Federal Family Education Loan and Direct Loan Programs
The Federal Family Education Loan (FFEL) and the Direct Loan programs are student loan options known also as Stafford Loans. They are administered by the U.S. Department of Education. Stafford Loans are for students and PLUS loans for parents. This link provides details about the loans.
A primary difference between FFEL and Direct Loan programs is the source of loan funding. Direct Loan Program funds come directly from the federal government whereas funds for FFEL can come from banks, credit unions or other lenders. For both programs loan amounts and eligibility rules are the same. Repayment plans can differ however.
Securing either type of loan requires filling out a FAFSA form. The school a student is attending is involved in the process and informs a student of loan eligibility. Also part of the process is the signing of a promissory note which specifies borrowing conditions and repayment terms. The promissory note is legally binding.
Since FFEL loans require a non-government lender it becomes necessary to locate one. Schools participating in FFEL can supply lists of what are considered preferred lenders but students may opt for a lender not on the list.
The critical issue of how much a student can borrow is related to whether or not one has a subsidized or an unsubsidized loan. Subsidized loans are determined based on financial need. The advantage of a subsidized loan lies in deferrment of loan interest while one is a student and for a six month period that follows leaving school.
A consequence of the difference between a subsidized and an unsubsidized loan is the accumulation of interest from the time the loan is disbursed until repayment in full. In determining eligibility for unsubsidized loans schools subtract the totla amount of other financial aid from the cost of attendance. It is possible to receive both subsidized and unsubsidized loans for the same enrollment period.
Maximum yearly loan amounts for dependent undergraduates are:
$3,500 (for the 2007-08 academic year) for first-year students.
$4,500 (for the 2007-08 academic year) after completing the first year of study.
$5,500 after completing two years of study if the remainder of the program is at least a full academic year.
For both Direct Loan and FFEL programs, payment goes through the school in at least two installments. No installment can be more than half of the loan amount. Usually for first-year undergraduate students and a first-time borrowers, schools cannot disburse the first payment until 30 days after the first day of your enrollment period. This takes into account loan repayment if a student does not begin classes or withdraws during the first 30 days of classes. Schools with cohort default rates of less than 10 percent for each of the three most recent fiscal years for which data are available are exempt the delayed disbursement requirement.
There is a fee of up to 4 percent of the loan. For FFEL or Stafford Loans, part of the fee goes to the federal government, and part goes to the guaranty agency (the organization that administers the FFEL Program in your state). For Direct Stafford Loans, the whole fee goes to the government.
Upon graduation there is a six-month "grace period" before repayment. However interest still accumulates on unsubsidized loans during this period.
A primary difference between FFEL and Direct Loan programs is the source of loan funding. Direct Loan Program funds come directly from the federal government whereas funds for FFEL can come from banks, credit unions or other lenders. For both programs loan amounts and eligibility rules are the same. Repayment plans can differ however.
Securing either type of loan requires filling out a FAFSA form. The school a student is attending is involved in the process and informs a student of loan eligibility. Also part of the process is the signing of a promissory note which specifies borrowing conditions and repayment terms. The promissory note is legally binding.
Since FFEL loans require a non-government lender it becomes necessary to locate one. Schools participating in FFEL can supply lists of what are considered preferred lenders but students may opt for a lender not on the list.
The critical issue of how much a student can borrow is related to whether or not one has a subsidized or an unsubsidized loan. Subsidized loans are determined based on financial need. The advantage of a subsidized loan lies in deferrment of loan interest while one is a student and for a six month period that follows leaving school.
A consequence of the difference between a subsidized and an unsubsidized loan is the accumulation of interest from the time the loan is disbursed until repayment in full. In determining eligibility for unsubsidized loans schools subtract the totla amount of other financial aid from the cost of attendance. It is possible to receive both subsidized and unsubsidized loans for the same enrollment period.
Maximum yearly loan amounts for dependent undergraduates are:
$3,500 (for the 2007-08 academic year) for first-year students.
$4,500 (for the 2007-08 academic year) after completing the first year of study.
$5,500 after completing two years of study if the remainder of the program is at least a full academic year.
For both Direct Loan and FFEL programs, payment goes through the school in at least two installments. No installment can be more than half of the loan amount. Usually for first-year undergraduate students and a first-time borrowers, schools cannot disburse the first payment until 30 days after the first day of your enrollment period. This takes into account loan repayment if a student does not begin classes or withdraws during the first 30 days of classes. Schools with cohort default rates of less than 10 percent for each of the three most recent fiscal years for which data are available are exempt the delayed disbursement requirement.
There is a fee of up to 4 percent of the loan. For FFEL or Stafford Loans, part of the fee goes to the federal government, and part goes to the guaranty agency (the organization that administers the FFEL Program in your state). For Direct Stafford Loans, the whole fee goes to the government.
Upon graduation there is a six-month "grace period" before repayment. However interest still accumulates on unsubsidized loans during this period.
Labels: Student Loans
posted by Paul at 9:51 AM
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