What is the difference between the William D. Ford direct loan & the Stafford loan?

    Published: 06-16-2009
    Views: 22,241
    Financial advisor Brad Barnett discusses what the difference between the William D. Ford direct loan and the Stafford loan is.

    Brad Barnett

    Brad received his Bachelor of Science degree from Southern Arkansas University, with a major in Psychology and a minor in Business.  He furthered his education by graduating from the Medical College of Virginia at Virginia Commonwealth University with a Master of Science degree in Rehabilitation Counseling, specializing in Mental Health.  He has been involved in the financial aid and/or rehabilitation professions for the past 15 years. Brad, a Past President of the Virginia Association of Student Financial Aid Administrators (VASFAA), currently serves as the Senior Associate Director of Financial Aid & Scholarships for James Madison University.  Immediately prior to JMU, he served as an Assistant Director of the Financial Aid Office at Virginia Commonwealth University.  Brad has presented numerous sessions at state, regional, and national conferences, and has served on a variety of association committees.  In addition to speaking at professional conferences, Brad has conducted an abundance of workshops and presentations in non-conference environments, including teaching a credit based financial literacy course at JMU entitled “Dollars and Sense.”  Many of the topics Brad’s speaks on include communication, leadership, values, financial aid policies and procedures, financial literacy, and saving for college.  He has also facilitated strategic planning and value development retreats.

    Host: What is the difference between the William D Ford Direct loan and the Stafford loan?

    Brad Barnett: You will hear the term Direct Students Loan and Stafford Loan used interchangeably. But the bottom line is they are both student loans. They carry the same interest rate, they carry the same annual loan limits and the same Federal Financial Aid Applications process. So, you are not going to get more money upfront from one than you are the other. The main difference is the funding source. With the Direct Loan program; the school gets your student loan money from the Federal Government.

    So, the government is your Bank, when you pay back your student loans, you are going to pay back to the government. With the Stafford Loan Program, the school gets your student loan money from an actual Lending Institution like a Bank or Credit Union and then when you into repayment, you pay back that institution for your loans. The school is going to determine whether it's a Direct Loan School or whether it's a Stafford Loan School. Unfortunately, you don t get to choose which one, the school would tell you, what type of school it is.