Direct Loan - Frequently Asked Questions (FAQ)

financial aid

  1. What is the difference between the Direct Loan Program and the Federal Family Education Loan Program (FFELP)?
  2. Will I still be able to continue to borrow from the same lender as last year?
  3. If I borrowed a federal Stafford or PLUS last year, will I have to repay two different lenders now?
  4. Where can I find information about who services my other federal loans?
  5. Do I have to complete another Master Promissory Note (MPN)?
  6. How and when do I complete a Direct Loan MPN?
  7. What is the interest rate and fees charged in Direct Loans compared to FFELP?
  8. Will the Stafford loans I borrowed through my bank or lender in prior years still be deferred?
  9. How do I apply for a Parent PLUS loan?
  10. How do the Direct Loan repayment options differ from FFELP?
  11. Does Direct Loans offer an extended repayment plan?
  12. Does Direct Loans allow borrowers to defer payment? If yes, for what time period?
  13. How does Direct Loan Servicing capitalize interest?
  14. How do I contact Direct Loan Customer Service?

 


  1. What is the difference between the Direct Loan Program and the Federal Family Education Loan Program (FFELP)?
    The most important difference between Direct Lending and the FFELP program is the source of loan funding. Direct loans are funded through the U.S. Department of Education using funds obtained from the U.S. Treasury. This program offers students and parents one point of contact because the loans are made, backed and serviced by the U.S. Department of Education. In the FFELP program, funds come from banks and lenders creating multiple points of contact for students. There are also some differences in interest rate, fees and repayment options which make the Direct Loan Program more beneficial for borrowers.

  2. Will I still be able to continue to borrow from the same lender as last year?
    No. If you borrow a Federal Stafford or PLUS loan for the 2010-2011 academic year, you will be required to borrow through the Direct Loan program. This change will require you to complete a new Master Promissory Note (MPN).

  3. If I borrowed a federal Stafford or PLUS last year, will I have to repay two different lenders now?
    Yes. You will likely be repaying your federal loans to different servicers. One or more servicers will be associated with the federal FFELP loans you received at METRO TECHNOLOGY CENTERS prior to the 2010-2011 academic year and your Direct Loan will have a servicer as well. You will receive correspondence and payment information from both the Department of Education and your prior lender or servicer.

  4. Where can I find information about who services my other federal loans?   Information on your federal loan debt can be accessed via the National Student Loan Data System (NSLDS) at http://www.nslds.ed.gov. Note that any private (alternative) loans you have borrowed will not appear in the NSLDS.

  5. Do I have to complete another Master Promissory Note (MPN)?
    Yes. You must sign a new Direct Loan Master Promissory Note (MPN) because you will be borrowing from a new lender, the U.S. Department of Education. You will need to have your Federal Student Aid PIN number that was used to complete you FAFSA in order to electronically sign the MPN.

  6. How and when do I complete a Direct Loan MPN?
    Information on completing the MPN and entrance counseling is available here. If you plan to borrow a Stafford Loan during the 2010-2011 academic year, we encourage you to complete your MPN immediately following your acceptance of student loan offers that will appear on your 2010/2011 Award Letter. If you are going to borrow a PLUS loan, please wait until you have received your financial aid award letter to complete this process. The award letter will be necessary to help you determine the amount you need to request. The PLUS loan requires a credit approval and the approval is only valid for 90 days, therefore families should not apply until mid-June.

  7. What is the interest rate and fees charged in Direct Loans compared to FFELP?
    Interest rates and fees for 2010-2011 are:
    Direct Loan Program Interest Fees*
    Subsidized Federal Direct Loan 4.45% 1.066%
    Unsubsidized Federal Direct Loan 4.45% 1.066%
    Federal Direct PLUS Loan 7.0% 4.264%

    *Direct Loan Fee Rebate: The Subsidized and Unsubsidized Federal Direct Loans have a 1.0% origination fee and also offer a .5% rebate on the origination fee – resulting in a net fee of .5%, which will be deducted from the gross amount of the loan borrowed. Once you enter repayment, if you make your first 12 monthly payments on time, the rebate becomes permanent. If you fail to make 12 on-time monthly payments; however, a charge for the initial rebate will be added to the outstanding balance of the loan.

    The Federal Direct PLUS Loan has a 4% origination fee and also offers a 1.5% rebate on the origination fee – resulting in a net fee for 2.5%, which will be deducted from the gross amount of the loan borrowed. The 12 on-time payment rule also applies to the PLUS loan in order to keep the rebate.

  8. Will the Stafford loans I borrowed through my bank or lender in prior years still be deferred?
    As long as you are enrolled in school on at least a half-time basis, your prior year federal loans will continue to be deferred. Enrollment information is reported to lenders by the school on a regular basis.

  9. How do I apply for a Parent PLUS loan?
    Under the Federal Direct PLUS loan program parents may borrow up to the full cost of their student’s education minus other financial aid received. Credit checks are required, however; the Direct Lending Program uses a more lenient credit assessment when compared to most FFELP lenders.

    If you are planning to borrow a PLUS loan for 2010-11, please wait until you have received your financial aid offer to complete this process. The award letter will be necessary to help you determine the amount you need to request. Families should not apply for a PLUS Loan earlier than mid-June since the PLUS loan requires a credit approval which is only valid for 90 days.

  10. How do the Direct Loan repayment options differ from FFELP?
    All repayment options offered to FFELP borrowers are also available for Direct Loan Borrowers, with the exception of Income Contingent Repayment, which is only available in Direct Loans. There are five repayment options available for Direct Loans:
     
    • Standard
    • Extended
    • Graduated
    • Income Contingent Repayment
    • Income-Based Repayment
       

  11. Does Direct Loans offer an extended repayment plan?
    Yes. In addition, there are other repayment plans available to borrowers. Detailed information about repayment plans is available on the Direct Loan Servicing Online Web site.

  12. Does Direct Loans allow borrowers to defer payment? If yes, for what time period?
    Yes. The Direct Loan Program offers the same deferments that are available to borrowers in the Federal Family Education Loan Program (FFELP). The maximum period for which a borrower may receive a deferment is determined in accordance with the Direct Loan Program regulations, and depends on the deferment type. Information about deferments is available on the Direct Loan Servicing Online Web site.

  13. How does Direct Loan Servicing capitalize interest?

    Direct Loan Servicing capitalizes all unpaid interest:

    • Upon entering repayment
    • Upon expiration of a deferment period
    • Upon expiration of a forbearance period
    • Annually for any borrowers repaying under the Income Contingent Repayment (ICR) who have payments that do not cover monthly interest accrual.
       

  14. How do I contact Direct Loan Customer Service?
  • Applicant Services (PLUS borrowers): Open 8:00 AM to 8:00 PM ET, Monday through Friday. The phone number is 800-557-7394.
  • Direct Loan Servicing Center: Open 8:00 AM to 8:00 PM ET, Monday through Friday. The phone number is 800-848-0979.
  • The Direct Loan Servicing Online Web site, www.studentloans.gov, offers personalized online services from start (during counseling) to finish (repayment).