Student Loans

There are many types of student loans, but the majority of them are “Federal Student Loans” (FSL). In this case, U.S. Dept of Education is the lender and they offer better terms than private lenders. But just like any lender, a loan comes with interest. In order to apply for federal student loans, FAFSA (Free Application for Federal Student Aid) is needed. Not just one year, but every year.

Mainly, there are 4 types of federal student loans: 1) Direct subsidized loans; 2) Direct unsubsidized loans; 3) Direct PLUS loans; 4) Direct consolidation loans.

1) Direct subsidized loans (DSLs):
DSLs are for eligible undergrads who demonstrate financial need. This need is determined by a formula used in FAFSA. If you are qualified, federal government will cover the interest (hence the “subsidized” part) during a period of time: while you are at school and 6 months after you leave school. Here you can find the latest interest rates for the “Direct Subsidized Loans”.

2) Direct unsubsidized loans (DULs):
Borrowers will be responsible to pay the interest for DULs during all loan periods, including enrollment (Although you don’t have to replay DULs during enrollment, but interest accrues up, and you have a bigger loan payment than DSL when your loans enter repayment period). DULs are available for both undergraduates and graduates. The eligibility is not based on financial needs. Here you can find the latest interest rates for “Direct Unsubsidized Loans”. You will see, the interest rates, origination fee and eligibility for repayment and forgiveness options are the same for undergrads for both DSLs and DULs. However, the DULs’ interest rates are higher for Graduates.

3) Direct PLUS loans (DPUs):
DPUs are for either graduates (They are also called Grad PLUS Loans: GPLs) or parents of undergraduate students (Parents PLUS loans: PPLs). These loans are gap fillers: filling the gap between COA (cost of attendance) and various fundings including after borrowing your maximum allowed limits of DSLs or DULs. Here you can find the latest interest rates for “Direct PLUS loans”. You can see the rates are higher than DSLs or DULs. Besides, the DPUs require a credit check. If your credit isn’t the best, you can apply the loan with a co-signer (endorser). There is also a limit, which is COA. The big difference between GPLs and PPLs is that GPLs borrowers don’t have to make payment during enrollment or 6 months after leaving school, however interest accrues just like DULs. PPU borrower will be expected to pay immediately after the loan is disbursed unless applying for a deferment. GPLs also has advantages: Borrows can apply for income-driven repayment plans and eligible for loan forgiveness programs.

4) Direct Consolidation Loans (DCLs):
DCLs allow borrowers to consolidate all eligible federal student loans into 1 loan after leaving school. Whatever you have left (either paid partially or unpaid) will be combined into 1. The interest rate would be a Weighted Average of current interest rates of student loans and rounded up to nearest one-eighth of 1%. DCLs are also eligible for income-driven repayment plans and loan forgiveness programs.