Your Questions About Direct Loans

Nagesh answers:

Be careful of the PLUS loans… They limit your options of future payment plans, espeicially regarding income based repayment plans (IBR). Income based repayment is only avaialble for FFEL direct loans (excluding Perkins and PLUS loans). Such payment options can really help you afford your loan payments when you graduate. The IBR plan and federal loan forgiveness programs would not be applicable if you do not get a federal loan.

Most FFEL loans (like Stafford loans) offer similar benefits and are the better choice if you wish to have better payment options.

As for the difference between an FFEL loan and normal loans typically vary. A private loan can have any terms the lender wishes (check the fine print), while federally backed loans have strict restrictions. Direct federal loans do not need to be paid while you are a full time student, and often have better interest rates. Your interest rate can make a drastic difference in your payments.

If it were up to me, I’d get a Direct federal Stafford loan unless there is a specific advantage you see in one of the alternatives. The income based repayment is probably one of the most valuable options to a student, especially those that find themselves without a job for prolonged periods. Many students end up in default or have difficulty making payments, and qualifying for Income based repayment can ease this greatly.

Nagesh answers:

I copied this directly from the Direct Loan Consolidation Website

13. Can I Consolidate a Defaulted Loan?
Http://loanconsolidation.ed.gov/help/faq.html#default

Generally, Federal education loan(s) in default may be consolidated in a Direct Consolidation Loan if borrowers:

Agree to repay the loan(s) under the Income Contingent Repayment Plan.

OR
Make satisfactory repayment arrangements with the current loan holder(s).
If, before applying for consolidation, borrowers who want to completely clear the default notation from their credit records, they may want to consider another option: loan rehabilitation. Borrowers should contact their loan holders to obtain more information about this option.

Borrowers cannot consolidate defaulted loans under these conditions:

– If a judgment has been issued against a defaulted loan, it cannot be included in the consolidation unless the judgment order has been vacated (dismissed).

– If they are trying to consolidate defaulted Direct Consolidation Loans.

– If they are trying to consolidate defaulted FFEL Consolidation Loans unless they have made satisfactory repayment arrangements with their current loan holder OR the borrowers agree to repay under the Income Contingent Repayment Plan.

– If they are trying to consolidate defaulted Perkins or health professions loans unless they have made satisfactory repayment arrangements with their current loan holders.

Note: Borrowers with defaulted FFEL or Direct Loan Program loans may be liable for collection costs incurred to collect the loans. If the holder of the defaulted loan, which may be either the U.S. Department of Education or a guaranty agency, retains a collection agency to collect defaulted loans, charges imposed by the collection agency may be added to the amount borrowers owe. This means that the amount of the Direct Consolidation Loan may include collection costs of up to 18.5% of the principal and interest outstanding on the defaulted loan.

For defaulted Perkins Loans and health professions loans, collection costs may equal as much as the amount owed at the time the defaulted loan is paid off through consolidation.

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The Income Contingent Payment Plan looks at your income each year, the total amount of federal student loan debt, and the number of people you support in your household to determine your payment amount. You can get a rough calculation of what your payments migh be here:
http://www.ed.gov/offices/OSFAP/DirectLoan/RepayCalc/dlentry2.html

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As for the tax offset, I guess it would all depend on how long it took to get your loans consolidated, and how long before you began making payments. I would guess that the process would stop not long after you began making regular payments.

Nagesh answers:

Sounds like a scam to me. Just remember any loan needs to be repaid, with interest. I would not trust any loan company that sends out spam. If you need a loan, talk to your bank or credit union.

Nagesh answers:

Well i also accepted my Subsidized Direct Loan and its my first year in college too
this loan from what i understand doesnt charge you an intrest while your in school because the government pays the intrest
and they start charging you the intrest 6 months after you graduate OR 6 monthes after you drop out

hope this helps 🙂

Nagesh answers:

I WON’T fixed means it’ staying that way it’s staying at 5.0%, if concolidating gets you a rate below 5.0% than do i, but on my app it said my rate would be above 5%.