Guide to the Federal Direct Student Loan Program

By Minh Tong Reviewed by Melissa Cook Updated Feb 14, 2023
Guide to the Federal Direct Student Loan Program

The Federal Direct Student Loan Program provides low-interest loans to eligible students to help pay for the cost of post-secondary education. The program is administered by the US Department of Education and includes the three types of loans:

  1. Direct Subsidized Loans: These loans are for students with financial need and the government pays the interest while the student is in school.
  2. Direct Unsubsidized Loans: These loans are not based on financial need and the student is responsible for paying the interest, even while in school.
  3. Direct PLUS Loans: These loans are for parents of dependent students and graduate/professional students. Eligibility is determined by credit history.

To be eligible for a Federal Direct Student Loan, a student must:

  1. Be a U.S. citizen or eligible non-citizen.
  2. Be enrolled at least half-time in an eligible degree or certificate program.
  3. Be in good academic standing and making satisfactory academic progress.
  4. Not be in default on any previous federal student loans.

The amount a student can borrow depends on several factors including:

  1. Cost of attendance (determined by the school)
  2. Financial aid received from other sources
  3. Dependency status
  4. Year in school

Interest rates on Federal Direct Student Loans are fixed and set each year based on the 10-year Treasury note rate. Repayment begins six months after graduation or dropping below half-time enrollment.

Repayment plans include: Standard, Graduated, Income-Based, Pay As You Earn, REPAYE, and Income-Contingent. 

Borrowers can change repayment plans as their circumstances change. Loan forgiveness is available for certain public service careers and for those who meet specific criteria.

It’s important to remember that defaulting on a Federal Direct Student Loan can have serious financial consequences, including wage garnishment, tax refund offsets, and difficulty obtaining future loans or credit.

To apply for a Federal Direct Student Loan, a student must complete the Free Application for Federal Student Aid (FAFSA) and be awarded the loan as part of their financial aid package. The school will disburse the loan funds to the student and the student will be responsible for repaying the loan directly to the Department of Education.For more information on debt settlement and loan forgiveness, speak with an Americor Debt Specialist today.


Minh Tong

Minh leverages decades of experience in marketing, sales management and technology to provide high-level advice and lead new initiatives. Minh has a Bachelor of Science in Business/Managerial Economics from University of California at Irvine. He brings over 20 years of sales and executive management experience to the company and his responsibilities include customer service improvement, professional development, and carrying out communications and marketing. Originally from the east coast, Minh resides in southern California and enjoys spending time with his family, going to the beach, and playing a variety of sports.