William D. Ford Federal Direct Loan Program

You may have noticed several different names for the loan that you got from the Federal government. The official name of this Federal Loan system is the William D. Ford Federal Direct Loan Program. To know more about this loan program read this article.

Posted by Akshay Nair P R on 18th May 2018

William D. Ford Federal Direct Loan Program

This loan program provides low-interest loans for students as well as parents to help them pay for the expenses of student's education after high school.

William D.Ford who was the representative from Michigan from 1965 to 1995, was the person who tried to increase the educational opportunities for everyone.

For this, he came up with the Middle Income Student Assistance Act, which increased the opportunities for everyone to afford a higher education.

Due to this effort of him, in 1994 the Federal Direct Student Loan program was named in his honor.


Program Detail

The Federal Student Aid according to the data of 2012, the total loan portfolio balance was $896 billion, they were able to get back $473 billion and the new loans that originated in 2012 were $106.7 billion. This William D. Ford Federal Direct Loan Program has four components:

Direct Subsidized Loans

Direct Consolidation Loans

Direct Unsubsidized Loans

Direct PLUS Loans


Direct Subsidized Loans

  • Low cost, fixed rate (4.45% for the 2017-2018 academic year) loans

  • Only for Undergraduate students

  • The government pays the interest while you are in school 

  • Eligibility: US citizen or eligible non-citizen who is an undergraduate student, with a diploma or equivalent and should not be a defaulter in any federal student loan

  • Should have applied for FAFSA

  • Repayment: You have a 10 year period for repayment. However, you can qualify for more

Source:https://www.edvisors.com/college-loans/federal/stafford//subsidized


Direct Unsubsidized Loans  

  • Low-cost, fixed rate (Undergraduate: 4.45% and Graduate: 6.0% for the 2017-2018 academic year)loans

  • You have to pay for the interest

  • Eligibility:- not based on need,  US citizen or eligible non-citizen, should have a high school diploma or equivalent, should be enrolled in a degree or certificate program 

  • Should have applied for FAFSA

  • Repayment: You have a 10 year period for repayment. However, you can qualify for more

Source:https://www.edvisors.com/college-loans/federal/stafford/unsubsidized


Direct PLUS Loans

  • Unsubsidized loans for Parents of dependent students

  • Interest rate of 7.0% for the academic year of 2017-18

  • Eligibility:- Dependent undergraduate student, the parent should have a good credit history, Parent and student must be a US Citizen, permanent residents, or eligible noncitizens

  • Students should have applied for FAFSA

  • Repayment: You have a 10 year period for repayment. If you want you can apply for more.


Direct Consolidation Loans

  • This allows you to combine multiple federal education loans

  • As a result, you have to pay a single monthly payment

  • Eligibility - All loans that you consolidate must be within the grace period

  • Cons

    • Increase the total cost of borrowers loan

    • A portion of the grace period may be forfeited

    • Perkins borrowers lose deferment subsidy and cancellation eligibility.

  • Pros

    • Reduced monthly payment

    • Flexible repayment option

    • One lender and one monthly payment


Conclusion

If you want to borrow a student loan then William D. Ford Federal Direct Loan Program has a lot of options for you. These are low-interest loans for students that would help the students to pay the loan at low-interest levels. Not only this other facilities that are attached to these loans make them a must for all those students who are looking for a loan to go through their education expenses.


FAQ

  1) Are Sallie Mae loans considered as a Federal Loan?


Sallie Mae or the SLM Corporation is a public corporation and a private sector lender. So, the loan provided by it is not considered as a federal loan. As the Federal loan is funded by the US government, not any bank or financial institution.

  2) Can you default on a student loan?


If you default on your student loan then it affects your credit, which would eventually affect your purchasing power which involved down payment and use of credit cards. Also, after this, you will lose your eligibility for deferment, forbearance and loan forgiveness, as well as other benefits, like choosing your own repayment plan and eligibility for additional federal aid. 

  3) How long does it take for a student loan to go into default?


Default in terms of the loan is the failure to repay it according to the terms of the promissory note. In case of most federal loans, you will default if you have not made a payment in more than 270 days

  4) How can a loan be repaid?


There are four ways of repayment of the federal loan:

  • The Standard Repayment Plan: It includes the monthly payment of $50(min.)  over a fixed period of time up to 10 years. This payment may change according to the loan amount.
  • The Extended Repayment Plan: In this, you can repay it over an extended period of time of 12 to 30 years. With a fixed amount for each month $50(min.).
  • The Graduated Repayment Plan: This is for those borrowers who are income initially is low but it would increase steadily over time. In this, your repayment will start low and increase in every two years.
  • The Income Contingent Repayment Plan: In this plan, monthly payments are on the basis of the borrower’s adjusted gross income (AGI) and the total amount of Direct Loans borrowed. The required monthly payment will not exceed 20% of the borrower’s discretionary income.