Frequently Asked Questions about Direct Loans

With the Direct Loan program who will I make repayment to?

Payments are made to the U.S. Department of Education. Students do not have to start repayment until six months after they graduate or they fall below half-time status. However, you can make payments at any time towards your loan.

The U.S. Department of Education pays (subsidizes) the interest while the borrower is in school and during grace and deferment periods on subsidized Direct Loans. The borrower is responsible for paying the interest that accrues on unsubsidized Direct Loans.

Subsidized Direct Loans disbursed to undergraduate students after July 1, 2009 carry a fixed interest rate of 5.6 percent. Unsubsidized Direct Loans disbursed to undergraduate students during the same time period have a 6.8 percent interest rate. Graduate students have a 6.8 percent fixed interest rate for subsidized and unsubsidized loans.

You have a grace period of 6 months after you graduate, leave school or drop below half-time status before you must begin repayment on a loan. During the grace period on a subsidized loan you don't have to pay any principal and you won't be charged interest. On an unsubsidized loan you don't have to pay any principal, but you will be charged interest. You can either pay the interest as you go along or it will be capitalized (i.e., added to the principal loan balance) later.

What steps do I need to take in order to get a Direct Loan?

The steps you are required to take depend on the type of borrower you are and which Direct Loan you would like to accept. The following definitions will help you make that determination.

  • Federal Family Educational Loan Program (FFELP) includes the Federal Stafford Loan, Federal Parent PLUS Loan, and Federal Grad PLUS Loan. Please note that Perkins Loans are NOT part of FFELP and the change to Direct Loans does NOT affect Perkins Loans.
  • A “student borrower” is a student wishing to accept a Subsidized Direct Loan, Unsubsidized Direct Loan, or Grad PLUS Direct Loan.
  • A “parent borrower” is a parent wishing to accept a Parent PLUS Direct Loan.
  • A “new borrower” is a student or parent who has never had a FFELP loan at JMU.
  • A “returning borrower” is a student or parent who had a FFELP loan at JMU in prior years.
Common Rules:
There are also some rules that apply to all student borrowers. They include:
  • All students must complete the FAFSA (this must also be completed for Parent PLUS Direct Loans)
  • All students must meet the general eligibility requirements for financial aid outlined at http://www.jmu.edu/finaid/wm_library/elig_criteria.html
  • All students will go to ecampus.jmu.edu and enter their e-ID and password to accept their Direct Loan(s) (Exceptions for Grad PLUS Direct Loans and Parent PLUS Direct Loans are noted below)
  • Instructions regarding the completion of Entrance Loan Counseling and the Direct Loan Master Promissory Note will be e-mailed to JMU students and parents in April. Please do NOT complete any of these documents until you are requested to do so.

New Borrower Rules:
New student borrowers wishing to apply for a Subsidized Direct Loan and/or Unsubsidized Direct Loan need to complete the following:
  1. Accept loan(s) on e-campus
  2. Direct Loan Master Promissory Note (this only needs to be done when you apply for your first Direct Loan at JMU)
  3. Entrance Loan Counseling
New student borrowers wishing to apply for a Graduate PLUS Direct Loan need to complete the following documents:
  1. Graduate PLUS Direct Loan Request Form
  2. Direct Loan Master Promissory Note (this only needs to be done when you apply for your first Grad PLUS Direct Loan at JMU)
  3. Graduate Entrance Loan Counseling
New parent borrowers wishing to apply for a Direct Parent PLUS Direct Loan need to complete the following:
  1. Parent PLUS Direct Loan Request Form
  2. Direct Loan Master Promissory Note (this only needs to be done when you apply for your first Parent PLUS Direct Loan at JMU)
Returning Borrower Rules:
Returning student borrowers wishing to apply for a Subsidized Direct Loan and/or Unsubsidized Direct Loan need to complete the following:
  1. Accept loan(s) on e-campus
  2. Direct Loan Master Promissory Note (this only needs to be done when you apply for your first Direct Loan at JMU)
Returning student borrowers wishing to apply for a Graduate PLUS Direct Loan need to complete the following documents:
  1. Graduate PLUS Direct Loan Request Form
  2. Direct Loan Master Promissory Note (this only needs to be done when you apply for your first Grad PLUS Direct Loan at JMU)
Returning parent borrowers wishing to apply for a Direct Parent PLUS Direct Loan need to complete the following:
  1. Parent PLUS Direct Loan Request Form
  2. Direct Loan Master Promissory Note (this only needs to be done when you apply for your first Parent PLUS Direct Loan at JMU)
What are the main benefits in making this switch from the Stafford Loan program (FFELP) to the Direct Loan Program (DL)?
  • Unlike the FFELP bank loan program, with a few thousand participating lenders, the Federal Government is the single source of funds for Direct Loans which reduces the confusion and complications for students.
  • Direct Loans are never sold by the federal government, so student borrowers always know who holds their loans and the terms of their loans. FFELP (i.e., Stafford) loans are frequently sold, with promised benefits not honored by the new loan holder(s).
  • Students and schools who participate in Federal Direct Loan program are not subjected to constant marketing campaigns by lenders who tout benefits that are contingent upon some action on the part of the borrower and are not in the promissory note.
  • Borrowers are free to consolidate their loans with any lender they choose (who is willing to make a consolidation loan) once they graduate, thus protecting consumer choice.
  • Loans are able to be processed more quickly because there is only one lender involved, which will result in a smoother process for receiving funds.
  • Only Federal Direct Loans offer a true, income contingent loan repayment option with loan forgiveness after 25 years of repayment. Borrowers with a desire to work in relatively low-paying, community service jobs can do so while minimizing the fear of defaulting on the repayment of their student loans.
  • Direct Lending has the new Public Service Loan Forgiveness program that will forgive remaining debt after 10 years of eligible employment and qualifying loan payments for people working in key public service professions such as teaching, government, social work, law enforcement, and non-profit 501(c)(3) organizations.
  • Under the Direct Loan Program the Parent PLUS Interest Rate is 7.9%. Under FFELP the Parent PLUS Interest Rate is 8.5%.
Why do I have to start over if I already have federal (FFELP) loans from prior years?

The Department of Education is the new lender; therefore, you must complete the required forms with them in order to receive your loan funds.

I have prior loans from a bank, what options do I have in repayment now that I will have FFELP Loans and Direct Loans?

Federal Student Direct loans can be consolidated along with outstanding student loan debt from FEELP (i.e., Stafford Loans). However, if you do not want to consolidate your FFELP and Direct Loans, you will have to make separate payments to the different loan servicers.

Is my eligibility for loans and the amounts I can receive in federal loans the same in Direct Lending as it was in FFELP?

Yes, the eligibility requirements and loan amounts are the same. The Department of Education acts as a lender, providing funds for Direct Loans and Parent or Grad PLUS loans in the same amounts as the Stafford and Parent or Grad PLUS loans offered through the Federal Family Education Loan Program. (In FFELP banks and other private lenders provide these loans.)

Can I still use my prior bank for Stafford Loans, Parent PLUS, or Grad PLUS Loans if I choose to do that?

No, you will not be able to choose a lender for receiving a new loan, as the Department of Education is the only lender in Direct Lending.

For repayment purposes you can consolidate with the bank you used for loans in prior years if you choose, and if the bank is offering consolidation.

How will my receipt of prior loans from banks/lenders affect my Direct Loan eligibility?

Changing from FFELP to Direct Lending will not affect your loan eligibility because Direct Loans are subject to many of the same regulations as FFELP loans. For instance, students must meet satisfactory academic progress and be within their aggregate loan limits to receive any kind of federal loans.

Please go to http://www.jmu.edu/finaid/dlchart.shtml to view a chart designed to help you understand the differences in between the Direct Loan and FFEL Program, and why JMU is making this change.