Direct Loan
What Is a Direct Loan?
Direct Loan is a federal student loan issued directly by the U.S. Department of Education.
Direct Loans are part of the William D. Ford Federal Direct Loan Program and include several types, such as Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
Most federal student loans today are Direct Loans.
Why It Matters
Direct Loan:
- Qualifies for income-driven repayment
- May qualify for forgiveness programs
- Offers federal borrower protections
Borrowers with older federal loans may need consolidation to access certain benefits.
How Direct Loan Works
Direct Loan is funded by the federal government and disbursed through schools.
Borrowers select repayment plans after leaving school.
Example: A Direct Loan borrower may choose a standard 10-year repayment plan or an income-driven plan based on earnings.
Interest accrues according to loan type and terms.
Direct Loans are serviced by contracted loan servicers.
Direct Loan vs. FFEL Loan
Direct Loan → Issued by federal government
FFEL Loan → Issued by private lenders under former program
Program structures differ.
FAQs About Direct Loans
Do Direct Loans qualify for forgiveness?
Yes, many federal forgiveness programs require Direct Loan status.
Can Direct Loans be consolidated?
Borrowers may consolidate eligible federal loans.
Is interest fixed?
Most Direct Loans have fixed interest rates set annually.
Related Terms
