Federal Direct Stafford Loans

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Federal Direct Stafford Loans

The federal government makes Stafford (both subsidized and unsubsidized) and PLUS loans directly available to students through selected schools across the country. No banks or guarantee agencies are involved. The U.S. Department of Education is the lender.

Eligibility for student and parent loans remains the same as under the Federal Family Education Loan Program, except that the government is the lender rather than a commercial institution. Loan amounts, deferments, monthly repayment amounts and cancellation benefits for Direct Loans are the same as those for other federal loans.

You also must meet certain conditions to receive federal aid

The main difference between subsidized and unsubsidized Stafford Loans is that the subsidized loan is available only to those who can demonstrate financial need, and the interest is paid to the lender by the government while the student attends school at least half-time. With the unsubsidized Stafford, the student pays the interest while enrolled.

Applications are available at participating schools. The student (or his or her parents) may pay an origination fee of three percent of the loan that is deducted proportionately from each loan disbursement. Contact the school’s financial aid office to determine whether there are Direct funds available.

The Direct Loan Program offers four repayment plans:

  • The Standard Repayment Plan requires a fixed amount (at least $50) to be paid each month for up to 10 years.
  • The Income Contingent Repayment Plan bases the monthly repayment amount on annual income, family size and the loan amount.
  • The Extended Repayment Plan allows the borrower to extend repayment over a period of 12 to 30 years, depending on the loan amount.
  • Under the Graduated Repayment Plan, payments are lower at the beginning of the repayment period and then increase every two years over 12 to 30 years.

Once a Direct Loan is made, it is managed and collected by the U.S. Department of Education’s Direct Loan Servicing Center. For more information, call (800) 848-0979 or visit www.dlservicer.ed.gov.