Federal Direct Student Loan Program
Federal Direct Student Loan Program
American Public University System recently researched and compared two student loan programs for our students, the Federal Family Educational Loan Program and the Federal Direct Student Loan program. American Public University System is currently participating in the FFELP program for the Stafford and Parent PLUS loan programs and has been since November, 2006. The original decision to participate in the FFELP program was to provide benefits to students that were not available in the Direct Loan Program. Those benefits are non-existent in today’s economy and unlikely to return.
During our recent research it became evident that the Direct Loan program was the better loan program for our students, at this time, for a number of reasons.
- FFELP funds are disbursed through private lenders (such as banks, credit unions and non-profit lenders, etc.). Those lenders tend to inundate students with “direct to consumer” marketing that is often very confusing and over whelming. The Direct Loan program is funded directly by the Federal Government, eliminating the middle man and the confusion.
- There are more repayment plans through the Direct Loan program, specifically, the income contingent plan. If a student does not repay their loans in 25 years, the government forgives the balance of the loan. In addition, the interest never exceeds 10% of the loan principle.
- Direct Lending has the new Public Service Loan Forgiveness program that will forgive remaining debt after 10 years of eligible employment and qualifying loan payments for people working in key public service professions such as teaching, government, social work, law enforcement, and non-profit 501(c)(3) organizations. American Public University System is a Public Service focused educational institution.
- The Direct Loan program is fully integrated with the federal financial aid process, simplifying the administration and oversight of the government funds. American Public University System already has the software and business process in place to administer this program.
- Students will only have to track their loans with one lender instead of multiple lenders.
- Reconciliation of the Federal Direct Loan program is required, and ensures that the students are receiving the funds and are only repaying what they actually received.
- Benefits advertised are part of their Master Promissory note, unlike the benefits advertised with the FFEL program which are not apart of the FFEL promissory note. Borrowers are assured to receive borrower benefits only if they are part of the signed promissory note.
- Loans can be sold in FFEL, negating their borrow benefits. Loans are never sold in the Direct Loan program.
- Direct Loans can be consolidated in the Direct Loan program, or in the FFEL program. There is still a choice in repayment options for American Public University System students.
We will begin the Direct Loan program for the new Federal Student Aid (FSA) Intent Form created beginning June 1st. Students who have not completed the Virtual Financial Aid Office (VFAO) for prior starts will be automatically redirected to Direct Lending as their lender in the VFAO. When you reach the point of lender selection in the VFAO, you will have to sign new Master Promissory Notes. Over the short term, students currently borrowing in the FFELP program will continue with their current lender through the end of their current academic year. Afterwards, all students will be integrated into the Federal Direct Lending Program.