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Direct Loans FAQ

Q. Why is Alaska Pacific University changing to the Direct Loan Program?

A. Federal Direct Lending provides a stable source of student loan funding because the funds are provided by the US Treasury. The Direct Lending Program is not impacted by changes in the economy. Direct Lending provides single point contact for managing student loans

Q. What are Direct Loans?

A. Direct loans are funded through the US Department of Education using funds obtained from the US Treasury. These include the Direct Subsidized Loan, the Direct Unsubsidized Loan, the Direct Parent PLUS loan, and the Graduate PLUS loan.

Q. What is the interest rate and fees charged in Direct Loans compared to FFELP?

A. 2010-2011 Interest Rates

DIRECT LOAN PROGRAM INTEREST FEES
Subsidized Direct Loan (undergraduates only) 4.5% .5%
Subsidized Direct Loan (all other students) 6.8% .5%
Unsubsidized Direct Loan 6.8% .5%
Federal Direct Parent PLUS or Grad PLUS 7.9% 2.5%

FFELP INTEREST FEES
Subsidized Direct Loan (undergraduates only) 4.5% .5-1.5%
Subsidized Direct Loan (all other students) 6.8% .5-1.5%
Unsubsidized Direct Loan 6.8% .5-1.5%
Federal Direct Parent PLUS or Grad PLUS 8.5% 3-4%

Direct Loan Rebate: The Subsidized and Unsubsidized Federal Direct Loans have a 1.0% origination fee and also offer a .5% rebate on the origination fee-resulting in a net fee of .5%, which will be deducted from the gross amount of the loan borrowed. Once you enter repayment, if you make your first 12 monthly payments on time, the rebate becomes permanent. If you fail to make 12 on-time monthly payments; however, a charge of the initial rebate will be added to the outstanding balance of the loan.

The Federal Direct PLUS Loan has a 4% origination fee and also offers a 1.5% rebate on the origination fee-resulting in a net fee of 2.5%, which will be deducted from the gross amount of the loan borrowed. The 12 on-time payment rule also applies to the PLUS loan in order to keep the rebate.

Q. Will this change effect me if I previously borrowed under the FFELP Program? Do I have to complete a new Master Promissory Note?

A. YES. You must complete a new Direct Loan Master Promissory Note because you will now be borrowing from a new lender, the Department of Education. studentloans.gov/myDirectLoan/index.action

Q. How and when do I complete a Direct Loan Master Promissory Note?

A. You should complete the Direct Loan Master Promissory Note as soon as possible. You will need your Federal PIN in order to e-sign the application. This is the same PIN that you use to sign your FAFSA. The MPN can be completed at studentloans.gov/myDirectLoan/index.action

Q. What will happen to the existing loans that I have borrowed with other lenders? Will I have to repay two different lenders now?

A. Once you graduate or choose not to attend school at least half time, you will have the option to combine your federal education loans into one new loan with the Federal Consolidation Loan Program. www.loanconsolidation.ed.gov

Q. How do I contact the Direct Loan Program?

A. The US Department of Education Direct Loan Program Customer Service phone number is 1.800.848.0979

Direct Loan Program Additional Websites

General Direct Student Loan Information
http://www.ed.gov/offices/OSFAP/DirectLoan/index.html

Master Promissory Note, Entrance Counseling, and Account Information
www.studentloans.gov

Consolidation
www.loanconsolidation.ed.gov