A Better Deal for Taxpayers and Students Direct Lending is an example of using market competition instead of statutory subsidies. Direct Lending saves the federal government billions of dollars. Direct loans have a lower subsidy cost than loans made through government guarantees. In addition, a significant portion of the federal costs of the program is offset by the repa yment stream from borrowers.
Direct lending is a more accountable student loan system.
Since its creation, the program has streamlined the multiple layers of federal, state, and non-profit bureaucracies that used to be fully funded with federal dollars. Because of its integrated design, the program is more fiscally accountable, less prone to error and easier to manage than the antiquated government-guaranteed student loan system. Direct Lending works for students. Not only is applying for a direct loan simpler and less bureaucratic, the program s improved servicing and collection features ensure that borrowers repay their loans. Direct lending s flexible repayment pla ns reduce loan defaults.