Federal Direct Student Loans
Due to the recently enacted Health Care and Education Reconciliation Act of 2010, signed by President Obama on March 30, 2010, all Federal Stafford, PLUS and Graduate PLUS loans previously processed as Federal Family Education Loans (FFEL), through private lenders, must now be processed through the Federal Direct Student Loan Program effective no later than July 1, 2010. This means all Federal Stafford, PLUS and Graduate PLUS loans for the 2010 -2011 award year (beginning Fall 2010) will be processed through the Direct Student Loan Program.
Generally, the Federal Direct Student Loan Program provides the same Stafford, PLUS and Graduate PLUS Loans as the Federal Family Education Loan Program. Direct Loans have the same annual and aggregate borrowing limits as FFEL Loans and have the same interest rates (with the exception of the Direct PLUS Loan which has a slightly lower interest rate). The Federal Direct Loans have the same eligibility requirements (submit FAFSA, must be enrolled at least half-time, etc…). The main difference between the two programs is the source of funding. The Direct Student Loan Program provides loan funds directly from the U. S. Treasury.
NOTE: Students who are awarded a Federal Direct Stafford or Graduate PLUS or student’s parents who borrow a Direct PLUS Loan must sign a new Federal Direct Loan Master Promissory Note (MPN) before the loan proceeds can be disbursed.
Please review the Frequently Asked Questions page (link below) which will provide additional information and links to several Federal Direct Loan web sites.
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Frequently Asked Questions
Q. What are Direct Loans?
A. Direct Loans are low interest loans for students (Stafford and Graduate PLUS) and parents (PLUS) to help pay for higher education costs. Instead of a private lender (bank), the U. S. Department of Education is the lender.
Q. Do I have to complete a new Stafford Loan Master Promissory Note (MPN)?
A. Yes. You must complete a Direct Stafford Loan MPN because you have a new lender, the Federal Department of Education.
Q. Can I complete the Direct Stafford Loan MPN now, if I know I will apply for a Stafford Loan?
A. Yes. You can complete a Direct Stafford Loan MPN before you are awarded a Stafford Loan. The MPN process is on-line at https://studentloans.gov/myDirectLoan/index.action
Q. What will happen to the existing loans that I borrowed under my previous lender(s)?
A. Your previous loans will remain with the previous lender(s)/servicer(s) or, if your lender sold your loans, to the organization (in some cases the Department of Education) that purchased your loans. You may choose to consolidate your loans with a Direct Consolidation Loan, which will combine all your previous loans into one loan. With the Consolidation Loan, you will have only one payment for all of the loans combined within the consolidation loan.
Q. Where do I go if I want to consolidate my previous loans?
A. For more information about the Consolidation loan, your options, and how to apply, go to https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp
Q. If I have already completed the Stafford Loan entrance counseling, do I have to complete another counseling session?
A. No. If you have completed a Stafford Loan entrance counseling session while at MSU and you received Stafford Loan funds at MSU, then you do not have to complete a new entrance counseling session. Only borrowers who have not had a loan at MSU must complete a new entrance counseling session.
Q. What is the interest rate for the Direct Stafford Loan?
A. The interest rates for the Direct Stafford Loan will be the same rates as for the previous Stafford Loan rates. For more information, please go to http://www.direct.ed.gov/calc.html.
Q. What are the loan fees for the Direct Stafford Loan?
A. The Direct Stafford Loan has a loan fee with a rebate. For 2009-2010 the fee is 1.5% with a 1.0% rebate for a net fee of .5%. For 2010-2011 the fee is 1.0% with a .5% rebate for a net fee of .5% *If you do not make your first 12 monthly payments on-time, the rebate amount will be added to your principal.
Q. How does this affect the PLUS Loan process?
A. For the Fall/Spring 2010-2011 school year the parent PLUS applicant will have to borrow through the Direct PLUS Loan program. For Summer 2010, Federal PLUS(Parent) Loans will be awarded and processed as FFEL(Bank Based Loans) through May 31, 2010. Beginning June 1, 2010 Federal PLUS(Parent) Loans will be processed through Direct Loans. For the Direct Federal PLUS(Parent) Loan you must complete a new Direct Federal PLUS(Parent) Loan Master Promissory Note (MPN). We will have more information about the Direct PLUS process in the next few weeks.
Q. How does this affect the Graduate PLUS Loan process?
A. For the Fall/Spring 2010-2011 school year the Graduate student will have to borrow through the Direct Graduate PLUS Loan program. For Summer 2010, Federal Graduate PLUS Loans will be awarded and processed as FFEL(Bank Based Loans) through May 31, 2010. Beginning June 1, 2010 Graduate PLUS Loans will be processed through Direct Loans. For the Direct Graduate PLUS Loan you must complete a new Direct Graduate PLUS Loan Master Promissory Note (MPN). We will have more information about the Direct Graduate PLUS Loan process in the next few weeks.
Q. Where can I find more information about Direct Loans?
A. The U. S. Department of Education has a Direct Loan web site specifically for student and parents. It is found at https://studentloans.gov/myDirectLoan/index.action
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