Direct Loan Comparison Chart
Category FFELP Direct Lending
(i.e., Stafford Loan and Parent PLUS Loan) (i.e., Direct Loans and Parent PLUS Direct Loans)
Annual and Aggregate The same annual and aggreate loan limits that apply to the Stafford Loan Program also apply to the Direct
Loan Limits Loan Program
Borrower Benefits Legislation passed by Congress prior to the The legislative changes that led to reduced benefits in the
current economic issues led to the elimination of FFELP did not reduce Direct Loan benefits. In some cases,
borrower benefits. It costs more for lenders to it actually strengthened them (e.g., Public Loan
make Stafford loans now. A strengthened Forgiveness, etc.). Additionally, benefits remain with the
economy will not bring back these benefits. loan through the duration of repayment.
Benefits are practically non-existent on new
loans. Benefits on older loans may be lost when
the loan is sold.
Eligibility Criteria The criteria used to determine who is eligible for Stafford Loan and Direct Loan is identical
Fees (Interest Rate) for The maximum interest rate a lender can charge is set by Congress, and is the same rate for FFELP and Direct
Subsidized and Loans.
Fees (Up Front) Students with FFELP Stafford Loans are generally Direct Loan borrowers are charged a net .5% (half of a
charged a 1% Default Fee on the loan before percent) fee on the loan before disbursement. This means
disbursement. In some cases, the fee may be the student receives more money from each loan
Income Contingent FFELP does not have the is program. It offers the
Repayment (ICR) Income Sensitive Repayment plan, which is not as Having Direct Loans meets one of the criteria for this
flexible as ICR. program. ICR can make loans less expensive for qualifying
borrowers who are struggling with repayment.
Interest Capitalization Interest may be capitalized at a higher rate than Interest capitalized at less than statutory maximum.
with Direct Loans.
Loan Consolidation Due to the legislation changes and economic Consolidation remains a viable option. Students can
issues, the majority of lenders are not offering consolidate their FFELP Loans with the Direct Loans when
loan consolidation any longer. Many companies they enter repayment if they so choose.
specializing in loan consolidation have gone out
Loan Process The FFELP process often leads to confusion due Direct Lending provides a much more streamlined flow for
to the complexities associated in working with loans, which makes navigating the process much simpler
multiple lenders, servicers, and guaranty for borrowers.
Loan Repayment Borrowers repay private lenders. Borrowers repay the federal government.
Loan Sale Many lenders are selling their loans to the Loans are with the federal government and never sold to
government via the "PUT" Program to help with other lenders, so this provides single servicing for the life
their liquidity issues. of the loan.
Parent PLUS Loan Parent PLUS Interest Rate is 8.5% Parent PLUS Interest Rate s 7.9%
Public Service Loan This is not an option under FFELP, as you can only Having Direct Loans meets one of the criteria for this
Forgiveness qualify for this with Direct Loans. program.
Stability Many lenders have left the FFELP due to issues The liquidity issues that are impacting FFELP lenders are
with liquidity, forcing borrowers to find new not affecting Direct Loans. The funding source for Direct
lenders. This trend is likely to continue in the Loans is more stable.