Direct Loan Program FAQs
Q: What are the primary differences between the William D. Ford Federal Direct Loan and the Stafford Loan programs?
A: The primary difference is the source of the loan funding. Federal Direct Loans are made by the U.S. Department of Education using funds obtained from the U.S. Treasury. In the Stafford Loan program, loan funds are provided by banks or other financial institutions. Under this program, all students at Shaw University will have the Federal Direct Loan Program as their lender.
Q: How does this affect Shaw University students?
A: Students that want to borrow a federal student loan for the academic year will be borrowing through the Federal Direct Loan program.
Q: What do I need to do to receive my federal loans?
A: Have a processed FAFSA on file. Complete entrance loan counseling at www.studentloans.gov , and sign your electronic Master Promissory Note. The Financial Aid Office can only certify your loan application after you have completed this process.
Q: What types of Direct Loans are available?
A: Shaw University students and their parents will continue to have access to Subsidized, Unsubsidized and Parent PLUS loans under the Direct Loan Program.
Q: If I have prior student loans, will I need to do entrance counseling again?
A: Yes, all Shaw University students will need to complete entrance loan counseling to receive loans through the Direct Loan Program.
Q: If I have prior educational loans, will I need to sign a new "Master Promissory Note" (MPN)?
A: Yes, all borrowers will need to sign a new MPN to receive loans through the Direct Loan Program.
Q: If I have prior loans, will my Direct Lending Stafford and PLUS loans have different interest rates from my existing loans?
A: Stafford Loans: the interest rates in the two programs are the same. For Stafford Loans disbursed between July 1, 2010 and June 30, 2011, the interest rate is fixed at 4.5% for undergraduate Subsidized Stafford Loans (only) and fixed at 6.8% for Unsubsidized Stafford Loans.
PLUS Loans: the interest rate is lower in the Federal Direct Loan Program. Instead of 8.5%, the interest rate is 7.9% for loans disbursed between July 1, 2010 and June 30, 2011.
Q: What are the loan fees in the Direct Lending?
A: Stafford: The effective upfront fee will be 0.5% of the loan. For example, the proceeds of a $10,000 loan will be reduced by $50. If a student fails to make 12 consecutive on-time payments on entering repayment, they will be billed an additional 1.5% fee.
PLUS: The effective upfront fee will be 2.5% of the loan. For example, the proceeds of a $10,000 loan will be reduced by $250. If the borrower fails to make 12 consecutive on-time payments, they will be billed an additional 1.5% fee.
Q: Will borrowers with both Direct Loans and other Federal Loans have multiple loan repayment servicers?
A: Yes. However the borrower can consolidate in the Federal Direct Loan Consolidation Program.
Q: What kinds of repayment options are available with Direct Lending?
A: Repayment options are explained in full at www.studentloans.gov
Q: Will this affect my alternative loans?
A: No. This applies only to federal student loans, not private or alternative loans.