Direct Student Loans - Are They For You?

What is a direct student loan and how can it benefit you? These loans are one of the best options for those who qualify for them, because they are backed by the United States Department of Education. This means that they have low interest rates and favorable repayment terms, as compared to private student loans.

The current interest rate for these loans is 6.8 percent, and the interest rate is fixed, which is an important feature to look for in any loan, whether a student loan, mortgage, or car loan. Loans with variable interest rates can look very appealing right now, because they are at a historic low, but if interest rates rise, monthly payments will also rise to potentially disasterous levels.

Direct Student Loans are also appealing because interest does not accrue until the borrower graduates or is no longer attending school at least half time. Private loans usually do not have this benefit; while the student may not have to repay the loan until after they graduate, the interest starts accruing as soon as the student receives the funds, which means that the student owes more money and has to pay back more money over the life of the loan. In general, federal loans are always going to be a better bet, financially, then loans from banks or other private institutions.

With a Direct Student Loan, the student does not have to start paying until six months after they stop attending school at least half time. Students need to keep in mind that there is no second grace period, so if they stop going to school at least half time for six months, and then start going back to school again...their loan repayment period has started and will not halt now that they are back in school.

Schools that participate in this loan program provide exit counseling to the student before the student graduates, withdraws, or drops below half time attendance, to ensure that the student knows all of the terms and conditions of their repayment plan.

There are special conditions that apply to reservists who are called to active duty, so anyone in the military does not need to worry that if they take out this type of loan, they may have to start repaying their loan because they were called away to serve their country.

Although there are many benefits to taking this type of loan, this doesn't mean that the student gets a free ride. It is just as important for a student to repay the Direct Student Loan as it is for them to repay any other type of loan; defaulting on any type of loan can have a permanent negative effect on a students' credit.

College financing can be tricky and complicated - but it doesn't have to be. Visit http://www.financecollegenow.com to find out about the best options in federal student loans, private student loans, student loan consolidation, grants and scholarships.

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