Direct Loan Program
Beginning with the 2010-11 academic year, Northwestern University is joining thousands of other U.S. colleges and universities in the William D. Ford Federal Direct Student Loan Program. We will no longer use private lenders (through the Federal Family Education Loan program) for Stafford, PLUS or GradPLUS loans. We are making this move to ensure continuity of service for you and other federal student loan recipients in light of Congressional moves to change the federal student loan program as well as ongoing changes in the student loan industry.
The U.S. Department of Education software necessary to administer the Federal Stafford, PLUS and Grad PLUS loans through the Direct Loan program is already familiar to Northwestern. Our knowledge of this software will ensure no disruption in the processing or the receipt of your loan funds for the 2010-11 year.
Currently, Northwestern's Federal Stafford, PLUS and Grad PLUS loans are available under the Federal Family Education Loan (FFEL) program. In the FFEL program, funds are provided from private lenders. As you may know, recent economic difficulties created considerable challenges for lenders in the FFEL program, with many lenders reducing borrower benefits or exiting the program altogether.
In the William D. Ford Federal Direct Loan program, loan proceeds are provided directly from the federal government to the university on behalf of the borrower. No third party is involved. In fact, more than half of the colleges and universities in the United States already participate in Direct Lending. Northwestern decided to participate in Direct Lending for 2010-11 in order to eliminate any possible risks to our students and parents that might be associated with either federal regulatory changes or market fluctuations affecting the FFEL program.What are the benefits of switching to the Federal Direct Loan Program?
- Federal Stafford and PLUS/Grad PLUS loans are currently a stable, guaranteed source of funding in the Direct Loan Program.
- The option of an income-contingent or income-based repayment plan is offered with Direct Lending.
- Students in the Direct Loan program who enter into public service jobs may qualify for loan forgiveness.
- The PLUS loan credit approval process in Direct Lending uses a more liberal credit assessment than most FFEL program lenders.
- The interest rate for Direct PLUS Loans is 7.9% as compared to 8.5% in the FFEL program.
How Does the Direct Loan Transition Impact Student Loan Borrowers?
- Students will no longer select a third-party lender for their Stafford Loans.
- All Stafford Loan borrowers must complete a new Master Promissory Note (MPN) in the Direct Loan program. MPNs signed prior to 2010 in the FFEL program are not valid within the Direct Loan program. Direct Stafford Loan MPNs can be completed online at http://www.dlenote.ed.gov prior to receiving an award for 2010-11. The same PIN used for completing the Free Application for Student Aid (FAFSA) is used to electronically sign the MPN. PINs can be obtained at: http://www.pin.ed.gov.
- Although the Office of Financial Aid will continue to certify PLUS loan eligibility, Parent Loan (PLUS) and Grad PLUS borrowers will no longer apply with private lenders. Do not complete a PLUS Loan pre-approval with a private lender for loan periods of August 2010 or later. Information on how to apply for a 2010-11 Grad PLUS Loan will be provided in the early Spring.
- Continuing Stafford and PLUS borrowers will have loans through FFELP and Direct Loans. Different servicers will be associated with the federal FFELP loans you received prior to the 2010-11 academic year and your Direct Loan. You should receive correspondence and payment information from both the Department of Education and your prior lender(s) or servicer(s) before you enter repayment.
Terms and conditions of Direct Loans, in-school deferments and grace periods, mirror the FFEL program.Direct Loan Program Questions and Answers (pdf)