When it comes to paying for college, there are many different avenues to consider. Today, there is a wide range of higher education loans available. For some, applying for a direct loan is the best way to go.

The Department of Education funds this type of loan. While some schools offer loans for students, the government is your lender with a direct loan. To apply, you can make a phone call to have the application mailed to you. The application is also available online.

This type of loan is offered in two different ways. The first is called a subsidized direct loan. This means that you receive your money based on how much you require. While in school, you will not be charged interest or be required to make payments.

The second type of direct loan is unsubsidized. This means that you have received money that was not based on your level of need. You need to understand that the responsibility of paying interest will fall on you. There are also limits to the amount of money you will receive through these two options.

Loan Amount Limits

Subsidized direct loans for undergraduate students offer a maximum of $2,625 during their first year in school, followed by $3,500 (second year) and $5,500 (remaining years). Graduate and professional students may borrow up to $8,500 per academic year.

An unsubsidized direct loan for undergraduate students allows $4,000 for their first and second years in school. After the second year, a student may borrow up to $5,000. Graduate and professional students may borrow up to $10,000 each full year they are in school.

Repayment Plans

There are four different ways to repay your direct loan, offering varying time periods to do so:

The first is called a Standard Repayment Plan, meaning every month; you will pay the same amount of money. This is one of the most common repayment plans. It carries a repayment of up to 10 years.

The Graduated Repayment Plan offers lower payments at the start of their repayment period. As the years pass, the amount of money you are expected to pay will increase. The amount of interest added to the plan is a bit higher. You will receive up to 30 years to repay the loan.

The Income-Sensitive Repayment Plan allows the monthly payment to correspond to your current income. It also takes into consideration the size of your family and total household bills. This is one of the most flexible plans. Flexibility comes with an extra price; you will be paying more in the long run.

The Extended Repayment Plan is offered for those who need up to 30 years to repay the direct loan. 

After school, you may experience economic hardship or other circumstances that prevent timely payment. There are options to assist you in these moments. A deferment allows you to put off your direct loan payments for up to 3 years. Additional options include forbearances, as well as college loan consolidation.

Loan consolidations allow you to combine all of your different loans for one lower monthly payment. Forbearance is when your repayment period is temporarily put off for a short period of time. This can be used when you are dealing with illness or have lost your job.

Summary:

Direct loans offer a way for undergraduate, as well as graduate and professional students, to pay for college. Two main types of this sort of loan include unsubsidized and subsidized. This refers to the payment of accumulated interest. As for repayment after graduation, there are four different options. They all vary in options, as well as how long you have to pay off the loan.

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