Direct Loan Information and FAQ

Stephens College is changing the way we process Federal Student Loans starting with the 2010-2011 academic year. We will no longer award Federal loans through the Federal Family Education Loan Program (FFELP). We put together this brief Q & A to provide you with a better understanding of the new loan process. If you still have additional questions, please contact the Financial Aid Office at finaid@stephens.edu.

FAQs

Q. Why the change?
A. Economic issues, including the recent subprime lending crisis, coupled with regulatory changes to the student loan industry have all contributed to our decision to exit the Federal Family Educational Loan Program. After careful consideration and review of these issues and changes, the College concluded that a change to the Direct Loan program would be more beneficial to students.

Q. What are the primary differences between Direct Loans and the Federal Family Education Loan Program (FFELP)?
A. The primary difference is the source of the loan funding. Direct Loans come straight from the U. S. Department of Education using funds obtained from the U.S. Treasury. This program offers students one single source of contact since these federal loans are made, guaranteed and serviced by the U.S. Department of Education. In the FFEL Program the lender, guarantor and servicer can involve any combination of banks and agencies across the country. It is often the case that the student’s lender will sell their loan to another lender or loan servicer. This can add complexity for students, especially in the event an error or problem in the processing of their loans should occur. Under Direct Loans, there is a single point of contact for students and their school to turn to with any problems that might arise.

Q. How do I apply for the Direct Loan?

A. The process is similar to what students have used in the past. Students complete the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov.    Stephens College will review the application and notify a student of eligibility for the loan and the maximum amount they can receive.  To accept the loan, you would complete a Student Loan Data Sheet and sign a Direct Loan Master Promissory Note (MPN).  This time, the U.S. Department of Education will be the lender. Students only need to sign once; as a student requests loans for subsequent years, the loans will be added to their MPN. Students may complete all required loan forms online at www.stephens.edu/loansteps. 
 
Q. What are the benefits in the Direct Loan Program?

A. There are several benefits in the Direct Loan Program:

• A guaranteed source of funding for student loans. 
• A simple application process.
• Quick receipt of funds.
• Excellent customer service.
• The option of an income-contingent repayment plan or an income-based repayment plan when a student enters repayment. This means a student has the option of ensuring that the loan repayment amount will always be affordable based on what the borrower’s income will allow.
• Students in the Direct Loan Program who enter into public service jobs can have any remaining balance on the loans forgiven after 10 years of repayment while in public service work. (While this option does not exist in the FFEL Program, students who borrowed in that program can consolidate their loans into the Direct Loan Program in order to take advantage of this forgiveness.)

Q.  Will the loan limits remain the same? 
A.  Yes, the loan limits in the Direct Loan program are the same as in the FFEL program. The annual maximum in subsidized Stafford loans is $8500.00. The combined maximum of both subsidized and unsubsidized Stafford loans is $20,500.00 annually. The Stafford lifetime aggregates remain $65,500.00 (subsidized) and $138,500.00 (combined subsidized and unsubsidized).
Federal Direct GradPLUS Loans may be used as supplemental funding when Stafford Loan maximums are reached. As always, the total amount you may borrow in student loans for any academic year is limited to your annual Cost of Attendance minus all other sources of funding.

Q.  Will I still be able to borrow from the same lender as last year?
A.  Due to current legislative processes, we do not know at this time if the FFEL program will be available for the 2010 – 2011 academic year.  Please contact the Financial Aid Office if you would like to remain with your FFEL lender.  If we are able to process your loan with your lender, you can borrow with the same lender as last year. Otherwise, you will be required to borrow through the Direct Loan program.

Q.  If I borrowed Federal Stafford and/or GradPLUS loans in prior years and I borrow loans for 2010-2011, will I have to repay two different lenders?
A. You may be repaying your federal loans to multiple servicers. You will receive correspondence and payment information from both the Department of Education and your prior lender(s) and/or servicer(s). The combination of FFELP and Direct Loan funding is not unusual. Since the choice to participate in either FFELP or Direct Loan Program is a decision that each school must make, it already happens that a student could have loans in both programs. This is the case for students who begin their education at a school that uses the Direct Loan Program and then transfers to a school using the FFEL Program; that student would have loans with each program. Many of our transfer and graduate students already have this combination.
If you prefer a single payment, when you begin repayment you can consolidate your old FFEL loans with your new Direct loans with the U.S. Department of Education. For more information regarding Direct Loan Consolidation, please visit the U.S. Department of Education's website at http://loanconsolidation.ed.gov.

Q. How does the loan consolidation process work?

A. Once a student graduates or chooses to no longer attend school on a half-time basis, the student can contact the Direct Loan Program for an application for a Direct Consolidation Loan, which will combine the FFELP and Direct Loans into a single loan. When it comes time to begin repaying the loans, the borrower will be provided with several options concerning consolidation and will be able to choose which one has the greatest advantage. Students can move all their loans to Direct Loans or they can move all loans to FFELP. The choice will be up to the student.

Q.  How can I find out who services my federal loans?
A.  Information regarding 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 (non-federally-funded loans) you have borrowed will not appear in the NSLDS.

Q.  Will my current Master Promissory Note (MPN) remain in effect or will I have to complete a new MPN?
A.  If you choose to borrow your Federal Direct Stafford and/or Federal Direct GradPLUS loans for the 2010-2011 academic year, you must complete new Direct Loan Master Promissory Notes because you will be borrowing from a new lender, the U.S. Department of Education. 

Q.  How and when do I complete a Direct Loan Master Promissory Note (MPN)?
A.  You may complete a Direct Loan MPN at www.stephens.edu/loansteps.  You must complete all loan paperwork before July 15th in order to ensure that funds are available for your use on the first day of classes.

Q. How will I know when funds will be disbursed?

A.  You will receive notification from Stephens College that funds have been disbursed to your student account. Disbursements occur no earlier than ten (10) days prior to the start of a term.  To ensure loan funds are available for your use on the first day of classes, be sure to complete all loan paperwork prior to July 15th.

Q. Who do I contact if I have questions about repaying my Direct Loan?
A.  There is one contact for everything relating to your Direct Loan.  This is the Direct Loan Servicing Center.  You can call them at 1-800-848-0979 or visit them online at www.dl.ed.gov.

Q. If my parents borrow a PLUS loan, will they have to borrow it through the Direct Loan program?
A. Due to current legislative processes, we do not know at this time if the FFEL program will be available for the 2010 – 2011 academic year.  Please contact the Financial Aid Office if your parents would like to remain with their FFEL lender.  If we are able to process the PLUS loan with your parents’ lender, they can borrow with the same lender as last year. Otherwise, they will be required to borrow through the Direct Loan program.

Q.  What is the Direct PLUS Loan program?
A.  The federally sponsored PLUS loan is a low-interest student loan for the parents of dependent undergraduate students, who are attending at least half-time. The interest rate is a fixed 7.9%. There is a 2.5% origination fee (which is net of a 1.5% up-front rebate that assumes 12 on-time monthly payments) deducted from the proceeds of the loan. Loan funds are disbursed directly to Stephens College in equal amounts over each term of enrollment for the academic year. The maximum amount that can be borrowed is the cost of education less any other forms of financial aid. PLUS loans must be processed according to federal regulations, which stipulate that a loan cannot be processed after the end of the loan period.

Q.  Who can borrow a Parent PLUS loan?

A.  The borrower can be the biological or adoptive parent or, in some cases, the stepparent, and must be a U.S. citizen or permanent resident.

Q. What are the repayment terms for a Direct Parent PLUS loan?
A.  Repayment begins 60 days after the loan is fully disbursed, and extends up to 10 years. However due to a recent bill passed by congress Parents can choose to defer payments on a Plus loan until 6 months after the date the student ceases to be enrolled at least half time. Accruing interest can either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly. To apply for the PLUS loan, go to www.stephens.edu/plussteps.  The borrower must complete the credit check process and sign a Direct PLUS Loan Master Promissory Note.

If a parent is denied a Federal PLUS loan due to credit reasons, the parent may appeal the denial with the Direct Loan Servicing Center or reapply with a credit-worthy co-borrower. The Direct Loan Servicing Center can be reached at (800)-848-0979.

Deferment for PLUS loans is NOT automatic!  The borrower must contact Borrower Services at (800)-848-0979 (when prompted, you will need to enter your social security number).

Q. Can I borrow a private educational loan?

A.  Yes! Private (supplemental) loans, exclusive of the Federal Stafford and PLUS, are available from lending institutions for students and families to borrow for expenses not covered by your financial aid offer, up to the cost of education for the academic year. Rates are competitive and we recommend you research the options available. Most students need a credit-worthy cosigner.  Federal loans should be applied first.

 

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