Direct Student Loans

Written by Seth Cotterell
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Student loans are some of the most common sources of college financing. They are much more readily available than scholarships and grants, and a majority of students receive a student loan of some type during their college careers. The most common type is the direct student loan.

Direct student loans are loans from the federal government. The loan is made directly to the student, hence the name, and is paid through the student's college or university. The loan amount comes directly from the federal government to the school, which then disperses it to the student. When the loan reaches the school, it deducts the cost of tuition and fees, and then issues a refund to the student of any amount that is left over.

Subsidized and Unsubsidized Direct Student Loans

Direct Stafford loans are the most common type. Stafford loans are either subsidized or unsubsidized. Subsidized loans do not accrue interest while the student is enrolled in college. Eligibility for subsidized Stafford loans is determined completely on the financial need of the student. Student and parent incomes determine how much subsidized money a student may receive.

Unsubsidized Stafford loans are slightly different. Because they are not based on financial need, they do accrue interest while a student is enrolled. Though you will not have to start making payments until after graduation, the interest that has accumulated in the years you were enrolled will be included in your payments. This means that unsubsidized loans will cost more to repay in the long term.

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