A direct loan is a type of student loan made directly by the U.S. Department of Education. The William D. Ford Federal Direct Loan Program provides low-interest loans for students and parents to help pay for the cost of a students education after high school. There are four types of Direct Loans:

• Direct Subsidized Loans: These are given to undergraduate students who demonstrate financial need. You won’t pay or collect interest while you are in school and during the grace period after you leave school. The Department of Education pays the loan’s interest on your behalf during that time.

• Direct Unsubsidized Loans: These are given to any undergraduate or graduate student and are not based on financial need. Interest will be collected while in school and included in your student loan repayment plan.

• Direct PLUS Loans: These are for the parents of undergraduate students, or for graduate and professional students. They can be used to help pay for education expenses not covered by financial aid. The Direct PLUS loan is not based on financial need, but credit is necessary. Eligibility is determined by the school and once the student has signed, he or she has entered into a legally binding agreement to repay all the loans.

• Direct Consolidation Loans: These are a combination of some or all your federal student loans into a single loan with one loan servicer.

Direct loans offer low interest rates and generous borrower protections. To receive a Direct Loan, borrowers must sign a Master Promissory Note (MPN) and complete entrance counseling. The interest rate on Direct Unsubsidized Loans is 5.50 percent for undergraduate borrowers and 7.05 percent for graduate and professional borrowers. Direct PLUS Loans are not need-based and require a credit check.