Commonly asked questions about the federal direct lending program
Beginning in Fall 2009, Indiana State University will participate exclusively in the William D. Ford Federal Direct Loan Program. Students and parents will now get Stafford, Parent PLUS, and Graduate PLUS Loans directly through the U.S. Department of Education, rather than through lenders participating in the Federal Family Education Loan Program (FFELP).
The following FAQs provide answers to some commonly asked questions about ISU’s move to the Direct Loan Program:
Why is ISU moving to the Federal Direct Loan Program?
Volatility in the credit markets and reductions in lender subsidies have caused many lenders to stop offering borrower benefits or to discontinue participation in FFELP altogether.
Students should find that Federal Direct Loans offers a more streamlined process for obtaining loans. Federal Direct Loans are not sold so students and parents will make payments to the Department of Education through the life of their loans. The customer service process also is streamlined because there is a single point of contact for schools and students.
What is the difference between FFELP and the William D.
Ford Federal Direct Loan Program?
In the Federal Direct Loan Program, the U.S. Department of Education acts as a lender, providing funds for Stafford, Parent PLUS and Graduate PLUS Loans. With FFELP, students chose a bank or other financial institution.
Are there any differences in interest rate and fees
between the two programs?
Interest rates for Stafford Loans are identical for both programs.
The interest rate for Federal PLUS loans is 7.9% in the Federal Direct Loan program (compared to 8.5% in the FFELP program).
Fees in the Federal Direct Loan- Federal Stafford is 1.5% minus 1% rebate * vs. .5% to 1.5% (varies by lender) in the
FFELP program.
Fees in the Federal Direct Loan – Federal PLUS is 4% minus 1.5% rebate* vs. 3% to 4% (varies by lender) in the FFELP program.
*The upfront rebate reduces the fee you pay at origination. If you don’t make your first 12 monthly payments on-time, the rebate amount will be added to your principal balance.
Will I still be able to continue borrowing through the
same lender as last year?
NO. If you borrow a federal loan in 2009/2010, you will be required to borrow through the Federal Direct Loan program.
What happens to the loans I borrowed from a lender in
the FFELP program?
You have the choice of repaying your FFELP Loans according to the terms of repayment agreed to in your promissory note, or you can consolidate your FFELP Loans with your Federal Direct Loans after you leave school. For more information on Federal Direct Loan Consolidation, you may go to http://loanconsolidation.ed.gov/index.html
I’m a parent. I plan to borrow a PLUS loan for my student
in 2009/2010. I usually get pre-approved through my
lender.
What should I do this year?
You will need to complete the Federal Direct PLUS Loan Request Form. Once we receive that form, we will submit your information to the Department of Education for a credit check.
How do I apply for Federal Direct Loans?
Steps to apply for the Federal Direct Stafford Loan
- File the Free Application for Federal Student Aid (FAFSA) at http://www.fafsa.ed.gov.
- Complete the Federal Direct Stafford Loan Request Form and return form back to ISU
- All Stafford borrowers (new and returning) must complete an All borrowers (new and returning) must complete an Entrance Counseling Session. This process requires either the borrower’s Social Security Number or Federal Student Aid PIN.
- All borrowers (new and returning) must complete a Master Promissory Note (MPN). This process requires the Federal Student Aid PIN of the borrower. If you don’t have your federal PIN, go to http://www.pin.ed.gov to request a new or duplicate PIN.
Steps to apply for the Federal Direct PLUS Loan
- File the Free Application for Federal Student Aid (FAFSA) at http://www.fafsa.ed.gov.
- Complete the Federal Direct PLUS Loan Request Form and return form back to ISU.
- All borrowers (new and returning) must complete a Master Promissory Note (MPN). This process requires the Federal Student Aid PIN of the borrower. If you don’t have your federal PIN, go to http://www.pin.ed.gov to request a new or duplicate PIN.
Steps to apply for the Federal Direct Grad PLUS Loan
- File the Free Application for Federal Student Aid (FAFSA) at http://www.fafsa.ed.gov.
- Complete the Federal Direct Grad PLUS Loan Request Form and return form back to ISU.
- All borrowers (new and returning) must complete an Entrance Counseling Session. This process requires either the borrower’s Social Security Number or Federal Student Aid PIN.
- All borrowers (new and returning) must complete a Master Promissory Note (MPN). This process requires the Federal Student Aid PIN of the borrower. If you don’t have your federal PIN, go to http://www.pin.ed.gov to request a new or duplicate PIN.
How do I contact the Federal Direct Loan Program?
Direct Loan Program Customer Service phone number: 1-800-848-0979 or online at https://www.StudentLoans.gov.