Direct Loan FAQ 2010-2011

• We are moving from the Federal Family Educational Loan Program (Federal loans through private lenders) to the Federal Direct Loan Program for 2010-2011.
• 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.


Why is Concordia College changing to the Direct Loan Program?
What is the difference between the Direct Loan Program and the Federal Family Education Loan (FFELP) Program?
Will I still be able to continue borrowing through the same lender as last year?
What will happen to the existing loans that I have borrowed from other lenders?
Do I have to complete another Master Promissory Note?
How and when do I complete a Direct Loan Master Promissory Note?
What is the interest rate and fees charged in Direct Loans compared to FFELP?
I have previously completed entrance counseling under the FFELP Program, do I have to complete Direct Loan entrance counseling?
Will the Stafford Loans I borrowed through my bank or lender in prior years still be deferred now that the Concordia College is participating in the Direct Loan Program?
What steps should I take to obtain a Parent PLUS loan?
How do the Direct Loan repayment options differ from FFELP?
How do I contact the Direct Loan Program?



Why is the Concordia College changing to the Direct Loan Program?
• Federal Direct Lending provides a stable source of student loan funding because the funds are provided by the U.S. Treasury.
• The Direct Lending Program is not impacted by changes in the economy.
• Direct Lending provides a single point of contact for managing student loans.
• Loans are never sold in the Direct Loan Program. Loans through the FFELP Program can be sold multiple times which can be confusing for the borrower upon repayment.
• Direct Lending offers a more lenient credit assessment for Grad PLUS and Parent PLUS loan programs.



What is the difference between the Direct Loan Program and the Federal Family Education Loan Program (FFELP)?
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.


Will I still be able to continue borrowing through the same lender as last year?
No, if you borrow a Federal Stafford, Federal Parent PLUS for the 2010-2011 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) through the Direct Loan program for the Federal Stafford and Federal PLUS loan, we feel confident that the new streamlined process will benefit all Concordia College student and parent borrowers.


What will happen to the existing loans that I have borrowed from other lenders?
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. If you have questions on where your loans are being serviced, you can view your federal loan history here. You will need your Federal PIN number (the same number used to sign your FAFSA) to login to this site.

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 through the Federal Direct Loan Consolidation Program. Please visit the Department of Education's Web site for more information about Loan Consolidation.


Do I have to complete another Master Promissory Note?
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. You will need your Federal PIN number (the same number used to sign your FAFSA) to electronically sign the MPN.


How and when do I complete a Direct Loan Master Promissory Note?
If you plan to borrow a Stafford Loan next year, you must begin with submitting the FAFSA. Once you have been awarded for 2010-2011 you will receive an award notice from Concordia that will indicate the loan amount(s) that you are eligible for. This award notice will include a loan brochure. Please follow the instructions in the loan brochure to accept or decline any loans that were offered to you and complete the application process for a new Federal Direct Loan Master Promissory Note and Entrance Counseling. You will use your Federal PIN number (the same number used to sign your FAFSA) to electronically sign the MPN. PLUS loans require that a parent complete a Federal Direct PLUS Loan Request form that is returned to Concordia and a Federal Direct Loan Master Promissory Note. Application instructions will be in the same loan brochure that will be sent with students 2010-2011 award notice.


What is the interest rate and fees charged in Direct Loans compared to FFELP?

Direct Loan Program Interest rate Fees*
Subsidized Federal Direct Loan (undergraduates students) 4.5% (2010-11) 0.5%
Subsidized Federal Direct Loan (graduate students) 6.8% 0.5%
Unsubsidized Federal Direct Loan 6.8% 0.5%
Federal Direct PLUS or Graduate PLUS Loan 7.9% 2.5%
     
FFEL Loan Program (lender based federal loans) Interest rate Fees
Subsidized Federal Direct Loan (undergraduates students) 4.5% (2010-11) 0.5%-1.5%
Subsidized Federal Direct Loan (graduate students) 6.8% 0.5%-1.5%
Unsubsidized Federal Direct Loan 6.8% 0.5%-1.5%
Federal Direct PLUS or Graduate PLUS Loan 8.5% 3.0 - 4.0%


*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.

The Federal Direct PLUS Loan has a 4% origination fee and also offers a 1.5% rebate on the origination fee – resulting in a net fee of 2.5%, which will be deducted from the gross amount of the loan borrowed. The 12 on-time payment rule also applies to the PLUS loan in order to keep the rebate.


I have previously completed entrance counseling under the FFELP Program, do I have to complete Direct Loan entrance counseling?
Yes, all students will be required to complete Direct Loan entrance counseling for Concordia College. This will better help students understand the terms of the loan. There is not an entrance counseling session for Direct PLUS loans.


Will the Stafford Loans I borrowed through my bank or lender in prior years still be deferred now that the Concordia College is participating in the Direct Loan Program?
As long as you are enrolled in school on at least a half-time basis (6 credits or greater), your prior year federal loans will continue to be deferred. Enrollment information is reported to lenders by the Registrar’s Office on a regular basis.


What steps should I take to obtain a Parent PLUS loan?
Under the Federal Direct PLUS loan program parents may borrow up to the full cost of attendance for their student minus other financial aid their student has received. Credit checks are required.

You cannot apply through any lender other than the Department of Education. Applying through multiple lenders will cause unnecessary hits on your credit report and delay processing of your loan. Parents will need to complete a Federal Direct PLUS Loan Request and return to Concordia. Parents will also need to complete a Direct PLUS Loan Master Promissory Note with the Department of Education. After you have completed the application for a PLUS loan, Concordia College will submit your information to the Department of Education for a credit check so there is no need to be preapproved through another lender. Parents must wait until their student has received their 2010-2011 award notice before applying for a Federal Direct PLUS loan.


How do the Direct Loan repayment options differ from FFELP?
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:

1. Standard
2. Extended
3. Graduated
4. Income Contingent Repayment
5. Income-based Repayment



How do I contact the Direct Loan Program?
The U. S. Department of Education Direct Loan Program Customer Service phone number is 800-848- 0979.


Direct Loan Program Websites:
Additional General Direct Student Loan Information
Additional General Direct PLUS Loan Information

Information For:

current students
faculty and staff		 parents
alumni		 high school students
admitted students