Comparison of Federal Direct Loan Program and Federal Family Education Loan Program Features
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Federal Direct Loan Program (FDLP) |
Federal Family Education Loan Program (FFELP) |
| Front-end Customer Service |
Controlled by the Financial Aid Office
One Master Promissory Note
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Controlled by multiple partners (internal & external)
Each lender has own Master Promissory Note
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| Back-end Customer Service |
Single point of service for life of the loan
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Multiple loan servicing agents
Loans may be sold several times over life of loan
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| Simplicity of Processing |
One process overseen by the Financial Aid Office
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Multiple processes for multiple lenders
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| Availability of Capital |
Funds are guaranteed to be available from U.S. Government
No exclusionary determinations on schools or students
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Funding not guaranteed
Dependent upon credit markets and corporate strategic decisions
Can refuse to lend to schools and/or students
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| Loan Consolidation |
Once in grace period or in repayment can consolidate loans
Consolidating Perkins with DL will not lose Perkins grace period
Because DL loans are not sold, benefits are guaranteed
Consolidating Direct Loans in DL Consolidation, will not lose1% origination fee reduction received at disbursement
DL Consolidation repayment option includes income contingent repayment with any remaining balance forgiven after 25 years
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Once in grace period or in repayment can consolidate loans
Consolidating Perkins with FFELP loses Perkins grace period
If loans are sold, benefits are typically lost, occurs often
Few lenders continue to offer consolidation loans
No income contingent repayment option in FFELP consolidation
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| Repayment Incentives |
0.25% interest rate reduction for EFT payments
12 on-time payments needed to keep upfront rebate of 1%
Because Direct Loans are not sold, benefits are never lost
Interest is capitalized when borrower changes status
Capitalization is adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan.
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Some lenders offer 0.25% interest rate reduction for Electronic Fund Transfer (EFT) payments
Incentives for on-time payments typically require 36 to 48 months of on-time payments. Recent reports state that as few as 1% of borrowers qualify
If loans are sold, benefits are typically lost, occurs often
Interest is typically capitalized as frequently as allowed under law and regulations
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| Repayment Plans |
Standard, Graduated, Extended, Income-Based and Income-contingent repayment plans
Income-contingent plan confirmed with IRS and has a 25-year maximum with balance forgiven – better than IBR for some borrowers
May change repayment plans at any time without penalty
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Standard, Graduated, Extended, and Income-Based Repayment options
Ability to change repayment plans may be restricted to annually or student may lose benefits
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| Loan Fees |
0.5% net origination fee after 1% upfront rebate for Stafford
2.5% net origination fee after 1.5% upfront rebate for PLUS
No guarantee fee
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Up to 1% origination fee – depending on lender for Stafford
Up to 3% origination fee - depending on lender for PLUS
Up to 1% for guarantee fee - determined by guarantee agency
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| Interest Rates |
7.9% interest on Graduate PLUS and PLUS
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8.5% interest on Graduate PLUS and PLUS
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