Direct student loans are low interest loans designed to help college attendees pay for education after high school and they are fairly easy to obtain. There are no credit checks, no application fees and are catered to a students needs based on the program of study. This lending is either subsidized or unsubsidized. A subsidized amount is awarded based on a financial need basis only. The federal government pays the interest accrued until repayment begins for the college graduate. An unsubsidized amount is not awarded on financial needs. Borrowers will pay the interest on the amount from the time that the funds are dispersed.
A student can choose to pay the interest in installments or allow the loan to accumulate interest. In this situation, the interest will be capitalized, added to the amount of the principal and will increase the amount repaid in the end. Paying along the way will save the most money on a direct student loan. Anyone who is a degree-seeking college attendee enrolled half-time or more in college credit classes is eligible for one. The amount borrowed is based on the program of study and how many years the borrower has completed in college. For example, a first year college attendee will be able to borrow less in direct student loans than a college attendee who has completed two years of study. Interest rates paid will be lower while a borrower is attending college. Once the education is finished the interest rate will be higher.
Many students like to obtain this lending because the interest rates are so low. There is a nominal fee to pay once a direct student loan is disbursed. A portion of this fee goes directly to the federal government to help decrease the cost of lending. Collection and late fees may also apply if payments are not made when scheduled. Amounts are paid back to the lender after a borrower leaves school, drops below the half-time enrollment mark, or once a borrower graduates. Lenders also offer a six month grace period before repayment will begin. During the grace period, a borrower will receive payment information on their direct student loans. The lender will notify the student, usually by mail of the repayment amount, current interest rate, and the date payment is expected.
"My covenant will I not break, nor alter the thing that is gone out of my lips" (Psalm 89:34). It is vital that a college attendee pay the debt on time and the full amount - not doing this can negatively impinge on the students credit report. It is possible to receive a deferment on a direct student loan under certain circumstances. For example if a student were to earn an associates degree and wanted to obtain a bachelors degree, payment would be deferred while the student is enrolled at least half time. Guidelines may vary according to lender for deferment.
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