Federal Direct Student Loan

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The Federal Direct Student Loan Program (FDSLP)

We all know that the government is trying to provide all students with an equal right to attend college, no matter how much you or your family earns. That is why federal financial aid has either granted or loaned over $ 81.5 billion to students or their parents in the 2003-2004 academic year. But do you know what the source of federal loan money is? There are in fact two groups of sources, private lenders or direct from the government themselves. This government funding is known as the Federal Direct Student Loan Program.

Why are there different sources of federal loans?

It all comes down to which scheme the college or university you are going to attend participates in. If it participates in the Federal Family Education Loan Programme (FFELP), the loans that you may be eligible for will be funded by private lenders. If the source of funding is through the Federal Direct Student Loan Program (FDSLP), the government will be the lender and will deposit the money with the school you are attending. There are no differences in the federal loans whatsoever, just the money provider!

What types of loans does this apply to?

There are four main types of loan which can be referred to as a federal direct student loan. These are:

  1. The Stafford loan that is awarded as part of your financial aid package where the government will pay the interest whilst you are in university and you do not have to start repaying until after you graduate.
  2. You can also apply for an Unsubsidized Stafford loan to cover the costs of your families Expected Financial Contribution (EFC) to your further education. This loan has to start being repaid as soon as you start your course.
  3. A Parent PLUS loan is an unsubsidized loan that is loaned to the parents to finance their EFC and is an alternative to an Unsubsidized Stafford loan. The money is sent directly to the college and the parent/s must start paying back the loan 60 days after their child starts college.
  4. Consolidation loans are a type of federal direct student loan that enable to combine any federal loans you have into one loan with one monthly repayment. This can help to reduce your monthly outgoings and control your student financing.