial aid office.    

Obtaining a Direct Loan is a great way to pay for your post-secondary education.  All Direct Loan recipients are able to take advantage of low interest rates because the federal government subsidized a portion of the accrued interest.  This subsidy benefits all Direct Loan borrowers, since it lowers the cost of the overall loan.  When searching for financial aid, make sure to apply and complete the direct loan application.