New Loan Program for 2010-11
Apr 15, 2010 by Joel Laos | 0 Comments
The Denver Seminary Financial Aid Office is pleased to announce its transition to the Federal Direct Loan Program (DL) from the Federal Family Education Loan Program (FFEL) effective the beginning of the 2010-11 academic year. The FFEL program was terminated as a part of the Health Care and Education Reconciliation Act of 2010 (HCERA) that was recently signed by President Obama, requiring every institution to transition to Direct Loans for the upcoming academic year.
Students who apply for financial aid are reviewed for all types of aid for which they may be eligible. One of the largest federal aid programs is comprised of loans such as the Federal Stafford, Unsubsidized Stafford, PLUS, and Graduate PLUS loans. These loans were previously processed under a program called FFEL, which required a student to select a private lender; the lender funded the federal loan for the student.
Beginning July 1, 2010, the lender for these federal loan programs will no longer be a private lending institution, but instead the funds will come from the U.S. Federal Government as supported by the U.S. Treasury. Thus, at its most basic, the FFEL and DL programs are the same, but the source of funding differs.
Yes, and the differences will benefit the student participating in the DL program. These differences include:
- Lower PLUS Interest. The interest rate for the PLUS loan is lower in DL than for borrowers in FFELP (those rates are currently 7.90% in DL and 8.50% in FFELP).
- Lower Fees. FFELP loans carry associated fees, and DL fees are generally more favorable than FFELP, because of the way they are calculated. For 2010-2011 the origination fee for the Stafford DL is 0.50% (the FFELP Stafford fee ranges from 0.50% to 1.50%), and the PLUS DL origination fee is 2.50% (the FFELP PLUS fee is 3% to 4%).
- More Repayment Options. The repayment options for students with DL loans are similar to those who have FFELP loans. However, under the DL program there are two new options - the Income Contingent Repayment plan (the amount that you put towards your debt is tied into your income, allowing greater repayment flexibility) and Public Service Loan Forgiveness.
- Easy Servicing. Direct loans are easier to track, because your loans will not be sold from lender to lender, but will reside with the Federal government. This will make an otherwise complex process easier, because tracking the loans and repayment terms will be consistent.
- Easy Organizing. Further, even if you had FFELP loans in the past, you can consolidate your loans if you choose, and then repay to one source. Review Direct Consolidation Loans to determine if this is the best option for you before consolidating.
When you receive your Award Letter for the 2010-11 academic year you will be provided with specific instructions. There will be requirements for you to follow which include:
Confirming that you wish to accept the loan(s) offered. Students do this by going online to Fast Awards (provided by Great Lakes) to confirm their loan offer(s) and indicating the amounts they wish to borrow (not exceeding the amount on the award letter).
Submitting an online Master Promissory Note (even if you did one in the past under FFELP or under DL at another school).
Completing an interactive entrance counseling session online, as required by the U.S. Department of Education, which informs applicants how to manage their educational expenses and how to be responsible borrowers.
No. It is possible you already have a Direct Loan through another institution, but this is the first time Denver Seminary is utilizing the Direct Loan program.
I know I will receive more specific instructions about Direct Lending and the requirements when I receive my 2010-11 Award Letter, but is there anything I can do now to help me with the transition?
If you have not yet filed your Free Application for Federal Aid (FAFSA) for 2010-11 you should do so as soon as possible.
If you are considering attending in the summer of 2010, you will need to complete the 2009-10 FAFSA and will be accepting a loan through the FFEL program.
Otherwise, it's best to wait until you have specific instructions from the Office of Financial Aid informing you how and when to secure your Direct Loans.
You can contact the Financial Aid Office at Denver Seminary by email () or phone (303-762-6903; 800-922-3040 x1226).