We are moving from the Federal Family Educational Loan Program (federal loans through private lenders) to the William D. Ford Federal Direct Loan Program for 2010-2011 (also known as Direct Lending). You may have questions or concerns about the changes and what this will mean for you as a borrower. We have compiled a list of questions and answers that hopefully you will find helpful.
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 FFEL 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.
No, if you borrowed a Federal Stafford loan for the 2009/2010 academic year, you will be required to borrow through the Direct Loan program. While this change will require you to complete a new Master Promissory Note (MPN) for the Federal Stafford Direct Loan, we feel confident that the new streamlined process will benefit all of MGCCC student borrowers.
Any previous loans you borrowed from another lender will be serviced by the lender/servicer you selected when you signed your original MPN. Many loans were sold to the Department of Education so pay close attention to any letters and mailings you receive regarding your previous loans.
After graduation you have a choice to make individual payments to your previous lender(s) and to the Department of Education for your Direct Loans, or you can consolidate your loans into one payment with the Department of Education. Please visit the Department of Education's website for more information about Loan Consolidation.
Yes, you must sign a new Direct Loan Master Promissory Note (MPN) because you will be borrowing from a new lender, the Department of Education.
If you plan to borrow a Direct Loan next year, you must begin with submitting the FAFSA. Once you have completed the FAFSA, you will be required to complete the Master Promissory Note online at studentloans.gov.
| Direct Loan Program | Interest | Fees* |
| Subsidized Federal Direct Loan | 4.5% | .5% |
| Unsubsidized Federal Direct Loan | 6.8% | .5% |
| FFEL Loan Program | Interest | Fees |
| Subsidized Stafford Loan | 4.5% | .5-1.5% |
| Unsubsidized Stafford Loan | 6.8% | .5-1.5% |
*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.
No, you will not be required to complete entrance counseling if you have previously completed it for a similar Federal loan under the FFEL program. Only new borrowers will be required to complete Entrance Counseling.
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.
With the exception of one, all repayment options offered to FFELP borrowers are also available for Direct Loan Borrowers. There are five repayment options available for Direct Loans:
The U. S. Department of Education Direct Loan Program Customer Service phone number is 800-848-0979.
