Federal Direct Loans (U.S. Department of Education William D. Ford Loan Program)
What does this mean to me?
Prior to Fall 2010, students at Texas A&M University-Kingsville with Federally guaranteed student loans were participating in the Federal Family Education Loan (FFELP) program. Beginning with the Fall 2010 terms, all student and parent borrowers will be required to participate in the Direct Loan program.
What are Direct Loans?
The William D. Ford Direct Loan program (known as Direct Loans) was authorized and created by the Higher Education Act of 1965. The program provides subsidized, unsubsidized, PLUS, GradPLUS and consolidation loans to borrowers for educational purposes. The lender for all of these loans is the U.S. Department of Education. The Direct Loan program will take the place of the FFEL program previously used at Texas A&M University-Kingsville
What is the difference between the Direct Loan and the FFEL program?
The fundamental difference between the two programs is the source of funding. Direct Loan funds are distributed directly from the U.S. Department of Education (the lender). FFEL loans are administered and disbursed by private banks and other types of lenders.
What are the Advantages of the Direct Loan Program?
- ACCESS TO FUNDS: The Federal Direct Loan program is funded directly by the Federal Government, eliminating the concern for access of funds from banks and other lending institutions.
- LOWER COST TO PARENT: The Federal Parent Loan for Undergraduate Students (PLUS) Loan is available through the Direct Loan program at a lower cost to parents. Parents of dependent students are able to access Federal PLUS at 7.9% interest with Direct Loans versus 8.5% in Federal Family Educational Loan Program (FFEL).
- ADDED REPAYMENT PLAN: There is an additional repayment plan option through the Federal Direct Loan program, specifically, the income contingent plan. The government forgives the balance of the loan if it is not repaid after the 25th year of being in repayment. In addition, the interest never exceeds 10% of the loan principle.
- PUBLIC SERVICE FORGIVENESS: For Texas A&M University-Kingsville graduates working in key public service professions such as teaching, government, social work, law enforcement, and non-profit 501(c)(3) organizations, Federal Direct Loans have a new Public Service Loan Forgiveness program that will forgive remaining debt after 10 years of eligible employment and qualifying loan payments.
- SMOOTHER DELIVERY OF LOAN FUNDS: The Federal Direct Loan program is fully integrated with the federal financial aid process, simplifying the administration and oversight of the loan funds. Texas A&M University-Kingsville has the technology and business processes in place to administer this program which is similar to the FFEL Program we had previously administered.
- ONE LENDER: Students will be able to track their Federal Direct loans with one lender and in one location.
- LOANS NEVER SOLD: Loans can and have been sold in the FFEL Program. Loans are never sold in the Federal Direct Loan program. Many FFEL loans have already been placed with the Department of Education due to lenders facilitating continuation in the FFEL program during the last two years as the economy took a decline.
- CONSOLIDATION CHOICE: All federal loans can be consolidated to the Federal Direct Loan program, or to the FFEL program. There is still a choice in repayment options for Texas A&M University-Kingsville students.
We believe this change in access of loan funds will have a positive impact on our ability to serve our students and parents.
Will I be allowed to borrow student and PLUS loans from the same lender as last year?
No. All subsidized and unsubsidized student loans, PLUS and GradPLUS loans for the Fall 2010 and beyond at Texas A&M University-Kingsville will be through the Direct Loan program.
What changes can I expect?
All continuing borrowers (those that have student loans through the FFEL program) will be required to complete a new Master Promissory Note with the Department of Education.
All continuing borrowers (those that have student loans through the FFEL program) will be required to complete an entrance interview with the Department of Education.
New student loan borrowers for Fall 2010 and beyond will likely not notice the change in programs. This program change does not affect any student or PLUS loan processed through the Fall 2010 semester
How will I know if I need to do something?
The Free Application for Federal Student Aid (FAFSA) is required for Direct subsidized, unsubsidized and GradPLUS loans. If you have completed the FAFSA, forthcoming email notifications and the Blue & Gold Connection will provide you with all of the information needed to process your loans.
Will my FFEL Stafford loans automatically be moved from my previous lender to the Department of Education?
No. Please refer to your lender for the administration of previous FFEL Stafford loans.
Are the interest rates the same for both FFEL and Direct Loans?
Direct PLUS loans have a lower interest rate (7.9%) compared to FFEL PLUS loans (8.5%). All other loans have the same interest rate regardless of the program.
Will private (alternative) student loans be through the Direct Loan program?
No. Private student loans (also known as alternative student loans) remain unchanged.
This page was last updated on: May 16, 2012