The Department of Education offers Federal Direct Loans to pay for college through the William D. Ford Direct Loan Program. Federal Direct Loans are low-interest loans available to undergraduate, graduate and professional students as well as to parents of dependent undergraduate students.

There are three types of loans available. Direct Subsidized Loans are available for undergraduate students and have the lowest interest rate. Direct Unsubsidized Loans are available for both undergraduate and graduate students and have a slightly higher interest rate. PLUS loans are offered to parents of dependent students and to graduate or professional students. These loans have the highest interest rate of the three types.

Federal Direct Loans have other advantages besides the low-interest rates. The borrower only deals with one loan servicer, even if he has loans at different schools. The borrower has access to his loan information online through the servicer’s webpage. There are also many different repayment options available, and it is easy to switch between them as the needs of the borrower change. Borrowers can also have the option of consolidating their different Federal Direct Loans for more convenient repayment.

To apply for a loan, students need to complete the Free Application for Federal Student Aid, or FAFSA. PLUS loan borrowers also need to pass a credit check. If their credit history is negative, the loan will not be approved, unless the borrower can get an endorser with a positive credit history.

Loan limits vary based on whether the student is dependent or independent, the grade level and the type of loan. Once a loan is accepted, a Master Promissory Note, or a formal promise that the loan will be repaid with all the interest accrued, is signed by the student. Before the first disbursement of a Direct Loan, students will need to complete entrance counseling, either in person or online.