Direct Loan Information and FAQ
Trinity has participated in the Direct Loan Program since the 2009-10 academic year. Previously Trinity participated in the Federal Family Education Loan Program (FFELP) where students borrowed money from a lender, such as a bank. In the Direct Loan program, students will borrow directly from the Federal Government. Please read the FAQs that we’ve compiled. If you still have additional questions, please contact a counselor at (202) 884-9530 or firstname.lastname@example.org.
Q. What is the difference between Federal Subsidized and Unsubsidized Loans?
The federal government pays the interest on a subsidized loan while the student is in school at least half-time. After the student drops below half-time or leaves school, interest will begin to accrue. Students should contact their federal loan servicer for more information.
Interest does accrue on an unsubsidized loan while you are in school. You may choose to pay interest while in school in order to avoid “paying interest on interest” (capitalizing interest).
Q. What are the current interest rates for Federal Direct Loans?
A. Beginning July 1, 2013, the Stafford loan interest rate varies annually with a maximum rate of 8.25% for undergraduates and 9.5% for graduate students. The rate for 2014-15 undergraduate Stafford loans is 4.66%. The rate for 2014-15 graduate Stafford loans is 6.21%. The rate for Direct Plus Loans (Parent and Graduate) is 7.21%.
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 Stafford loan application is a three-step process. If you do not complete all three steps, your loan will not be processed.
- Accept the loan in Self Service via the “My Financial Aid” portal.
- Complete the Stafford Loan Entrance Counseling process at the StudentLoans.gov website.
- Sign your Stafford Loan Master Promissory Note (MPN) at the StudentLoans.gov website. The Stafford MPN is good for ten years provided at least one Stafford Loan is disbursed to you within the first 12 months after signing.
Q. What are the benefits in the Direct Loan Program?
A. There are several benefits in the Direct Loan Program: 1. A guaranteed source of funding for student loans. 2. 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. 3. 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.) 4. Most lenders offer benefits during repayment after a student makes payments for two to four years. Very few students end up receiving those benefits. In the Direct Loan Program, students earn benefits after only one year.
Q. What happens if some of my federal student loans are from a bank-based lender and now part of my loans will be through the Department of Education?
A. 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. In order to make repayment to one source once repayment starts, many students take out a consolidation loan which combines both types of loans into a single loan.
Q. How does the 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. 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 1-800-699-2908 or visit them online at www.myfedloan.org.