Students often ask me about direct student loans, and what they are exactly. Direct student loans are federal education loans that are provided by the Department of Education, and are not to be confused with uncertified student loans, which are often characterized as direct-to-consumer loans.
With the inception of the Student Aid and Fiscal Responsibility Act, or SAFRA, in 2010 all Stafford, and PLUS loans are no longer be offered as part of the Federal Family Education Loan Program, and will therefore only be available as a part of the Department of Education’s Direct Loan Program.
Specific Direct Loans
Direct student loans are federal education loans that have the Department of Education as the lender, and not some bank, or financial institution. Before the passing of SAFRA in 2010, federal student loans could be offered as part of the FFEL Program, or as part of the Direct Loan Program.
SAFRA essentially eliminated the FFEL Program, and now most federal loans are offered via the Direct Loan Program.
There are four major kinds of federal student loans that are currently being offered as part of the Direct Loan Program:
- The Subsidized Stafford Loan
- The Unsubsidized Stafford Loan
- PLUS Loans
- The Direct Consolidation Loan
Both of the Stafford Loans can be applied for via the completion of the FAFSA, while PLUS Loans, and the Direct Consolidation Loan will require the filling out of a separate application. Student loans provided as part of the Direct Loan Program will also require that you sign a Master Promissory Note, or MPN, that will serve as a guarantee of your ability to payback the loan.
The important thing to keep in mind about direct student loans is that they are federal education loans where the Department of Education serves as the lender. The money therefore comes “directly” from the federal government, and because of this you no do not have to worry about taking into consideration what some third-party lender will charge you in terms of fees, and interest, or what they may require in terms of credentials in order to get an approval.
It is beyond the scope of the article to go into detail about each type of direct student loan, and if you want to learn more about the Subsidized, and Unsubsidized Stafford Loans, PLUS Loans, and the Direct Consolidation Loan, you should visit the accompanying pages on this site.
In the end you should remember that federal student loans are no longer being offered by private lenders, and that any student loan you receive involving a bank, or other financial institution will most likely be a private education loan, and not a direct federal loan.