Photo: Student at computer

Direct Lending Frequently Asked Questions

Here are some of the most frequently asked questions and answers about direct lending:

What are Direct Loans?

Direct Loans are low-interest loans for students to help pay for post-secondary education. The lender is the U.S. Department of Education rather than a bank or other financial institution. With Direct Loans you borrow directly from the federal government. The Direct Loan Servicing Center will be your contact for information regarding repayment of your loan. You will have online access to your Direct Loan account 24 hours a day, 7 days a week on their website

What is the difference between the Direct Loan and the FFEL program?

The primary difference between the two programs is the source of funding. Direct Loan funds come directly from the U.S. Department of Education which receives funds from the U.S. Treasury. FFEL loans are disbursed by private banks and financial institutions.

Why is Richland Community College moving to Direct Lending?

On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 was signed into law. The Act mandates that all Stafford loans be made under the Direct Loan Program effective for loans first disbursed on or after July 1, 2010. Richland Community College must move to the Direct Lending program to allow students access to federal student loans in the 2010-2011 school year.

How does this change affect me?

If you have borrowed through the FFEL program in the past (including Summer 2010) this change will not affect your outstanding loans. You will be required to complete a new electronic Master Promissory Note and Loan Entrance Counseling with the Department of Education.

Will I be able to borrow from the same lender I used last year?

No. All subsidized and unsubsidized student loans for Fall 2010 and beyond will be made through the Direct Lending program.

Are the interest rates the same for both FFEL and Direct Loans?

Yes. Congress sets the interest rates in both programs. The interest rate is 3.4% for subsidized loans, and the interest rate for unsubsidized loans is 6.8%.