Direct Loan Transition

The Health Care and Education Reconciliation Act of 2010 (HR 4872) eliminates the Federal Family Education Loan Program (FFELP) that has been utilized since 1965 to provide federal loan funds to students. As a result, Midway College will begin participation in the William D. Ford Direct Loan Program (DL) beginning with all loans disbursed for the 2010 summer term.

Below are some frequently asked questions to help explain the new loan program. If after reading this, you have questions or concerns, please feel free to contact the Financial Aid Office for more details.

What is the Federal Direct Loan Program?
The Direct Loan Program (DL) provides “low-interest” loans for students and parents to help pay for the cost of education after high school. The Department of Education serves as the lender for all federal education loans (Subsidized and Unsubsidized and PLUS Loans). These loans were previously processed under the FFEL program which required students to select a private lender who funded the federal loan for the student.

What do I need to do?
All student borrowers will need to complete a new Master Promissory Note. You may complete the new MPN at www.studentloans.gov beginning immediately. You will need to sign in to the site under “Manage My Direct Loan” using your Federal PIN that you used to sign your FAFSA.

What is the difference between DL and FFEL?
The main difference is the source of funding. Under the FFEL program student loan capital was provided by private lenders, while under the DL program the funds are provided by the Department of Education through the US Treasury. Also, in the DL program the interest rate on the Parent Plus loans are 7.9% instead of 8.5%.

Will my student loan limits remain the same?
Yes, the annual loan limits are the same in DL and FFEL programs.

Can I keep my current lender?
No. All future loans will be originated, disbursed, and serviced by the Department of Education and their appointed servicers.

Do I have to complete a new Master Promissory Note?
Yes, you will need to complete a new Direct Loan Master Promissory Note (MPN) because you will now have a new lender. You may complete the new MPN at www.studentloans.gov beginning immediately.

If I have loans from both the FFEL & DL programs, will I make payments to two different lenders?
Yes. Depending on how many FFEL lenders you utilized in the past, you will have to make payments to at least two different lenders (your FFEL lender and the Department of Education). However, you may consolidate all federal loans into a Direct Loan consolidation and only make payments to the Department of Education. For more information on Direct Loan consolidation, please visit the Direct Loan Consolidation website at www.loanconsolidation.ed.gov.

How do I apply for my 2010/2011 loans?
The first step is to complete the 2010/2011 FAFSA at www.fafsa.gov, if you have not already done so. You will need to complete the new MPN at www.studentloans.gov. If you are a new student loan borrower you will also be required to complete Entrance Counseling at the same website.

We are working diligently to make this transition as seamless as possible. We appreciate your understanding and patience during this transition period. We encourage you to contact us with any questions or concerns you have.