Federal Student Loan Process for 2010-11 Will Change from the Federal Family Education Loan (FFEL) Program to the Federal Direct Loan (DL) Program
Beginning with the 2010-11 academic year, The University of Akron will be participating in the Federal Direct Loan program. This move is mandated as a result of recent legislation passed by the federal government. In comparing the Direct Loan program with the Federal Family Educational Loan program the eligibility requirements, yearly loan amounts and borrowing limits are the same for both programs. The primary difference is the source of the funds (banks versus the federal government), and the fact that students and schools deal directly with the federal government, rather than multiple agencies, in applying for and disbursing student aid funds. The Federal Direct Loan program may better serve students for a variety of reasons.
Please note: All new and returning students will need to complete and sign (or resign) their Master Promissory Notes for the Federal Direct Loan program. Visit the www.dlenote.ed.gov to complete and sign your MPN. Remember . . . your student loans for 2010-11 cannot be disbursed without the new Master Promissory Note being completed.
How does this affect you?
- Access to Funds: The Direct Loan program is funded directly by the Federal Government, eliminating the concern for access of funds from banks and other lenders who may be exiting the FFELP program.
- Upfront Rebate: Loan fees in 2010-11 for both the subsidized and the unsubsidized Stafford loans have a 1.5% origination fee with an up-front rebate of 1.0%, resulting in a net origination fee of .5% for loans disbursed as of June 30, 2010. Effective July 1, 2010 the origination fee changes to 1.0 % with an upfront rebate of .5%.
The fee is deducted from the loan proceeds at the time of disbursement. The borrower is able to keep the rebate if, once he/she enters repayment, the first twelve monthly payments are made on time. If the borrower fails to meet the twelve on-time payments, the rebate fee is added to the principal of the outstanding loan balance.
- Added Repayment Plan: There is an additional repayment plan option through the Direct Loan program, specifically, the income contingent plan that bases your monthly payments each year on your adjusted gross income. The government forgives the balance of the loan if it is not repaid after the 25th year of being in repayment.
- Public Service Forgiveness: For UA graduates working in key public service professions such as teaching, government, social work, law enforcement, and non-profit 501(c)(3) organizations, Direct Loans have a new Public Service Loan Forgiveness program that will forgive remaining debt after 10 years of eligible employment and qualifying loan payments.
- Smoother Delivery of Loan Funds: The Direct Loan program is fully integrated with the federal financial aid process, simplifying the administration and oversight of the loan funds. UA has the technology and business process in place to administer this program that will be seamless and which is similar to other federal programs we administer.
- One Lender: Students will be able to track their Direct Loans with one lender and in one location.
- Loans Never Sold: Loans could be sold in FFEL program. Loans are never sold in the Direct Loan program.
- Direct Loan Consolidation: All federal loans can be consolidated to the Direct Loan Consolidation program. There is also a wide choice of repayment options.
The Office of Student Financial Aid is prepared for this change in our federal student loan process, and is looking forward to it having a positive impact on serving our students. Log on to www.directloans.ed.gov for additional information about the Federal Direct Loan Program.