Your Questions About Direct Loans

Nagesh answers:

You apply for Direct Loans (and all other forms of federal student aid, such a Pell grants) by completing the FAFSA–the Free Application for Federal Student Aid. You can find the application online at www.fafsa.gov.

Federal student loans are based on your dependency status (i.e. Dependent or independent) and your grade level. For example, a first year dependent student can borrow up to $5,500 and an independent can borrow up to $9.500. The only time income comes into it is in determining what portion of that total can be subsidized. A first year student with financial need can qualify for up to $3,500 in a subsidized loan, and the rest would be unsubsidized. The difference between the two is that the subsidized loan has no interest while you are in school, but the unsubsidized loan does.

Once you submit the FAFSA, it will be sent to the schools whose code you entered on the application. They will then determine what types of aid you qualify for and the amounts.

Nagesh answers:

Only your parents can borrow from the government’s PLUS loans program – PLUS stands for Parent’s Loan for Undergraduate Students.

If you were completing the MPN for this loan, then I would have to assume that this is your loan, and not your parents’ loan, therefore you filled out the right form, the MPN for the Stafford Loan.

If your parents had applied for a PLUS loan, they would have received instructions on signing a Promissory Note of their own.

By the way – as I’m sure you noticed while you were filling out and signing the MPN – that’s a legal agreement between you and the lender. They promise to lend you money – and you promise to repay it, according to the terms that are described in that Note.

It’s very important that you read and understand the agreement, because you have made a legal commitment to the lender, and it’s always a good idea to understand exactly what you are agreeing to. It’s a little long and little dull, but the good news is that that Stafford MPN is standard from lender to lender, so you’re agreeing to the same thing that every other Stafford borrower in the country is agreeing to.

As for the advice you got from the other respondent, that wasn’t very helpful was it? I guess he/she doesn’t realize that people ask questions here specifically in the hope that someone who DOES know a lot about financial aid will help them. There are several people who respond frequently here who know a LOT of the system, so keep asking questions, and we’ll keep trying to help.

Good luck to you!

Nagesh answers:

Every year is a different loan and a new application. Each time they would have to requalify with their credit. But be aware parent PLUS loans have a much more lenient borrowing policy than other student loans. Also, by the time you graduate (and if they take out a loan every year) your parent will have 4 loans and 4 separate loan payments.

Example : They borrowed 10,000 your first year of college, with payments of 120.00 a month they would start paying right away. So the total payments your parents make while you are a freshman are 120.00 a month

They borrow 15,000 second year for you and those payments are 170.00 a month. So now they are making TWO payments 170 and the 120 totaling 290 a month

They borrow 20,000 your third year of college and now have to make THREE payments on the three loans they have while you are a junior. The third payment is 220 a month… So 120+170+220= 510 dollars a month.

Your senior year they borrow another 20,000. So now they have FOUR loans total they are responsible for paying (because parent PLUS loans are never the responsibility of the student). Their total monthly payments for all four loans is $730.00 a month for about the next 6 years and it will be a bit less every year after that as they pay off the older loans.

Nagesh answers:

Direct loans is one company that does loans. There are many out there that help out students. I have direct loans and Great Lakes something(mygreatlakes.org).

Nagesh answers:

USDA loans are much like any other government loan program in the sense that they do have minimum requirements, but with USDA the eligibility is based upon income and location. Credit scores are not weighed as heavily as other loan programs but they will be looking to make sure you don’t have anything in collections and haven’t had any late payments in the past 12 months. You are allowed to have some things in collections, but they can’t amount to much. Your mortgage broker will be able to explain everything in greater detail and provide you with some direction on how to qualify sooner than later if you aren’t quite ready now. Good Luck!