Federal Loans

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Direct Loans are federally insured low-interest education loans for students and parents.  These include the Direct Subsidized Loan, the Direct Unsubsidized Loan, and the Direct Parent Loan for Undergraduate Students (PLUS). There are currently two methods by which federal loans are provided to students: Federal Family Education Loan Program (FFELP) and Direct Loans (DL). FFELP loans are issued through banks and DL loans are issued through the federal government. DCC and many other schools currently use FFELP.

Students will continue to complete the Free Application for Federal Student Aid (FAFSA) on the web www.fafsa.ed.gov, as they've done in the past.  Just indicate "student loans" when asked "in addition to grants, are you interested in being considered for work-study or student loans" on the FAFSA.  Parents who wish to use the PLUS loan will need to complete a separate PLUS loan application. 

The benefits of the Direct Loan Program:

The Direct Loan Program offers:

• A guaranteed source of funding for students loans
• A single point of service for students during repayment
• Additional repayment options for students and interest rate reductions for on time payments
• The Public Service Loan Forgiveness Program

There is a new loan forgiveness program for public service employees. Under this program, the amount forgiven is the remaining outstanding balance of principal and accrued interest on an eligible Direct Loan for a borrower who is not in default and who makes 120 monthly payments on the loan after October 1, 2007. The borrower must be employed full-time in a public service job during the same period in which the qualifying payments are made and at the time that the cancellation is granted. Students can go to http://studentaid.ed.gov.

Repayment options :

• Standard Repayment - With the standard plan, you'll pay a fixed amount each
month until your loans are paid in full. Your monthly payments will be at least
$50, and you'll have up to 10 years to repay your loans.

• Extended Repayment - To be eligible for the extended plan, you must have more
than $30,000 in Direct Loan debt. Fixed payments are the same amount each month you are in repayment, as with the standard plan, but payments may be spread over 25 years. Your fixed monthly payment is lower than it would be under the standard plan, but ultimately you’ll pay more interest.

• Graduated Repayment - With this plan your payments start out low and increase
every two years. The length of your repayment period will be up to ten years. If
you expect your income to increase steadily over time, this plan may be right for
you. Your monthly payment will never be less than the amount of interest that
accrues between payments. Although your monthly payment will gradually
increase, no single payment under this plan will be more than three times greater
than any other payment.

• Income Contingent Repayment - This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI), plus your spouse's income if you're married, your family size, and the total amount of your Direct Loans. Borrowers have 25 years to repay under this plan. The unpaid portion will be forgiven, but you will have to pay income tax on the amount that is forgiven. Under the ICR plan you will pay each month the lesser of:
1. The amount you would pay if you repaid your loan in 12 years multiplied
by an income percentage factor that varies with your annual income, or
2. 20% of your monthly discretionary income. If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized.

• Income-Based Repayment - Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.

Once you have graduated or drop below half time status (less than six credit hours), you will have the option to either combine your existing federal education loans into one new loan with the Federal Consolidation Loan Program or make separate payments to each of your lenders.  A consolidation loan will allow you to have one monthly payment and one lender. 

***You may still use other lenders for private and alternative loans. DCC will maintain processes to support both private and alternative loans***.

You must sign a new Direct Loan Master Promissory Note (MPN) because you will be borrowing from a new lender, the federal Department of Education.

What happens if I don't sign a new promissory note?

Until you have signed a new Direct Lending Master Promissory Note a loan can not be processed for you. Therefore, you will not receive Direct Loans.  Waiting until the last minute to sign the new Master Promissory Note will cause a delay in your loans arriving before tuition is due and the Business Office may charge you a late fee.

Here are some other helpful links:

• Deferment/Forbearance: http://www.ed.gov/offices/OSFAP/DirectLoan/postpone.html
• Repayment: http://www.ed.gov/offices/OSFAP/DirectLoan/RepayCalc/dlindex2.html
• Consolidation: http://loanconsolidation.ed.gov/index.html

You may review all of your loans at the student access website for the National Student Loan Data System at http://www.nslds.ed.gov/nslds_SA/