Direct Loan Program Information & FAQs - Financial Aid - Western University of Health Sciences

Financial Aid

Direct Loan Program Information & FAQs

Western University of Health Sciences is moving to the Direct Loan Program for 2009-2010!

Beginning with the 2009 - 2010 academic year Western University of Health Sciences will participate in the William D. Ford Federal Direct Loan (Direct Loan) Program. This means that students will now get their Stafford and Grad Plus loans directly through the U. S. Department of Education, rather than through lenders participating in the Family Education Loan Program (FFELP) such as Citi Bank, Chase, Wachovia, etc.

The shifting credit markets and changes in federal law have reduced the number of lenders offering Federal Stafford and Plus Loans through FFELP. Because of the changes in the federal law, many lenders can no longer offer the discounts and incentives that previously made it preferable to borrow from them.

Western University has carefully weighed the strengths and weaknesses of the Direct Loan Program and has determined that it is the best way to serve our student borrowers. The Direct Loan Program ensures the availability of funds, reduced fees versus the FFELP program and is simpler and faster.

Borrower Benefits In the Direct Loan Program

An up-front origination fee reduction is offered to Direct Subsidized Loan, Direct Unsubsidized loan and Direct Plus loan borrowers as a repayment incentive. The reduction is applied up-front,and increasing the net loan amount that the borrower receives. Currently the rebate amount is 1.5 percent of the loan amount borrowed. Please see chart below for example under Direct Loan fees.

To keep the up-front origination fee reduction, the borrower must make their first twelve required monthly payments on time (within six days of the due date). The Direct Loan Program does not count any deferment and forbearance periods used during this period of review. For example, if a borrower makes their first 3 payments on time and then needs a 12-month deferment due to unemploymenet, the Direct Loan system will ignore the deferment period and will wait for the borrwer to make their next 9 payments before evaluating if the borrower has achieved 12 on-time payments.

If the borrower does not make their first twelve required payments on time, the Department will add the rebate amount back to the principal balance.

Additionally, borrowers who have entered repayment may choose to have their loan payments electronically debited from their bank account each month through the Electronic Debit Account (EDA) option. As an incentive for using EDA, the Direct Loan Program offers a .25% reduction in the interest rate while a borrower uses the EDA option to make their loan payments. The interest rate reduction does apply during periods of deferment or forbearance.

Questions and Answers about the Direct Loan Program

What is the difference between the FFELP and the William D. Ford Federal Direct Loan Program?

In the Direct Loan Program, the U.S. Department of Education acts as a lender, providing funds for Stafford loans and the Grad Plus loans. With FFELP, students chose a bank or lender.

If I have previously received a Stafford or Grad Plus loan through another lender, do I have to change to the Direct Loan Program?

Yes. All students needing a Stafford or Grad Plus Loan for the 2009 - 2010 school year will need to apply for the loan through the Direct Loan Program.

What steps do I need to take to apply for the Stafford and Grad Plus Loans through the Direct Lending program?

Apply for financial aid via FAFSA
Wait to receive your award letter from the financial aid office that will be sent directly to your WesternU e-mail address
Follow the steps/instructions on your award letter

What is the interest rate on the Stafford Direct Loan Program?

The interest rate is fixed at 6.8%.

What is the interest rate on the Direct PLUS Loan?

The interest rate is fixed at 7.9%.

Does the Stafford Direct Loan program have any fees?

Yes. See chart below.

If the awards earliest disbursement date is...	Origination fee	Up-front origination rebate	Total origination fee
On or After July 1, 2008 and before July 1, 2009	2.0%	1.5%	.5%
On or after July 1, 2009 and before July 1, 2010	1.5%	1.0%	.5%

Does the Direct PLUS Loan have any fees?

Yes. See chart below.

Origination fee	Up-front origination rebate	Total origination fee
4.0%	1.5%	2.5%

How does the credit check process work on the Direct Grad Plus Loan?

Once the borrower completes the Master promissory note, which includes the applicants authorization for a credit check to be completed the borrower will receive written confirmation of the credit check result.

When does the credit check process take place?

The school sends notification to the Direct Loan program within 5 days after the student accepts their award in Banner.

How long is the credit check valid for?

A credit check is valid for 90 days.

Can endorsers of Direct Plus Loans complete the endorser addendum online?

No. A customized paper endorser addendum form would be mailed directly to the borrower.

Do I need to complete a new Entrance Interview for the Direct Loan program?

Yes. Students need to be aware of the differences in the Direct Loan Program versus the FFELP program.

Does the Direct Loan program have in-school deferment for graduate/professional students?

Yes. Graduate/professional students who have Direct Loans, Stafford and/or Grad Plus are placed in an In-school deferment status based on the information reported by the school.

Does the Direct Loan program allow borrowers to defer payments?

Yes. The Direct Loan program offers the same deferments that are available to borrowers in the Federal Family Education Loan (FFEL) Program.

Who will my servicer be for the Direct Loan program?

Currently, the department of education contracts with ACS for servicing.

Who should I contact if I have questions about the Direct Loan program?

Please contact the financial aid office at 909-469-5353 or e-mail at finaid@westernu.edu

Last Updated:05/05/2009

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Borrower Benefits In the Direct Loan Program

Questions and Answers about the Direct Loan Program