Federal Direct Loan Program – Definition

Cite this article as:"Federal Direct Loan Program – Definition," in The Business Professor, updated January 14, 2020, last accessed October 21, 2020, https://thebusinessprofessor.com/lesson/federal-direct-loan-program-definition/.


Federal Direct Loan Program Definition

The Federal Direct Loan Program is a loan structure created and funded by the Department of Education in the United States. This program offers low-interest loans to students and parents to enable them to sponsor the postsecondary education of their wards. The Federal Direct Loan Program is the only loan backed by the U.S government, it is otherwise called the William D. Ford Federal Direct Loan Program.

The Federal Direct Loan Program differs from loans offered by banks and other financial institutions, given that this loan is backed by the U.S government, they have low-interest rates.

A Little More on What is the Federal Direct Loan Program

The Federal Direct Loans are the only federal loans available to students in the United States, these government-sponsored loans enable students to fund their postsecondary education. This direct loan program offers varieties of loans such as direct consolidation loans, direct PLUS loans, subsidized direct loans, and unsubsidized direct loans.

Aside from federal loans, there are private lenders that offer student loans to fund their education after high school, loans offered by private lenders often have higher interest rates than the federal direct loans. There is a maximum of loans that students can take from the Federal Direct Loan Program every year, eligible students are also required to submit an application before they can be granted the loan.

References for “Federal Direct Loan Program”


https://www.investopedia.com › Personal Finance › Budgeting & Savings





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