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The primary difference between Direct Loans and the Federal Family Education Loan Program, (Stafford Loan) is the source of funding. While FFELP loans are funded through a variety of banks and private lending institutions, Direct Loan funds are borrowed directly from the federal government. Additionally, with Direct Loans borrowers have a single contact, the Direct Loan Servicing Center, for everything related to the repayment of the loan.​


Direct Loans are federally insured low-interest education loans for students and parents. These include the Direct Subsidized Loan, the Direct Unsubsidized Loan, the Direct Parent Loan for Undergraduate Students (PLUS) and the Direct Graduate PLUS Loan programs for graduate and professional students.​


The Direct Loan Program will provide AAMU students with a reliable source of educational loan funding. While volatility in the credit markets and reductions in lender subsidies have caused some lenders to stop making federal student loans or to stop offering borrower benefits and other services, the Direct Loan Program is not impacted by such changes in the economy and can therefore provide a stable and predictable loan process.


If you are a new or continuing student or parent borrower who plans to borrow a federal loan for the 2010-2011 academic year, this change will affect you. After the 2009-2010 academic year, AAMU will no longer process any loans through the Federal Family Education Loan Program.


All current year and 2010 summer session loans will be processed through the current Federal Family Education Loan-Stafford Loan process.


Your first Direct Loan will be for the fall 2010 semester.


No, federal and state grants are not affected.


The interest rate for Federal PLUS Loans is 7.9% in the Direct Loan program (compared to 8.5% in the FFEL program). Interest rates for Federal Unsubsidized and Subsidized Loans are the same in both programs. See the following chart for comparison of fees between the two programs:


Loan Type Gross Fee Minus Rebate* Equals Net Fee Charged for 2010-2011
Direct Student Loan - Federal 1.5% 1%*  .5%
FFEL - Federal Stafford .5% to 1.5% (varies by lender) N/A .5% to 1.5%(varies by lender)
Direct Loan - PLUS 4% 1.5% 2.5%
FFEL - PLUS 3% to 4% (varies by lender) N/A 3% to 4% (varies by lender)



Students will continue to complete the Free Application for Federal Student Aid (FAFSA) on the web, as they have 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 (or the Graduate PLUS loan if you are a graduate or professional student) will need to complete a separate PLUS loan application. We will have more information about this process in the weeks to come.


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


You may choose to complete your new Direct Loan MPN at any time, even before you have received your award letter! This process can be completed online at Direct Loan Master Promissory Note. You will need your federal PIN in order to electronically sign your MPN. This is the same PIN you use to sign the FAFSA. More information on your PIN is available online at Federal PIN Website.


No, if you have previously completed entrance loan counseling for the federal Stafford Loan Program, you will not be required to complete it for the Direct Loan Program. All new borrowers are required to complete entrance counseling. Direct Loan Entrance and Exit Counseling


You will borrow through the Direct Loan program as well. We will have more information about this process within the next few weeks.


I am a graduate or professional student and plan to borrow a Graduate PLUS Loan in 2010-2011. I usually get pre-approved through my lender. What should I do this year?  You will borrow your Graduate PLUS Loan through the Direct Loan program as well.


No. If you wish to receive a federal student loan for the 2010-2011 academic year, you will be required to borrow through the Direct Loan program.


Any loan(s) you borrowed from another lender either here at AAMU or at another institution will be maintained by the lender/servicer with whom you signed your original MPN. Your Direct Loan will be serviced by the Department of Education. You will receive correspondence and payment information from both the Department of Education and your prior lender/servicer.


Once you graduate or choose not to attend school at least half time, you will have the option to combine your existing federal education loans into one new loan with the Federal Consolidation Loan Program. With a consolidation loan, you will have only one payment to make each month and one lender. However, there are situations in which consolidation will not be the best repayment alternative. We encourage you to contact your prior lender for more information about repayment before you consolidate.