All students need money to finance their studies at whatever level they are in. Some have parents who are well able to do this without any struggles while others can do with a little help. This is where direct loan companies come in to make financing easier. In as much as direct loans are available to all students, it is important for them to understand how they work and the different types. Students get loans based on either their individual needs or their credit history. These criteria depend on the type of direct loan that you are seeking. Below are things you should know about online direct lenders:
Types of Direct Loans
Basically, there are four types of direct loans that students can benefit from. These types are categorized according to interest rates and the terms of the loans.
- Direct PLUS Loans
These kinds of loans are made available for professional and graduate students and also to students’ parents. They are also divided into two categories, the Grad PLUS and parents PLUS loans. These loans have a higher interest rate attached to them. Students who cannot access the other options end up with these kinds of loans since they need funding at the end of the day. It is always prudent for students to explore all other options first before they settle for these.
- Subsidized Direct Loans
These are some of the most favorable loans for undergraduate students. Their interest rates are relatively lower and are distributed according to the financial needs of individual students. Another aspect of this category of loans is that the interest that accrues while you are a student is paid off the government. This means things will work out better for you if you find a way of paying out your loan as soon as possible. This way you only have minimal interest amount on top of the borrowed amount.
- Direct Consolidation Loans
These kinds of direct loans involve consolidation of all your student loans so that you can pay off as a single loan. The interest rates for all the individual loans are weighted into an average rate. We see high rates, but nothing like what we see with payday loans or cash advances.This consolidation will make it easier for you to do the repayment after school. You will not be servicing many separate loans but just a single one. It may also be an opportunity for you to be eligible for parent PLUS loan forgiveness even though this may have other requirements.
- Unsubsidized Direct Loans
These are available to both graduate and undergraduate students. Even though they are not based on individual needs, they have a limit for annual borrowing. Their interest rates are slightly higher than those of subsidized loans. Unsubsidized loans are the second favorable loans after the subsidized ones. Comepare these rates to online payday loans and you will see a large difference in terms. Students who borrow these loans can also be eligible for loan forgiveness.
The Process of Applying for a Direct Loan
- Fill out the Form
This is the first step towards getting your loan and it requires that you meet all the requirements for the specific direct loan you are applying for
- Do a Review of Your Award Letters
Once you have filled your form and forwarded to the loan’s board, you will then receive award letters. These letters give details of the different student aids available for you so that you can choose what to go for. At this stage you also get the opportunity to determine exactly how much you need to complete your studies and avoid extra borrowing.
- You Accept, Decline or Negotiate the Aid
Depending on the kinds of aids presented in the letters, you can either accept, reject or negotiate the financial aid. If the offers favor you, then you accept and if not you can either negotiate or reject altogether. An appeal is allowed for you to end up with the help that you need. If you decline the aid you will need to look at other funding options like a payday loan or installment loan.
The Majority of students will need short term loans to finance their studies so you are not exceptional. However, you will need to be informed on the options you have and the criteria to get what you need in a favorable manner. The points discussed above will be of great help as you decide on the lender and the aid that you need.