Direct Loans for Students: Pros and Cons

In the 2019-20 school year, 69% of full-time college students took out one or more student loans and graduated with an average debt of $ 29,900 (including public and private student loans), according to federal statistics.

With this type of money at stake, it is critical that students and their families understand their student loan options, including direct loans.

These federal student loans have significant benefits and are a popular way to pay for college. But are direct loans your best option? Here's what you need to know about federal direct student loans.

Direct loans are loans funded and owned by the U.S. Department of Education through the William D. Ford Federal Direct Loan Program. This is the only federal student loan program currently authorized and available to students.

Other federal student loan programs have operated recently:
The Perkins loans were funded by individual colleges that participated in the program. Federal Family Education Loans (FFEL) were financed by private lenders and guaranteed by the federal government.

As of March 31, 2019, the Department of Education had $ 1.20 billion in Direct Loan Program loans outstanding in the hands of 34.5 million borrowers.

This represents 81% of the federal student loan portfolio, which totaled $ 1.48 trillion as of the same date. The other 19% comprise $ 271.6 billion in FFEL loans and $ 6.6 billion in Perkins loans.

Direct loans are an important source of funding for college students who have exhausted their savings, earned income, and gifts, such as grants or scholarships, and still have college expenses to pay.

To qualify for Direct Loans as a student in school, you will need to meet some basic eligibility requirements for Direct Loans, according to the Federal Office of Student Aid:

  • Register a Free Application for Federal Student Aid (FAFSA), which provides the information used to assess your eligibility and need for federal student aid, such as direct loans.
  • Be enrolled at least part-time in a program leading to a certificate or diploma.
  • Go to a college that participates in the Direct Loan Program.

Pros and Cons of Direct Loans

Borrowing from the Direct Loan Program means getting into debt, and this financial step should not be taken lightly.

A clear understanding of what direct loans are and how they work is essential in deciding whether or not to take out these loans and how to manage your repayment.

To help you understand how these student loans work, here are some potential pros and cons to consider.

What We Like

  • Interest subsidy
  • Affordable, fixed rates
  • Accessible college funding
  • Multiple repayment options
  • Federal deferment and forbearance
  • Student loan forgiveness

What We Don't Like

  • Loan limits
  • Parents and grad students pay more
  • Federal student loan fees

We hope you enjoy watching this video about to Loans 

Source:The College Money Mom

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