Guide to the Federal Direct Student Loan Program

Written By Minh Tong
Feb 14, 2023
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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.


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We provide debt resolution services. Our clients who make all monthly program payments save approximately 40 – 50% of their enrolled debt (average of 43%) upon successful program completion, before program fees. Fees are based on a percentage of your enrolled debt at the time of starting the program and range from 15%-25% of your enrolled debt. Programs range from 20-48 months. Clients must save at least 25% of each debt due to an enrolled creditor before a bona fide settlement offer will be made. On average, clients receive their first settlement within 4-7 months of enrollment and approximately every 3-6 months thereafter from when the prior debt was settled. Not all Clients complete the program. Estimates are based on prior results and may not match your results. We cannot guarantee that your debts will be resolved for a specific amount or percentage or within a specific timeframe. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting, legal advice or credit repair services. Our program is not available in all states; fees may vary by state. Some programs may be offered through The Law Firm of Higbee & Associates d/b/a Advantage Law. The use of debt resolution services will likely adversely affect your credit. You may be subject to collections or lawsuits by creditors or collectors. Your outstanding debt may increase from the accrual of fees and interest. Any amount of debt forgiven by your creditors may be subject to income tax. Clients may withdraw from the program at any time without penalty and receive all funds from their dedicated account, other than funds earned by the company or fees paid to third-party service providers, as may be applicable. Read and understand all program materials prior to enrolling. Certain types of debts are not eligible for enrollment. Some creditors are not eligible for enrollment because they do not negotiate with debt relief companies. To determine the offers you may be eligible for, Americor conducts a “soft credit pull.” This credit pull does not impact your credit score, creditworthiness, or ability to obtain credit from other sources. The soft pull is not a tradeline entry, it does not report against your score and will only take a few minutes.

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