Direct Student Loans

To fund higher education, students often turn to student loans. Many universities participate in the direct student loans program known as the Federal Direct Student Loan Program or FDSLP. Through this program, loans do not need to go through a third-party lender, instead the funds go straight from the government to the college.

While the FDSLP does offer many students a way to afford an education, those loans must be paid back. To make repayment easier, direct student loans can be repaid in a variety of ways.

Direct Student Loans – Repayment Options

Four repayment options are generally available to students with outstanding direct student loans. These options are standard, extended, graduated, and income contingent. Each option is briefly described below.

• Standard – The standard repayment option for direct student loans requires graduates to pay a set amount every month. The minimum payment is $50, and the loan must be paid off within ten years. The payment amount and payoff period are determined by the student's outstanding loan balance.
• Extended – Like the standard option, students pay a set minimum monthly payment of at least $50. The difference is that the loan does not have to be paid off until later, usually somewhere between 12 and 30 years. Students who owe large balances may need this option to keep their minimum payments low, even though they will end up paying more in interest.
• Graduated – This option acknowledges the fact that college graduates may not have large incomes after finishing school. So the minimum payments fluctuate. The payments begin as a low amount, then increase every two years or so. The final payoff date is extended to between 12 and 30 years to give the student more time. While this option can be a real asset for students, it does usually mean they will end up paying more in interest.
• Income Contingent – Direct student loans also have this program to help students whose are in financial need. The payments are based on income and will fluctuate along with the student's income. The loan repayment period is 25 years. If the loan is not repaid in that time, the remainder is forgiven by the government.

The US federal government is in the process of substantially changing laws relating to student loans, including interest rates, repayment options, consolidation laws, and so on. We STRONGLY recommend that you read updated information on the US Department of Education website for the absolute most up-to-date rules and regulations on student loans.