Direct Lending Student Loan Program
Effective July 1, 2010, City University of Seattle will be moving to the William D. Ford Federal Direct Student Loan Program.
Why? The university has been using the bank-based Federal Family Education Loan Program (FFELP) for more than a decade, but on
March 15, 2010, the President Obama signed into law the College Lending Bill prohibiting banks and private lenders from issuing federal
loans. Effective July 1, 2010, all federal student loans are required to go through a federal direct loan program.
What is the difference between these two loan programs? Under the Direct Student Loan Program loans are made by the U.S. Department
of Education. In the FFELP program, loans were made by private lenders (i.e. banks) who made federal loans in return for federal subsidies.
How will this change impact you? For the student, the process for obtaining student loans will be the same. You will still be required each
year to file an annual Free Application for Federal Student Aid (FAFSA) to determine eligibility. The difference will be with whom you sign a
promissory note. Just as you did under the FFELP program, you will be required sign a new promissory note with the Department of Education
before obtaining your first direct loans. For your convenience, you will be able to complete your promissory note through an on-line service.
What do you need to do next? If you have not already done so, go to
www.fafsa.gov and complete a 2010/2011 application. Then keep an eye out in
your mailbox for a letter from CityU's Financial Aid Office in late April that will provide you information on how to complete your electronic
promissory note for the Direct Student Loan Program.
Frequently Asked Questions
On March 15, 2010, the President Obama signed into law the College Lending Bill prohibiting banks and private lenders from issuing federal loans. Effective July 1, 2010, all federal student loans are required to go through a federal direct loan program.
Under the William D. Ford Federal Direct Student Loan Program loans are made by the U.S. Department of Education. In the Federal Family Education Loan Program (FFELP), loans were made by private lenders (i.e. bank or financial institution) who made federal loans in return for federal subsidies.
Eligibility requirements for direct loans are the same as those for FFELP. Undergraduate and graduate students may apply to borrow direct loans. As with FFELP, students may need to meet specific federal eligibility requirements to qualify.
If you currently have a loan under FFELP, you will be required to switch to the Direct Student Loan Program. You will be required to complete a new Master Promissory Note (MPN) with the Department of Education effective with the 2010/11 academic year.
All students are required to complete a Free Application for Federal Student Aid (FAFSA) at
www.fafsa.gov for each borrowing year (July 1st – June 30th) to determine eligibility for the upcoming aid year.
Complete your 2010/2011 Free Application for Federal Student Aid (FAFSA) to establish your loan eligibility. The City University of Seattle Financial Aid Office will send you information in late April on how to complete your online Master Promissory Note (MPN) with the Department of Education. By the middle of June you will receive a 2010/2011 Electronic Award notification via your official CityU of Seattle email account. You will complete your award online through your Student Center link in the portal.
Like FFELP, the Direct Loan Program does not require a credit check for students seeking subsidized or unsubsidized loans.
Annual and aggregate loan limits are the same for the Direct Loan Program as for FFELP. Both programs provide Stafford loans, and the limits are:
Dependent
Undergraduates |
Annual Limit |
Aggregate Limit |
| Total |
Subsidized Maximum |
Total |
Subsidized Maximum |
| Freshmen |
$5,500 |
$3,500 |
$31,000 |
$23,000 |
| Sophomore |
$6,500 |
$4,500 |
| Junior and Seniors |
$7,500 |
$5,500 |
Independent
Students |
Annual Limit |
Aggregate Limit |
| Total |
Subsidized Maximum |
Total |
Subsidized Maximum |
| Freshmen |
$9,500 |
$3,500 |
$57,500 |
$23,000 |
| Sophomore |
$10.500 |
$4,500 |
| Junior and Seniors |
$12,500 |
$7,500 |
| Graduate Students |
$20,500 |
$8,500 |
$138,500 |
$65,500 |
Three components drive the cost of borrowing Stafford loans under the Direct Loan Program – interest rates, federal origination fees and federal default fees.
- Interest Rates – interest rates on all loans made under the Direct Loan Program are fixed for the life of the loan. Click here for more information on direct loan interest rates.
- Federal Origination Fees – the federal government currently charges a one-time origination fee on all direct subsidized and unsubsidized loans, 0.5% of the loan amount. However, there will be no origination fee on such loans if they are first disbursed on or after July 1, 2010.
- Federal Default Fee – the federal government currently charges a one-time fee on all direct subsidized and unsubsidized loans 0.5% of the loan amount.
As long as you remain enrolled on at least a half-time basis, prior FFELP loans will continue to be deferred.
Just like with FFELP loans, direct loan repayments must begin six (6) months after you graduate, stop-out, or stop being enrolled on at least a half-time basis. Since direct loans are serviced by the U.S. Department of Education, and your FFELP loans through private lenders, you may be required to make repayment to two different lenders. However, you also have the option of consolidating all of your FFELP and direct loans once you graduate or leave school. If you choose to consolidate your loans, all of the loans you consolidate will be paid in full and all of your repayments will be made to the Direct Loan Program.
