The William D Ford Direct Student Loan Program

March 27, 2009 by  
Filed under Student Loans

The direct student loan program started around fifteen years ago and was designed to completely eliminate the middle man. Instead of dealing with credit unions, banks, and other private businesses for student loans, the federal government decided to give out direct student loans instead.

Direct student loan programs go beyond the Federal Family Education Loan Programs (FFELP), which are student loan programs that go through private lenders. Since they are quite similar to FFELP student loan programs, it is important for lenders to figure out which one they want. Both kinds offer Stafford student loans and PLUS student loans.

Direct student loans pretty much have the same criteria for eligibility, guidelines, and credit check requirements for non-need-based programs. Because this is so, it may be difficult to decide between them.

Partially, the decision involves deciding between two servicers that provide good customer service personnel for important queries. Sometimes, private lenders are more flexible and helpful and the government tends to be more bureaucratic and indifferent, while in some cases, the situation is reversed.

In order to get the best information on which option would be best for you, you can read some forums. One popular forum site is: http://talk.collegeconfidential.com/forumdisplay.php?f=7

Also, with so many social networking sites available on the internet nowadays, you have a wider range of personal opinions to peruse compared to objective opinions. Reading forum posts can quickly help you decide which option to go for.

There are more concrete differences between these two types, though. FFELP student loans are serviced and funded by private financial institutions, to which you will have to sign a promissory note to. It is quite common for lenders to grant student loans; it is quite similar to what mortgage companies do.

You may end up going through a lot of trouble to find a lender you actually like. You may end up choosing due to customer service instead of rate and repayment terms. But once they decide to give your student loan to another company, you may end up repaying one that you rejected. With direct student loans, the lender is none other than the federal government; student loans are never sold to another party.

The biggest and most important difference to people, though, is the rates, fees, and repayment terms. Stafford student loans and PLUS student loans come with fixed rates, but private lenders may be more flexible.

The only way to find out what is out there is to look around for the kind of student loan that you need. Then, calculate the total cost of the student loan and compare it with others. For additional information, visit: http://www.ed.gov/offices/OSFAP/DirectLoan/index.html

For Master Promissory Note (MPN) online applications, go to: https://dlenote.ed.gov/empn/index.jsp

No matter which student loan program you choose, it will still require a Free Application for Student Aid (FAFSA), so find the forms here: http://www.fafsa.ed.gov/

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