Direct Loans are loans from the federal government for students and their parents to help pay for the cost of higher education. They are low-interest to help people afford to go to college or other accredited institution. The money is borrowed from the United States Department of Education, though the borrower may deal with a private business rather than the Department of Education.

With Direct Loans, even if the student changes schools, there is one contact for loan information. Each company that provides Direct Loan service has a convenient website to check on the status of the loan and repayment information. Direct Loans offer a variety of different repayment plans, so borrowers can find a plan that fits their needs. The repayment plan can be changed if circumstances change for the borrower.

The direct unsubsidized loan is undoubtedly one of the most attractive loan packages that one can receive – it allows a borrower to obtain funds without putting up large assets as collateral, requiring a cosigner, and the interest rate on such a loan is usually much lower because of the direct nature of the transaction.

However, many first time borrowers, whether for personal or business purposes, find it hard to obtain direct unsubsidized loans, as banks tend to give them to only the most creditworthy borrowers. Which begs the question, how can one become creditworthy if one can not get a loan in the first place?

Below are some steps to getting direct unsubsidized loans, especially for those who are first time borrowers.

1. Connect with a business loan association.

Business loan associations are companies that consolidate many loans into large packages to offer more attractive loans to banks. They also sometimes sweeten the pot by taking on some of the risk. As banks do not want to deal with smaller loans from uncredited borrowers as a rule, joining your loan to others under the umbrella of a larger company that a bank is comfortable dealing with is a great way to start your business credit line.

2. Consider prepaid credit cards.

The prepaid credit card acts as a credit card but does not allow you to spend any more than the funds that are put on the card. Therefore, you can build a credit history with little to no risk to yourself, at the risk of not having actual credit. However, after building credit in this way, banks are much more likely to extend lines of credit.

3. Go private.

Loans from private investors are often a great alternative to public banking; just make sure that you have a business plan and a great idea.

Standard Repayment Plan

On the standard repayment plan, the borrower will pay a set amount each month. Payments are at least $50 per month, and the borrower will have up to 10 years to pay off the loan. This is a good option for borrowers who can afford a higher monthly payment.

Extended Repayment

The borrower must have more than $30,000 debt from Direct Loans for the extended repayment plan. There also must not be an outstanding balance after October 7, 1998. This payment plan gives the borrower 25 years to repay the loan. Payments are either fixed or graduated.

Graduated Repayment

Payment start low and increase every 24 months. Repayment will take up to ten years. This is good for those who expect to start working with a low income, but gradually increase income over time.

Income Contingent Repayment

This plan bases the monthly payment off of your adjusted gross income, family size and the amount of the loan. If loans are not paid off in 25 years, the monies unpaid will be discharged.