Direct Loans, the New Way to Deposit Going to College
Going to college can be a luxurious proposal for both the student and the government. Several people are finding that going to college is an unbearable dream due to raising tuitions and charge of living unless they obtain help in the form of a scholarship or loan. Of course the rising costs of everything are no cause that any bright child should not obtain a higher education and achieve all they can desire to.
In the past the national government has had a lending program to support people with funding their secondary education prices but this system has it draw backs. The old system of student advances was fraught with fraud, was time consuming and very confusing to most people. With the old system there were more than 7.000 lenders with 65 secondary markets and 35 guaranty organizations. For one loan most students would have to fill out several forms and apply to several organizations until they finally got the answer they needed.
The other big issue with the old lending system was the cost of managing the loans. On average it charge the government $11 per $100 loaned to manage the accounts. The result to this is the simplified Direct Loan system that is now in place. The Direct Loan system is just what it sounds like; the government lends the cash directly to you thus removing the middleman and much of the price of lending money to students.
When applying for a Direct Loan you will have two choices, a subsidized or unsubsidized loan. A subsidized loan is normally for people who would not generally be able to afford going to college at all. With a subsidized loan the government bears all the interest on the loan until your schooling is ended at which point you must begin to refund the loan. An unsubsidized loan is the standard Direct Loan for mostly people. With an unsubsidized loan you must bear interest on the loan while you are in school and then start to repay the loan after you graduate. You do have the choice of deferring the interest expenses while you are in school. If you select for this option the amount of the interest is added to the principal of the loan every month until you graduate.
Just like all other parts of finance in your life, you must also wisely control the Direct Loan financing. There are several things to keep in mind like the yearly lending limits. For the first year you can only use $2,625, $3,500 the second year and $5,500 every year after that. This means you may also have to effort or find other bases of funding while in school. Keep careful records of all the cash you receive and keep receipts for all you spend the money on. You might be shocked at what all can be used as a tax deduction.
As you can see Direct Loans is a fast and effective way to receive college finance from the government. The application procedure has been reduced to mostly one form, the time it takes to gain authorization is faster and you receive your cash sooner than before.