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Student Financial Aid
News and Events
Effective summer 2009, Auburn University will begin participation in the Federal Direct Loan Program. AU recently researched and compared the two federal student loan programs, the Federal Family Educational Loan Program (FFELP) and the Federal Direct Student Loan program. AU currently participates in the FFELP program for the Stafford and PLUS loans, but we wanted to be sure that the best possible program is in place. During our research it became evident that the Federal Direct Loan program was the better loan program for our students and parents for a number of reasons. The primary reason for our decision to change programs is assurance of funding. Over the last year, there have been unforeseen funding delays as a result of the volatile conditions in the credit market, as well as in the student lending industry.
How does this change affect me?
New and returning student borrowers will be required to eSign a Direct Loan Master Promissory Note.
New borrowers will be required to complete Direct Loan Entrance Counseling. Previous borrowers who have already completed Entrance Counseling with KHEAA will not be required to repeat Entrance Counseling with Direct Loans.
Direct lending offers numerous borrower benefits including:
Effective July 1, 2009, the government pays 1.00%
of your origination fee at disbursement, commonly called the loan rebate benefit. You are eligible to keep this benefit as long as you make the first 12 monthly payments of your student loan on time. The net disbursement of your loan will be 99.5%
of the principal.
There is a .25%
interest rate reduction for automatically debiting your payment from your checking account.
Repayment options include Standard, Extended, Graduated, and Income Contingent.
How does this affect my parent's Parent PLUS Loan?
Parents who wish to borrow a Parent PLUS Loan should refer to the summer 2009 and/or 2009-10 Direct PLUS Application under the Forms and Documents page for instructions.
Frequently Asked Questions
What will happen to the existing loans that I have borrowed from other lenders?
After graduation, you have a choice. You may either make individual payments to your previous lender(s) and to the Department of Education for your Direct Loans, or you can consolidate your loans into one simple payment. You may either consolidate all your loans with your previous lender, or with the Department of Education. However, many private lenders have discontinued their consolidation services.
If I have previously borrowed under the FFELP Program, do I have to complete another Master Promissory Note (MPN)?
Yes, you must sign a new Direct Loan Master Promissory Note. This will be the last promissory note you will have to sign as long as you continue to attend AU. Your Federal PIN is required in order to eSign.
How and when do I complete a Direct Loan Master Promissory Note (MPN)?
You should complete a Direct Loan Master Promissory Note as soon as possible if you plan to borrow a Subsidized or Unsubsidized Loan for summer 2009 or 2009-10.
I have previously completed Entrance Counseling with KHEAA under the FFELP Program, do I have to complete Direct Loan Entrance Counseling?
No, you will not be required to complete Entrance Counseling if you have already completed Entrance Counseling with KHEAA. New borrowers will be required to complete Direct Loan Entrance Counseling.
Where can I go to consolidate my loans?
You may explore your options, as discussed above, with either private lenders or with the Federal Direct Loan Consolidation Program.
Will the change in loan programs cause my prior loans go into repayment?
No, your prior Stafford loans will not go into repayment as long as you remain enrolled at least half time.
How do I contact the Direct Loan Program?
Direct Loan program: 1-800-848-0979
PIN Website: A Federal PIN is required in order to eSign your Direct Loan MPN.
Master Promissory Note: A Direct MPN is required of all new and current borrowers effective summer 2009.
Entrance Counseling: Federal Direct Entrance Counseling is required for new borrowers who have not already completed Entrance Counseling with KHEAA.
Account Information: Online billing information.
Loan Consolidation: Consolidate your FFELP loans with your Direct Loans when you graduate if desired.
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