Direct Loan Comparison Chart by jolinmilioncherie


									                                             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.
Unsubsidized 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
                           higher.                                             disbursement.
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
                           of business.

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%
Interest Rate
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.

To top