Today, many people know about the federal direct student loan program. This direct student loan service has allowed so many people to go to college who would otherwise would not be able to go to college and get the education that they need.

However, some people might not know a lot about the federal direct student loan program. They know it exists, but they do not know what it consists of. Here is some information to help you better understand how this program works to send young adults to college.

History Behind The Program

You might be surprised to know that the federal direct student loan program did not even exist until the early 1990’s. In 1993, President Bill Clinton passed the direct loan program into law. In the beginning, the federal direct student loan program had a large funding.

However, today the funding has decreased from over seven billion dollars in 2006 to just 509 million dollars budgeted for the program in 2008. However, President Obama has vowed to increase the budget for direct student loans and by July 2010 have all new student loans be through federal direct student loans.

With the United States as an example, other countries have started implementing federal direct student loan programs.

For example, New Zealand offers loans at zero percent interest for students who have lived there for 183 or more consecutive days.

This is even retroactive to all former students who had government loans before this federal direct student loan program was passed.

How It Works

The federal direct student loan program is essential for so many people. This program allows students to get low interest loans that they do not need to pay off while they are in school. The federal direct loans have a minimal interest rate while students are in school and even during repayment keep a low interest rate. Students can take their time to pay off these loans and know that they will not be paying tens of thousands of dollars in interest because they could not pay it off right away.

However, the federal direct student loan program is a need based program. Not everyone qualifies for this program, and even if you qualify the government will set how much you can take out in a loan through this program. However, even if you do not qualify for the federal direct student loan program, you can still find student loans through private lenders to help you go to college.

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Paying for school could cost you a fortune. Especially if your course is a tough one that requires a lot of dedication, it could be a real pain to poise between your work and school. In any scenario, national direct student loans funded under the Federal direct student loan program could really come in handy to get through graduation.

What are National Direct Student Loans?

National direct student loans are low-interest payable loans determined to aid students who are in economic distress and are offered to both undergraduate and graduate U.S students (citizens, nationals and anyone residing in the U.S rather than on a temporary basis). Formerly called National defense loans, they are now referred to as Perkins loans.
The national direct student loan coalition is solely responsible for sanctioning the loan to the needy students, and though the money comes from the federal government, the participating schools that sanction the loans themselves receive the payment and the government does not insure the loans.

The National direct student coalition also provides mentoring to institutions that are seeking information regarding the service. In a process of expansion, the National Direct Student Coalition is firmly motivated and prepared to include all the schools of the U.S Educational System under this service. Owing to its effectiveness, in the year 2008-2009 more than 700 schools got themselves registered under this system.

Under the rules set, the funds are provided to the participating institutions on their base guarantee and the Institution’s pro rated share value. Also, the aggregate need of the eligible students in attendance is pre-determined. The Institution needs to bear about 25% of the strength of the funding. The participating Institution also receives compensation for certain loan cancellations. The national direct student loan is meant for individuals and institutions of Higher Education (IHEs) that can apply for an allotment of funds to be awarded to undergraduate, graduate and vocational students who have got enrolled at the participating school.

The amount of the national direct student loan greatly depends on how soon the needy apply; the intensity of the need and the school’s funding capabilities. These loans can provide up to $5,500 for undergraduate students’ study each year, and a total of $27,500 for students that have completed two years of education towards a bachelor’s study.  However, the amount that you might actually be able to borrow could be less. As each participating school is allocated a certain amount of fund each year for the loan purpose, this comes to exhaustion as the number of applicants approved for the loan increases. And once the available funds are exhausted, the Institution can give out no more student loans in that particular year.

How to Apply?

The interest on national direct student loans is usually fixed at 5%. There are no other hidden fees or charges involved whatsoever, with the national direct student loan. If you are filing for a national direct loan, you need to fill out the Free Application for Federal Student Aid (FAFSA) and just wait till your application to be considered.

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The increasing popularity of national direct student loans has led to the urge in people to understand more about the direst student loan consolidation when it comes to repayment.

What is Direct Student Loan Consolidation?

Direct student loan consolidation is the mechanism by which all the direct student loans that have been taken by a student is merged resulting in single and customized repayment. The interest rate on the final single loan would be the average of the interest rate of all your existing direct student loans rounded off to the nearest .125%

Usually direct student loans mandate the students to commence repayment after a 6 month grace period since the studies get over. A student is allowed to opt for direct student loan consolidation either during the grace period or after he starts making the repayment. When done during the grace period, the repayment is likely to commence immediately. Hence it is recommended that the consolidation be done after the 5th month of the grace period for that would offer the maximum benefits.

Pre Requisites

The following are the pre requisites for resorting to direct student loan consolidation.

The total of all the national direct student loans in the name of the student should be over $10000
The student should have either completed studies or should be enrolled for less than half time.
The student should not have defaulted in the monthly repayments.

Should You Really Opt for Direct Student Loan Consolidation?

Direct Student Loan Consolidation can be resorted to if you have just started or in the middle of the repayment. Consolidation is the right solution only when you are about to default your repayments.

If you are on the verge of completing your direct student loans, it is not worth opting for a direct student loan consolidation since that would emaciate time, efforts and money.

Before opting for direct student loan consolidation, ensure that you consider the standard/ extended/graduated and income contingent repayment plans. Only if you find that all of the repayment plans might stress you beyond limits, it is worth considering direct student loan consolidation.

Benefits

For those who find it tough to make the monthly repayments on direct student loans, the direct student loan consolidation offers a viable solution wherein you can extend the repayment period and bring down the monthly installment drastically to even 54% of the original monthly debt.

The direct student loan consolidation helps the student by leaving him more money for monthly living expenses. It also simplifies your financial dealings and aids in improving your credit score.

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