Federal Direct Lending Program

Effective in Summer 2010, Texas A&M University-Corpus Christi is transitioning to the William D. Ford Federal Direct Loan program. This decision was made to ensure students and parents continue to have uninterrupted access to federal loans.

How are loans currently processed? How is this new program different?
Currently, Federal Stafford, PLUS and Grad PLUS loans are processed through the Federal Family Education Loan (FFEL) program, with funds being provided from lenders. In the Direct Loan program, loan proceeds will be provided directly from the federal government.

Why is the University switching loan programs?
Proposed legislation will require all institutions to originate loans through the Direct Loan program. Our University is choosing to move to an exclusive Direct Lending option to eliminate risks associated with late-breaking federal regulatory changes and market fluctuations in the FFEL program.

What are the benefits of switching to the Federal Direct Loan Program?

• Federal Stafford and PLUS/Grad PLUS loans are a stable, guaranteed source of funding.
• 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.
• The interest rate for Direct PLUS Loans is 7.9% as compared to 8.5% in the FFEL program.

How will this transition impact student loan borrowers?

• Students will no longer have to select a third-party lender for their Stafford Loans. If a Stafford Loan is offered to you, simply accepting the loan award will begin the origination/approval process.
• All Stafford Loan borrowers (new and returning) will be required to complete a new Master Promissory Note (MPN) in the Direct Loan program. MPNs signed prior to 2010 in the FFEL program will not be considered valid within the Direct Loan program.

  Direct Stafford Loan MPNs can be completed online prior to receiving an award for Summer 2010. The same PIN you used for completing the Free Application for Student Aid (FAFSA) is used to electronically sign the MPN. To obtain a PIN, click here.

• All Stafford loan borrowers must complete a new entrance interview for the Direct Loan program. Instructions for completing this loan requirement will be delivered in the award process.
• Although the Office of Student Financial Assistance will continue to certify PLUS loan eligibility, Parent Loan (PLUS) and Grad PLUS borrowers will no longer apply with private lenders. Instead, for loan periods of June 2010 or later we ask that you not complete a PLUS Loan pre-approval with a private lender, but rather initiate the process by completing a PLUS Loan Request Form (provided through our office). Forms and instructions on this process can be found on our web site. Guidelines will also be made available during the award process to student recipients via their student e-mail.
• Continuing Stafford and PLUS borrowers will have split loan programs (FFEL and Direct Loan). Direct Loans will be serviced by the Department of Education and the current holder of any FFEL loans will service loans previously borrowed. Loan consolidation with the Department of Education allows for one single payment.
• Terms and conditions of Direct Loans, in-school deferments and grace periods mirror the FFEL program.

We recognize that the transition to a new loan program will require additional attention from continuing borrowers but believe the security offered in Direct Lending far outweighs the risks present in the FFEL program. Additional instructions and information will be provided to students throughout the 2010-11 financial aid cycle. The staff of the Office of Student Financial Assistance stands ready to assist you and your parents with a successful transition.

For more information, please contact the Office of Student Financial Assistance.