Federal Direct Loan Program - Frequently Asked Questions
What is changing for the 2010-2011 academic year?
Thomas M. Cooley Law School currently processes Federal Stafford and Grad PLUS loans through the Federal Family Education Loan (FFEL) program; where students borrow loans from lenders and banks. Beginning on July 1, 2010, Cooley will participate exclusively in the William D. Ford Federal Direct Loan Program. This program requires borrowers to obtain loan funds directly from the U.S. Department of Education.
Does this change impact me?
If you are a new or continuing student borrower who plans to borrow federal loans in the 2010-2011 aid year, this change will impact you. As of July 2010, all Federal Stafford and Grad PLUS loans will be processed through the Federal Direct Loan Program.
What do I have to do to get my loan funds for next year?
- Complete the FAFSA (Free Application for Federal Student Aid),
- Complete a NEW Master Promissory Note for the Direct Loan program with the Department of Education.
- Graduate Plus loans available to apply after June 1st www.studentloans.gov
You are encouraged to check your financial aid information through NetPartner Portal as well as read any and all letters you receive from the Financial Aid Office.
Why did Thomas M. Cooley Law School choose to move to the Direct Loan program?
On March 25, 2010, the U.S. House of Representatives and the U.S. Senate passed the The Health Care and Education Affordability Reconciliation Act of 2010 ("HCEARA"-H.R. 4872) . This bill makes major changes in several federal student aid programs AND mandates that, effective July 1, 2010, all federal student loans (Stafford, PLUS, and Grad PLUS) will be originated through the Federal Direct Loan Program. The Family Federal Education Loan (FFEL) Program, which permitted lenders to originate these loans, is eliminated effective June 30, 2010. President Obama signed the bill into law on March 30, 2010.
Will I still be able to continue borrowing through the same lender as last year?
No. All federal loans will be processed through the Federal Direct Loan Program.
How will this affect my prior year federal Stafford and Grad PLUS loans?
This change will NOT affect any prior year federal loans.
What happens to the Stafford loans I borrowed in previous years?
Will they still be deferred now that Thomas M. Cooley Law School is changing its loan process? Your Stafford loans from previous years will remain in deferment as long as you are enrolled at least half time. You are responsible for notifying your lender if your enrollment status changes.
How will repayment work if I have FFEL and Direct loans?
Many FFEL lenders have been selling their loan portfolios to the Department of Education for servicing during the past two years. You will have the option of making separate payments to each agency/ loan servicing company OR you may opt to consolidate all loans into one Federal Direct Consolidation Loan.
Where can I find information about who services my other Federal loans?
You can find information about the servicers of your other federal loans at www.nslds.ed.gov. You will need your pin number from the FAFSA to access this site.
Will I still be able to borrow private loans through an outside bank or lender?
Yes, if you meet the approval qualifications you will still be able to borrow private loans through an outside lender.
What are the four standard 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, but you have 25 years to repay it. Under the extended plan you have two options: for fixed or graduated payments. Fixed payments are the same amount each month you are in repayment, as with the standard plan, while graduated payments start low and increase every two years, as with the graduated plan below.
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 payment obligation 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), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:
- 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
- 20% of your monthly discretionary income.
**Note: 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. The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged.
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