Frequently Asked Questions about Penn College's Transition to the Federal Direct Loan Program

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

The most important difference between the Direct Loan and FFEL programs is the source of loan funding. Direct loans are funded through the U.S. Department of Education using funds obtained from the U.S. Treasury. This program offers students one point of contact because the loans are made, backed, and serviced by the U.S. Department of Education. With the FFELP, funds come from banks and other lending institutions, which creates multiple points of contact for borrowers. There are also differences in interest rates, fees, and repayment options, which make the Direct Loan Program more beneficial for borrowers.

Do I have to complete another Master Promissory Note?

Yes. You must sign a new Direct Loan Master Promissory Note (MPN) because you will be borrowing from a new lender, the U.S. Department of Education. You will need to have your Federal PIN that was used to complete your FAFSA in order to electronically sign this MPN.

How and when do I complete a Direct Loan Master Promissory Note (MPN)?

Please refer to our Loans page for information on how and when to complete your MPN.

Will the annual loan limits remain the same?      

Yes, the annual loan limits in the Direct Loan program are the same as with FFEL. Please refer to the chart on our Loans page that illustrates the regulated amounts.

How do the interest rates and fees charged in Direct Loan compare to FFEL?

The chart below compares 2010-11 interest rates and fees for both programs.

Federal Direct Loan Program Interest Fees*
Subsidized Federal Direct Stafford Loan 4.5% 0.5%
Unsubsidized Federal Direct Stafford Loan 6.8% 0.5%
Federal Direct PLUS Loan 7.9% 2.5%
Federal Family Education Loan (FFEL) Program Interest Fees*
Subsidized Federal Stafford Loan 4.5% 0.5 to 1.5%
Unsubsidized Federal Stafford Loan 6.8% 0.5 to 1.5%
Federal PLUS Loan 8.5% 3.0 to 4.0%

* Direct Loan Fee Rebate: Both subsidized and unsubsidized Federal Direct Stafford Loans have a 1.0% origination fee. However, because of a 0.5% rebate, the net origination fee deducted from each loan disbursement is reduced to 0.5%. To retain this rebate, your first 12 monthly payments (once you begin repayment) must be made on time. Otherwise, a charge for the initial rebate will be added to your outstanding loan principal. Fees for the FFEL Program vary from lender to lender.

The Federal Direct PLUS Loan has a 4% origination fee and also offers a 1.5% rebate on the origination fee - resulting in a net fee of 2.5%, which will be deducted from the gross amount of the loan borrowed. The 12 on-time payment rule also applies to the PLUS loan in order to keep the rebate. Fees for the FFEL Program vary from lender to lender.

Do I have the option to stay with my current lender?

No. When Penn College made the decision to participate in the Federal Direct Loan program, our systems and agreement with the U.S. Department of Education were switched over to process Federal Direct Loans only.

If I have both the Federal Stafford and Direct Loans, will I have to make two payments when I enter repayment?

Yes, you would have two payments, just as you would if you borrowed a FFEL Program Stafford Loan from two different lenders. After graduation you have a choice to make separate payments to your previous lender(s) and to the U.S. Department of Education for your Direct Loans, or you can consolidate your loans into one payment with the U.S. Department of Education. For more information regarding Loan Consolidation please visit the U.S. Department of Education's Direct Loan Consolidation website.

How can I learn who services my federal loans?

Information regarding your federal loan debt can be accessed via the National Student Loan Data System (NSLDS). Note that any private alternative loans you have borrowed will not appear in the NSLDS.

Who can I talk to if I have questions or problems with my Direct Loan?

Your first contact would be Penn College’s Financial Aid Office. We are here to help you with any concerns you may have.  Once you go into repayment, most of your communication will be with the loan servicing company assigned to your loan by the U.S. Department of Education. You can track your loans via the National Student Loan Data System (NSLDS).

View our Loans page for additional information about Federal Direct Loans and other private alternative loans.

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