Direct Student Loans: What to Look Out For

Direct student loans provide people that wish to attend post-secondary school with a means to pay for an education. These loans are borrowed by students and their parents and are lent by the United States' Department of Education. Although direct student loans are meant to provide financial aid to students, there are some things that all students must look out for when they are applying for help.

Keep Your Eyes Open


One thing to watch out for is falling into debt on direct student loans. Falling behind on payments can lead to deferment or forbearance. If a student misses payment for over 270 days, he/she will default on his/her loan. Defaulting on a loan has harsh consequences that are difficult to get erase once they are established. These consequences include poor credit history, law suits, and the inability to qualify for any other type of financial aid. Look out for a repayment schedule that you can meet. Also, be sure to renegotiate if you run into trouble.

Look out for options that offer lower interest rates. If you are having trouble paying off your direct student loans, you can consolidate all of your loans into one Federal Direct Consolidation Loan. This type of loan might have an interest rate that will allow you to afford your monthly payments. If you are in default and you apply for consolidation the debt on your record will be erased. Certain colleges and/or universities do not accept direct student loans. One third of all colleges accepted direct student loans in 2008. Some colleges find other types of loans, such as those from the FFEL program, better to deal with. Be sure that the college that you are applying to accepts the type of loan that you have.

Acquiring Debt

Be aware that you are going to have student loan debt. When you graduate college, are searching for a job, and are settling down you are going to have to make monthly payments. Applying for a direct student loan is appealing when you are a student, but when repayment begins you must find a way to save money.

Certain colleges and/or universities do not accept direct student loans. One third of all colleges accepted direct student loans in 2008. Some colleges find other types of loans, such as those from the FFEL program, better to deal with. Be sure that the college that you are applying to accepts the type of loan that you have.

Income Sensitive Repayment

If you require income sensitive repayment, do not apply for a direct student loan. Income sensitive repayment is best for people who need to lower their monthly payments.  With this payment plan, borrowers pay a fixed percentage of their monthly earnings. If this income sensitive repayment is the best plan for you, apply for another type of loan such as a FFEL.

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