William D Ford - Federal Direct Student Loan Program

About 15 years back the Direct loan program was introduced where the Federal government funds the loan directly and not the credit unions or banks and other private finance business holdings. Direct loan programs work against the Federal Family Education Loan Program (FFELP) where it is the private lenders that basically fund the loan. Still considering the similarities the direct loan program and the FFELP offers, it is important to understand them better individually before taking a suitable loan program.

Stafford and PLUS loans are offered by both Direct loan programs as well as the FFELP. Both of them have the same guidelines to check for the eligibility of a loan approval. The credit checks are followed in the same method and criteria. When the similarities are more common between the two, the unique characteristics are tough to be identified. In some situations, such as in the case of customer service the private banks services better than the Government. However in other cases the benefit may be reversed.

The differences are quite eminent between both. For instance when a loan is funded through FFELP the financial company who provides the loan initially may not be the one who collects the payments. The loans are usually sold to other companies most of the time. Hence it may be difficult to identify a lender of your choice. It is more likely that you may end up repaying the loan to a company that you’ve rejected in the process of applying for one.

However, as far as student direct loans are concerned the loans are not sold to other banks or financial institutions. When it comes to the interest rates the PLUS loans and Stafford loan rates are fixed. However, the private banks may provide flexibility to some extent. For instance, the private lenders may waive off the origination fee which is fixed at 3% and the insurance fees of 1% that is determined as per the Federal rules. The private lenders make such compromises in order to obtain better business. They may also be flexible in terms of altering the payment cycle or grace period or the tenure of the loan in order to provide better customer service.

The best way to identify the best option is to go through forums from popular sites such as http://talk.collegeconfidential.com/forumdisplay.php?f=7. With increased social network it is easier than before to obtain valuable and diversified opinions. The opinions may be based on individual experience as well as on the basis of unique preferences.

Getting across several such posts may help to derive at a suitable conclusion. It is always advisable to shop around for the best offer when it comes to any type of loan since a loan is an obligation for a long duration. It is wise to work out on the cost provided by different lenders.

You may obtain the details of Direct loan from the federal site http://www.ed.gov/offices/OSFAP/DirectLoan/index.html. You may apply online for Direct loans by filling up the Master Promissory Note. The application may be done at https://dlenote.ed.gov/empn/index.jsp. As in any other loan program the Free Application for Student Aid (FAFSA) can be filled up at http://www.fafsa.ed.gov/.