Skip Ribbon Commands Skip to main content
NWTC Logo   Link to Home Page

 Important Information about Direct Loans

Beginning with the Fall 2010 semester, Northeast Wisconsin Technical College will begin processing federal student loans through the William D. Ford Direct Loan program, also known as Direct Lending (DL).  Funding for this program comes directly from the U.S. Department of Education.  This is a change to the current process of students and parents borrowing their federal student loans from private banks and other lending institutions through the Federal Family Education Loan Program (FFELP). 

The following questions related to the Direct Loan Program should help students and families understand how this program works.  You may find additional information at http://www2.ed.gov/offices/OSFAP/DirectLoan/index.html

  • Q.  What are Direct Loans?

    Direct Loans are federally insured low-interest education loans for students and parents.  These include the Direct Subsidized Loan, the Direct Unsubsidized Loan, the Direct Parent Loan for Undergraduate Students (PLUS) and the Direct Graduate PLUS Loan program for graduate and professional students.

  • Q.  Why is NWTC changing to the Direct Loan Program?

    The volatility in the credit markets and reductions in lender subsidies have caused some lenders to stop making federal student loans or to stop offering borrower benefits and other services.  NWTC has experienced a reduction in the number of lenders willing to make federal student loans to our students.  While NWTC made the decision to change prior to recent legislation included with the Health Care Reform bill, all schools are now required to participate in the Direct Loan program as of July 1, 2010. The Direct Loan Program is not impacted by changes in the economy and can therefore provide a stable and predictable loan process. The Direct Loan Program will provide NWTC students with a reliable source of educational loan funding. 

  • Q.  What is the difference between Direct Loans and the Federal Family Education Loan Program (FFELP)?

    The primary difference between Direct Loans and the Federal Family Education Loan Program (Stafford Loan) is the source of funding.  While FFELP loans are funded through a variety of banks and private lending institutions, Direct Loan funds are borrowed directly from the federal government.  Additionally, with Direct Loans, borrowers will have a single contact, the Direct Loan Servicing Center, for everything related to the repayment of their loan(s). 

  • Q.  Are there any differences in interest rates and fees between the two programs?

    Congress sets the maximum interest rates in both the FFEL and DL programs. Interest rates for Stafford Loans are the same in both programs.  The interest rate for Federal PLUS Loans is 7.9% in the Direct Loan program (compared to 8.5% in the FFEL program).  The following chart provides a comparison of the fees for both programs:

Fees Comparison: Federal Direct Loan Programs vs. Federal Family Educational Loan (FFEL) Programs

(for loans disbursed after 07/01/2010)

Direct Loans

FFEL Loans

Loan Type

Origination Fee

Rebate*

Origination Fee after Rebate

Loan Type

Default Fee

Federal Direct Subsidized Stafford Loans

1%

0.50%

0.50%

Federal Subsidized Stafford Loans

1%

Federal Direct Unsubsidized Stafford Loans

1%

0.50%

0.50%

Federal Unsubsidized Stafford Loans

1%

Federal Direct Parent PLUS Loans and Graduate PLUS Loans

4%

1.50%

2.50%

Federal Parent PLUS Loans and Graduate PLUS Loans

4%

*The rebate is applied when the loan is disbursed, increasing the disbursement amount. When you enter repayment, you must make your first 12 monthly payments on time for the rebate to become permanent. If payments are not made on time, the rebate amount is added to the loan balance.

 

 


  • Q.  Does this change impact me?

    If you are a new or continuing student or parent borrower who plans to borrow a federal loan for the 2010-2011 academic year, this change will affect you.  As of June 30th, 2010 NWTC will no longer process any loans through the Federal Family Education Loan Program.

  • Q.  Does this change affect my current year federal loans?  Also, what happens if I want to attend summer school?

    All current year and 2010 summer session loans will be processed through the current Federal Family Education Loan Program (FFELP).  All federal student loans beginning with the Fall 2010 semester will be processed through the Direct Loan Program (DL).

  • Q.  Will other student aid programs such as federal and state grants be affected by what is happening with student loans?

    No.  Other financial aid programs are not be affected by this change.

  • Q.  What do I need to do to be sure my funds are here to pay my fall tuition?

    You must complete a new Direct Loan Master Promissory Note (MPN) because you will be borrowing from a new lender, the federal Department of Education. Parents who wish to borrow a PLUS loan must complete the PLUS loan request form available on our website.

  • Q.  I have previously completed entrance counseling under the FFEL program.  Do I have to complete entrance counseling for Direct Loan?

    Yes, even if you have previously completed entrance loan counseling you will be required to complete it for the Direct Loan program.

  • Q.  Can I complete my new Master Promissory Note now?

    Wait. You may choose to complete your new Direct Loan MPN at any time, even before you've received your award letter. But we encourage you to wait until you are awarded so you can read more about your financial aid awards before choosing to borrow. This process can be completed online at https://studentloans.gov. You will need your federal PIN in order to electronically sign your MPN. This is the same PIN you use to sign the FAFSA. More information on your PIN is available online at http://www.pin.ed.gov/.

  • Q.  Will I still be able to continue borrowing through the same lender as last year?

    No.  If you wish to receive a federal student loan for the 2010-2011 academic year, you will be required to borrow through the Direct Loan program.

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

    Any loan(s) you borrowed from another lender either at NWTC or at another institution will be maintained by the lender/servicer with which you signed your original MPN.   Your Direct Loan will be serviced by a servicer assigned by the Department of Education.  You may receive correspondence and payment information from both servicers for a while, but the Department of Education is currently working to ensure that all loans a student has are assigned to the same servicer. 

    You may view all of your loan history by accessing the National Student Loan Data System at
    http://www.nslds.ed.gov/nslds_SA/.