Direct Federal Student Loans Means More Choice

by ellen
(Tennessee)

Having only Direct federal student loans for government school loans will actually lead to more choices for students and parents. While banks were making easy profits acting as middlemen for the government, they were not trying to take any business away from them. Their own loans had terms that were much worse than the federal loans. Some of these lenders charged students as much as 14% for a loan.

Now, they will be forced to compete for student borrowers or else give up this type of customer, entirely. They will probably offer different benefits than the federal government does. Rate cuts for a number of on-time payments, the ability to drop a cosigner after a number of payments, a skip a payment feature, or more flexible repayment plans are some options they can use.

Students can only benefit by having more rules, rates and benefits available than there were before. When the FFELP loan program was the main loan program, the rules for borrowers were just about the same as the ones in the Direct federal student loan program. If private lenders can grab some business, maybe the government will then eliminate their federal loan limits (which is what forces many students to look for additional private loans in the first place).