Direct Loans: Definition, Types, vs. Private Loans

What Are Direct Loans?

By Matthew DiLallo – Updated Dec 11, 2024 at 1:35 PM

Key Points

Direct Loans are federal loans with lower interest rates compared to private loans.
Four types of Direct Loans available, including subsidized, unsubsidized, PLUS, and consolidated.
Direct Loans offer benefits like repayment flexibility and consolidation options.

Direct Loans are federal student loans made directly by the U.S. Department of Education to students or parents. The loans help families cover the cost of higher education. They typically carry lower interest rates than private-sector loans and provide borrowers with additional protections.

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banking loan signing contract finance two hands — Image source: Getty Images.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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