Direct Loans

Questions and Answers  

What are the differences between the Federal Direct Loan Program and the Federal Family Education Loan Program (FFELP)?

The Federal Direct Loan Program allows students to borrow directly from one provider of funds--the U.S. Department of Education.   All loan funds are received electronically from one source--the U.S. Department of Education.  There is one electronic application process at the U.S. Department of Education Web site.  The program offers students one single source of contact since these federal loans are made, guaranteed and serviced by the U.S. Department of Education.
 
The Federal Family Education Loan Program (FFELP) provides funding to students from private lenders.   Private lenders receive government subsidies for their voluntary participation in the federal loan program.  In FFELP there are multiple guarantors and servicers that are involved with the loan process.  
  
Do the fees and interest rates differ between the Federal Direct Loan Program and the Federal Family Education Loan Program (FFELP)?

Yes.  Here is a Chart that compares interest rates and fees for the various programs for the 2008-2009 academic year.  Federal Direct Loan fees are the same for all borrowers.  Fees for FFELP vary by lender and the guarantor used to process the funds.  The interest rates between FFELP and Federal Direct Loans are the same for Federal Subsidized and Unsubsidized Loans; however, these rates are different in the Federal Graduate PLUS Loan programs.  
 
2008-2009 Interest Rates and Fees           Direct Loans                   FFELP
                                                             Interest        Fees             Interest        Fees
Federal Subsidized Loan                          6.8%            .5%              6.8%          0-2%
Federal Unsubsidized Loan                      6.8%             .5%              6.8%          0-2%
Federal Graduate PLUS Loan                   7.9%           2.5%              8.5%          3-4%
 
What are the benefits of borrowing through the Federal Direct Loan Program?

• Secure source of funding during a time of instability in the capital markets.
• The interest rate for the Federal PLUS Loan is 7.9% in the Federal Direct Loan Program as compared to 8.5% in the FFELP which leads to significant savings over the life of your loans.
• Lower origination fees—more money up front when you need the funds.
• All funds are received electronically—no paper checks, no delays in disbursement of funds.
• Easy process—there are three players involved in the Federal Direct Loan Program.  You, UST and the Department of Education.   In the FFELP there are many players (you, UST, your lender, your guaranty agency, your loan servicer, your secondary market and the U.S. Department of Education). 
• Consolidation program exists in the Federal Direct Loan Program.   Many lenders in the FFELP have discontinued doing loan consolidation.

I'm a new student at UST and was awarded a Federal Direct Loan through the Financial Aid Office.  How do I apply for a Federal Direct Loan?

If you have already received your Notification of Award and responded by accepting all or a portion of the loans offered, the Financial Aid Office will mail you information regarding the loan completion steps.  As a new student at UST you will need to complete online loan entrance counseling and an electronic Master Promissory Note (eMPN) through Direct Loan Servicing.  

I'm a continuing student and have already borrowed federal loans at UST prior to the fall 2008 term. How do I apply for a Federal Direct Loan?

You will be required to complete an electronic Master Promissory Note (eMPN) which will take approximately 15-20 minutes of your time.   After you accept your federal student loans the Financial Aid Office will email you an online link to complete your eMPN.  You must complete a Direct Loan eMPN before any loan funds will credit your account.  Please note that the directions to complete the eMPN will be sent to your UST email account.

My Notification of Award included a Federal Direct Graduate PLUS Loan.  Is there a separate application process for this loan type?

You will need to complete the 2008-2009 Federal Direct Graduate PLUS Application/Credit Authorization.  This form gives our office your permission to initiate a credit check with the Direct Loan Servicer.  You will be notified by the U.S. Department of Education about your loan status (i.e. approved or denied). 

You will also need to complete a Federal Direct Graduate PLUS eMPN.   The online link to complete an eMPN will be mailed or emailed to you after your Federal Direct Graduate PLUS  Application/Credit Authorization is processed. 

What if I've already borrowed a Federal Direct Loan at another institution?

Good news... if you've already completed an eMPN at another institution you may not be required to complete a new promissory note.  The Financial Aid Office will notify you if we need an updated eMPN on file. 

What if I don't want to change lenders?

All students at UST will be required to borrow their federal funds through the Direct Loan Program for the 2008-2009 academic year.  The only way to receive federal loan funds is to borrow directly from the U.S. Department of Education.   This decision was made only after all options were carefully considered.  As an institution we believe it is important to ensure funding to all students, to simplify the federal loan application process and to make sure that students receive loans with the best available terms.
 
Can I combine my federal loans if I have multiple lenders?

Yes, you can consolidate all your federal loans through the Federal Direct Loan Consolidation program.  Most private lenders have discontinued their loan consolidation program but please feel free to contact your lender to verify their participation.