Student Loan Information: Direct Student Loans

There is so much student loan information on the internet; it is hard to decipher what is accurate and what is not. What is important to know about student loans? Student loans are often the only way for students to fund their continued education. The Federal Direct Student Loan Program (FDSLP) has become a way for universities to offer their students direct student loans. FDSLP eliminates third-party lenders and offers government loans directly through universities.

What is the most important student loan information to remember?

Even though FDSLP conveniently eliminates the “middle-man,” FDSLP does require that the loans be repaid. These loans can be repaid in various ways to make the repayment process more manageable. Repayment options include standard, extended, graduated, and income-contingent repayments.

Standard repayments require students to pay a fixed monthly amount. The minimum amount for standard repayments on direct student loans is $50. The loans usually must be paid off in 10 years; however, both the monthly payment and payment term are determined by the unpaid balance of the loan.

Extended repayments also require a monthly payment of at least $50. Unlike standard repayments, extended repayments have payment terms of 12–30 years. Extended repayments are more appropriate for students who have more debt. The longer terms allow for lower monthly payments, but consequently, students pay more interest.

Graduated repayments accommodate the low initial incomes of many recent graduates. Graduated repayments allow for minimum payments to start low and to increase slowly over time. The payment term for graduated repayments is similar to that of extended repayments, often between 12–30 years. Like extended repayments, graduated loans offer lower monthly payments but charge more interest in the long run.

Income-contingent repayments are designed to assist students who demonstrate financial needs. Payment amounts for income-contingent repayments fluctuate in coordination with students’ incomes. If the loans are not repaid over the payment term of 25 years, the remaining debt is absolved by the government.

 
 
 

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