Direct loans are subsidized and unsubsidized monetary learning advances that are funded by the U.S. Department of Education through various schools. The are managed by a loan service person who is supervised by the department. Direct loans repayment is not generally due until six months after the student graduates, withdraws from school, or drops below half time. Repayment is generally initiated six months after the date of such event. A student who re-enters school during the six month grace period may be eligible for an in-school deferral.

There are several direct loans repayment plans that are available for the student to choose from. The standard repayment plan lasts approximately ten years and will involve a payment of at least $50 per month. They are excellent for students who are financially stable enough to handle higher payments. The extended repayment can be applied for if the student has a lower income and needs more time to repay the debts. The standard repayment plan lasts twenty five years.

The graduated plan gives flexibility to the borrower. It starts out with a lower monthly payment and increases over time. This is best used by the person who expects his or her income to increase gradually. It will allow time for beneficial financial changes to occur.

For students who are having severe financial difficulty, there are two very flexible direct loans repayment options to choose from. These are the income contingent option and the income-based repayment. The income based repayment option is based solely on the debtor’s monthly income. If the student has very low income, the payments will follow suit by being very low. The income contingent plan is based on the adjusted gross income each year. Under this plan payments could be reduced to twenty percent of the borrower’s total monthly income.