Direct Loan Program Question and Answer

What are the differences between the Federal Direct Loan Program and the Federal Family Education Loan Program (FFEL) Western used to participate in?

The primary difference between the Direct Loan and FFEL programs is the source of funding. In the FFEL program, private lenders are subsidized through the federal government to provide educational loans to students. Instead of providing subsidies to participating lenders, the Direct Loan program provides educational loan funds directly to the students from the U.S. department of Education. The main differences students will notice are listed in the table below.

Federal Direct Loan Program	Federal Family Education Loan Program
Borrow directly from one lender (the U.S. Dept. of Education)	Borrow from multiple loan guarantors, lenders, and servicers
All loan funds received electronically from one source (the U.S. Dept. of Education)	Loan funds received electronically, or by paper check from many different sources
Students use one single contact for loan guarantees and servicing (the U.S. Dept. of Education)	Students have several different contacts for loan guarantees and servicing
Loans remain with the U.S. Department of Education	Loans often sold to other institutions

What are the benefits of borrowing through the Federal Direct Loan Program?

Simplified Process:

In the Direct Loan Program, there are three main players involved: (1) You (2) Western (3) U.S. Department of Education. In the FFEL Program there are many players involved, each with separate contact info: You, Western, your lender, a guaranty agency, a loan servicer, the secondary market, and the U.S. Department of Education.

Lower Origination Fees:

More money up front when you need the funds

Federal PLUS Loan Interest Rates:

7.9% in the Direct Loan Program, as compared to 8.5% in the FFEL Program

Consolidation:

Federal Direct Loan Program offers a loan consolidation option, while many FFEL lenders have discontinued doing loan consolidation
Secure source of funding in uncertain capital markets
Electronic Fund Transmission (from U.S. Dept. of Education to Western), no delays in disbursement of funds due to paper checks from lenders

I am a continuing student and have already borrowed federal loans at Western Technical College prior to the Summer 2010 Semester. How do I apply for a Federal Direct Loan?

You will need to complete a new Stafford Master Promissory Note, which takes about 15-20 minutes. Since you have received student loans through Western in the past, you do NOT have to complete Entrance Loan Counseling again.

What if I don't want to change lenders?

President Obama recently signed the Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872) into law, which requires all Federal Stafford, PLUS, and Consolidation loans to be processed through the William D. Ford Federal Direct Loan Program, beginning July 1, 2010. To best serve our student loan borrowers, Western requires anyone borrowing student loans starting with the Summer 2010 Semester, to do so through the Direct Loan Program. Although this switch is mandatory, it does ensure funding with the best available loan terms, and simplifies the student loan process for our students.

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. The Federal Direct Loan Consolidation website provides information about student loan consolidation options. Most private lenders have discontinued their loan consolidation program, but please feel free to contact your lender to verify their participation.