Direct Loan FAQs
What is the difference between the Direct Loan Program and the Federal Family Education Loan Program (FFELP)?
The most important difference between Direct Lending and the FFEL program 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 and parents one point of contact because the loans are made, backed, and serviced by the U.S. Department of Education. In the FFEL program, funds come from banks and lenders creating multiple points of contact for students. There are also some differences in interest rate, fees and repayment options which make the Direct Loan Program more beneficial for borrowers.
Will I still be able to continue borrow from the same lender as last year?
No, if you borrow a Federal Stafford or Federal Grad PLUS loan for the 2010-2011 academic year forward, you will be required to borrow through the Direct Loan program. This change will require you to complete a new Master Promissory Note (MPN).
If I borrowed a federal Stafford or Grad PLUS through FFELP in one year and through Direct Loans in another, will I have to repay two different lenders now?
Yes. You will likely be repaying your federal loans multiple servicers. One or more servicers will be associated with the federal FFELP loans you received at Northwestern prior to the academic year, and your Direct Loan will have a servicer as well. You will receive correspondence and payment information from both the Department of Education and your prior lender or servicer.
After graduation you have a choice to make individual 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 Federal Student Aid website.
Where can I find information about who services my other federal loans?
Information on 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.
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 number that was used to complete your FAFSA in order to electronically sign the MPN.
How and when do I complete a Direct Loan Master Promissory Note (MPN)?
If you are going to borrow a GradPLUS loan, please note that the GradPLUS loan requires a credit approval, and the approval is only valid for 90 days. Please do not complete the GradPLUS loan application until you have received your offer of financial aid for the year to allow enough time to certify your GradPLUS loan prior to your credit approval expiring.
Please note: You MUST reapply for financial aid each year.
What is the interest rate and fees charged in Direct Loans compared to FFELP?
For updated information on current interest rates and fees, please review the graduate federal loan option page.
Will the Stafford Loans I borrowed through my bank or lender in prior years still be deferred?
As long as you are enrolled in school on at least a half-time basis, your prior year federal loans will continue to be deferred. Enrollment information is reported to lenders by the school on a regular basis.
How do I apply for a GradPLUS loan?
You should not apply through any lender other than the U.S. Department of Education. Applying through multiple lenders will cause unnecessary hits on your credit report and delay processing of your loan. GradPLUS loan application instructions will be provided on our website in the early spring.
How do the Direct Loan repayment options differ from FFELP?
All repayment options offered to FFELP borrowers are also available for Direct Loan Borrowers, with the exception of Income Contingent Repayment, which is only available in Direct Loans. There are five repayment options available for Direct Loans:
- Income Contingent Repayment
- Income-Based Repayment
- Pay As You Earn (PAYE)
Does Direct Loans offer in-school deferment for graduate/professional student Direct Grad PLUS Loan borrowers?
Yes. Graduate and professional students who have Direct Grad PLUS Loans are placed into an in-school deferment status based on the information reported by schools through the Enrollment Reporting process.
Does Direct Loans offer an extended repayment plan?
Does Direct Loans allow borrowers to defer payment? If yes, for what time period?
How does Direct Loan Servicing capitalize interest?
Direct Loan Servicing capitalizes all unpaid interest:
- Upon entering repayment
- Upon expiration of a deferment period
- Upon expiration of a forbearance period
- Annually for any borrowers repaying under the Income Contingent Repayment (ICR) who have payments that do not cover monthly interest accrual