There are many different types of financial assistance to help students and their families pay tuition fees. Front and center, generally offering the best deals – with the exception of an outright scholarship or scholarship, of course – are federal student loans. (See University loans: private versus federal .)

Federal Direct Loans – called direct loans because the funds come directly from the federal government, not through a private lender – are the most used loans today. One of their biggest advantages is that they do not require a creditworthiness test, any form of collateral or co-signatory, meaning that borrowers with poor credit scores and low incomes can qualify for them as long as they meet the other criteria for borrowers.

Available subsidized or non-subsidized, with different qualifications and options in each case, Federal Direct Loans can be used to pay a student’s Total Cost of Present (TCA). These expenses include tuition fees, books, laboratory costs, board and lodging and other relevant educational expenses. See Federal Direct Loans: subsidized Vs. for more information about eligibility for a loan and the differences between these two types. Subsidized .

How much can you borrow?

How much can you borrow?

Federal Direct Loans are similar to other types of federal student Squire Allworthyening, as there is both an annual and a cumulative ceiling for the dollar amount that can be borrowed. Factors that influence these limits include whether the loans are subsidized or not, the borrower’s dependence status for tax purposes, the student’s school year (for example, is he or she freshman or senior) and whether the loans are used to to pay for medical school.

Some exceptions allow students to borrow extra money in a given year. One applies to students who move from one class to another during an academic year: for example, students who become second-year students after the fall semester are eligible to borrow the difference between the higher annual loan for a second-year student and what they had already borrowed when she had the status of freshman. (If this might apply to you, check with your financial assistant.)

Students who transfer from one institution to another can also borrow the difference between the loan limit at the new institution and the amount they borrowed at their previous apprenticeship if the new institution has higher internal limits.

Unsubsidized loans. There are no income restrictions for eligibility for an unsubsidized loan. They are also the only type available for graduate education. The following table shows the credit limits:

Direct unsubsidized loan – Undergraduate students

Loan limits

Dependent

Independent

Annually

First year (first year)

$ 5,500 <$ 9,500

Second year (second year)

$ 6,500

$ 10,500

third year and thereafter (junior, senior)

$ 7,500

$ 12,500

Cumulative

$ 31,000

$ 57,500

Direct subsidized loan – Graduate and professional students

Loan limits

Graduate and Professional

Medical School

Annually> $ 20,500

$ 43,883- $ 47,167

Cumulative

$ 138,500

$ 224,000

The cumulative credit limits for graduate students include non-completed debts that have not been repaid. Here is another cumulative limit that is applied to Federal Direct Loans: the student cannot borrow more than the total annual education costs for education fees and expenses

minus

other loans, scholarships or financial support that he or she has received. Note that “independent” students – who are not listed as dependent on their parents’ or guardian’s tax returns – qualify for $ 4,000 to $ 5,000 more per year in loans, with a cumulative additional total of $ 26,500 . > Medical students enrolled in a qualifying program have much higher leeSquire Allworth limits (see above). In addition, there is an annual limit of $ 40,500 per year for students of osteopathy, dentistry, podiatry, veterinary medicine and certain other programs. Students of pharmacy, chiropractic, clinical psychology and other specific areas can borrow up to $ 33,000 a year. Subsidized loans. To get one of these, the student must be an undergraduate and meet an income qualification for financial need. The loan limits for dependent and independent students are identical – and lower than the limits for unsubsidized loans. However, students do not owe interest on these loans while they are in school. Graduate students may no longer receive a Direct Subsidized Loan.

Direct subsidized loan – Undergraduate Students

Loan Limits Dependent

Independent

Annually

First year (first year)

$ 3, 500

$ 3, 500

Second year (second year)

$ 4,500

$ 4,500

third year and thereafter (junior, senior)

$ 5,500

$ 5,500

cumulative

$ 23,000

$ 23,000

A student with a subsidized loan can borrow additional Direct Unsubsidized Loan funds, up to the cumulative limit for Direct Unsubsidized Loans. Consult your financial aid station.

Who is eligible?

Students who want to receive a Federal Direct Loan must apply for this by filling in the FAFSA. They then receive a SAR (Study Aid Report) report outlining the amount of financial support for which they are eligible. Students with a greater financial need receive subsidized loans, while those with more resources receive unsubsidized loans.

The school then uses this report to write its financial support letter, to tell the student how much support he can get and whether he is eligible for a subsidized loan. The student then submits a principal order stating the intention to pay off the loan after graduation. Students who receive Federal Direct Loans must be American citizens, permanent residents or non-citizens who meet certain criteria. Students who do not meet the criteria for these categories can still qualify if they meet certain other conditions with regard to where they register, their registration status and financial situation. Any student applying for a Federal Direct Loan must also attend a Title IV eligible school and cannot be in default with any other current federal student loan.

Which costs and interest are charged?

 

For the 2015-2016 school year, the Federal Direct Loan amounts were 4. 29% for both subsidized and unsubsidized loans for undergraduate students, and 5. 84% for graduated loans.

Each federal direct loan granted on or after 1 October 2015 also charges a license fee of 1,068%, and no interest or loan fees can be applied to the principal balance of the loan. The Bipartisan Student Loan Certainty Act of 2013 now links the interest rates for students to those of the 10-year government bond, with an additional fixed margin. Federal Direct Loan rates are set for the duration of the loan when they are established, but you get a different percentage for the loan each year, depending on interest rate movements. Click here to view the current rates.

What are the conditions for reimbursement?

 

The standard repayment term for Federal Direct loans is usually ten years, but there are exceptions. Students can choose from four basic types of repayment plans when it is time to start paying back their loans:

Standard repayment plan

 

Borrowers make a fixed monthly payment based on principal and interest, with a minimum amount of $ 50 or the amount of interest that is accrued.

  • Graduated repayment plan – the first monthly payment is for a lower amount, but increases over time until the loan is repaid. Payments are based on principal plus interest, but must be at least the amount of the accrued monthly interest. Revenue-based repayment plan –
  • the monthly payment of the student is based on the annual income and the amount of the loan. Payments can rise and fall with changes in income. Extended reimbursement plan
  • – if the total loan amount exceeds $ 30,000, this plan allows borrowers to make fixed or graduated payments for up to 25 years. Students do not have to make payments on either type of loan while they are still in school as long as their studies are equal to at least half that of a full-time student. However, the interest immediately begins to accrue on non-subsidized loans, while the federal government covers these costs on subsidized loans until the student has graduated.
  • Make sure you don’t borrow more than you think you can repay, but keep this information in mind: as a direct federal loan, a federal direct loan is one of a select group of loans that are eligible for student loan forgiveness. If you want to know more about this, read Debt Forgiveness: how you can pay your student loan

 

The Bottom Line Federal Direct Loan is a handy, flexible way to finance higher education. For more information about Federal Direct Loans and other ways to pay for college, consult your institution’s financial services provider. Also read the tutorial on student loans from Investopedia, How a private student loan