With the Direct Loan program who will I make repayment to?

Payments are made to the U.S. Department of Education. Students do not have to start repayment until six months after they graduate or fall below half-time status. However, you can make payments at any time towards your loan.

The U.S. Department of Education pays interest on subsidized loans while the borrower is in school and during grace and deferment periods on subsidized Direct Loans. The borrower is responsible for the interest that accrues on unsubsidized Direct Loans.

Subsidized Direct Loans disbursed to undergraduate students after July 1, 2010 carry a fixed interest rate of 4.5 percent. Unsubsidized Direct Loans disbursed to undergraduate students during the same time period have a 6.8 percent interest rate. Graduate students have a 6.8 percent fixed interest rate for subsidized and unsubsidized loans.  All Direct Plus Loans have a fixed interest rate of 7.9%.

You must begin repayment on a loan 6 months after you graduate, leave school or drop below half-time status.  During the grace period on a subsidized loan you will not have to pay any principal and you will not be charged interest. On an unsubsidized loan you don't have to pay any principal, but you will be charged interest. You can pay the interest or it will be capitalized (i.e., added to the principal loan balance) later.

What steps do I need to take in order to get a Direct Loan?

• All students must complete the FAFSA (this must also be completed for Parent PLUS Direct Loans),  Additional information may be requested, depending on the results of your FAFSA.

• All students must meet the general eligibility requirements:
  • Be enrolled at least Half-Time to receive Financial Aid.
  • Be enrolled in a Degree Program.
  • Be a Citizen or Non-Eligible Citizen.
  • May not exceed the Aggregate Loan Limit
  • Not in default or in an Overpayment Status for any Federal Aid Program
  • Meet the Satisfactory Academic Progress (SAP) Standards

• Instructions regarding and how to complete of Entrance Loan Counseling and the Direct Loan Master Promissory Note will be mailed. 

Why do I have to start over if I already have federal (FFELP) loans from prior years?

The Department of Education is the new lender; therefore, you must complete the required forms with them in order to receive your loan funds.

I have prior loans from a bank, what options do I have in repayment now that I will have FFELP Loans and Direct Loans?

Federal Student Direct loans can be consolidated along with outstanding student loan debt from FEELP (i.e., Stafford Loans). However, if you do not want to consolidate your FFELP and Direct Loans, you will have to make separate payments to the different loan servicers.

Is my eligibility for loans and the amounts I can receive in federal loans the same in Direct Lending as it was in FFELP?

Yes, the eligibility requirements and loan amounts are the same. The Department of Education acts as a lender, providing funds for Direct Loans and Parent or Grad PLUS loans in the same amounts as the Stafford and Parent or Grad PLUS loans offered through the Federal Family Education Loan Program. (In FFELP banks and other private lenders provide these loans.)

Can I still use my prior bank for Stafford Loans, Parent PLUS, or Grad PLUS Loans if I choose to do that?

No, you will not be able to choose a lender for receiving a new loan, as the Department of Education is the only lender in Direct Lending.

For repayment purposes you can consolidate with the bank you used for loans in prior years if you choose, and if the bank is offering consolidation.

How will my receipt of prior loans from banks/lenders affect my Direct Loan eligibility?

Changing from FFELP to Direct Lending will not affect your loan eligibility because Direct Loans are subject to many of the same regulations as FFELP loans. For instance, students must meet satisfactory academic progress and be within their aggregate loan limits to receive any kind of federal loans.

Please go to http://www.jchs.edu/page.php/prmID/804#2013 to view a chart designed to help you understand the differences in between the Direct Loan and FFEL Program.

Category	FFELP (i.e., Stafford Loan, Parent PLUS Loan, and Grad PLUS Loan)	Direct Lending (i.e., Direct Loan, Parent PLUS Direct Loan, and Grad PLUS Direct Loan)
Annual and Aggregate Loan Limits	The same annual and aggregate loan limits that apply to the Stafford Loan Program also apply to the Direct Loan Program
Eligibility Criteria	The criteria used to determine who is eligible for Stafford Loan and Direct Loan is identical.
Fees (interest Rate) for Subsidized and Unsubsidized Loans	The maximum interest rate a lender can charge is set by Congress, and is the same rate for FFELP and Direct Loans.
Fees (Up Front)	Students with FFELP Stafford Loans are generally charged a 1% Default Fee on the loan before disbursement.  In some cases, the fee may be higher.	Direct Loan borrowers are charged a net .5% (half of a percent) fee on the loan before disbursement.  This means the student receives more money from each loan disbursement.
Income Contingent Repayment (ICR)	FFELP does not have this program. It offers the Income Sensitive Repayment plan, which is not as flexible as ICR.	Having Direct Loans meets one of the criteria for this program.  ICR can make loans less expensive for qualifying borrowers who are struggling with repayment.
Loan Consolidation	Due to the legislation changes and economic issues, the majority of lenders are not offering loan consolidation any longer. Many companies specializing in loan consolidation have gone out of business.	Consolidation remains a viable option.  Students can consolidate their FFELP Loans with the Direct Loans when they enter repayment if they so choose.
Loan Repayment	Borrowers repay private lenders	Borrowers repay the federal government
Loan Sale	Many lenders are selling their loans to the government via the "PUT" Program to help with their liquidity issues.	Loans are with the federal government and never sold to other lenders, so this provides single servicing for the life of the loan.
Parent PLUS Loan Interest Rate	Parent PLUS Interest Rate is 8.5%	Parent PLUS interest Rate is 7.9%

For answers to the most commonly asked questions concerning Direct Loans, including the steps each borrower needs to take in order to apply for a Direct Loan, please go to http://www.jchs.edu/page.php/prmID/804#2012.