Federal Direct Loans

Beginning summer 2010, all Federal Direct , Parent PLUS and Graduate PLUS loans will be processed through the Federal Direct Loan program.

What are the benefits of the Federal Direct Loan Program? 

 

The Direct Loan Program offers:

· A guaranteed source of funding for students loans;

· A lower interest rate on Parent PLUS and Graduate Plus loans

· A single point of service for students during repayment;

· Additional repayment options for students and interest rate reductions for on time payment

 

Why did LMU move to the Direct Loan program?

 

On March 25, 2010, the U.S. House of Representatives and the U.S. Senate passed the Health Care and Education Affordability Reconciliation Act of 2010 ("HCEARA"-H.R. 4872). This bill included major changes in several federal student aid programs AND mandated that, effective July 1, 2010, all federal student loans (Direct, PLUS, and Grad PLUS) must be originated through the Federal Direct Loan Program. The Family Federal Education Loan Program (FFELP), which permitted private lenders to originate these loans, is eliminated effective June 30, 2010. President Obama signed the bill into law on March 30, 2010.

 

How will repayment work if I have FFEL and Direct loans?

 

Many FFEL lenders have been selling their loan portfolios to the Department for 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 can also 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 (alternative) loans through an outside lender?

 

Yes, if you meet the qualifications you will still be able to borrow private loans through an outside lender.

 

What is the Public Service Loan Forgiveness Program?

 

There is a new loan forgiveness program for public service employees. Under this program, the amount forgiven is the remaining outstanding balance of principal and accrued interest on an eligible Direct Loan for a borrower who is not in default and who makes 120 monthly payments on the loan after October 1, 2007. The borrower must be employed full-time in a public service job during the same period in which the qualifying payments are made and at the time that the cancellation is granted. Full time employees of LMU may qualify for Public Service Loan Forgiveness. Click here for more information.

 

What do I do if I have defaulted on a federal student loan and want to receive financial aid?

If you defaulted on a federal student loan, you cannot receive further Title IV aid until you resolve the default. You can resolve the default in the following ways:

  • Repay the loan in full or consolidate the loan: If a defaulted loan is successfully consolidated, it is counted as paid in full. However, if the loan holder simply writes off the entire loan, the loan is not paid in full, and you remain ineligible for Title IV funds.
  • Make satisfactory repayment arrangements: After you make six consecutive, full, voluntary payments on time, you may regain eligibility for Title IV funds. Voluntary payments are those made directly and do not include payments obtained by federal offset, garnishment, or income or asset execution. You may regain eligibility under this option only one time.
  • We must have written documentation that you have made satisfactory repayment arrangements from the loan holder.
  • Loan rehabilitation: Although you can regain eligibility for all federal student aid by making satisfactory repayment arrangements, the loan is still in default. A loan is rehabilitated once you make nine full, voluntary payments on time (no later than 20 days after the due date) within 10 consecutive months.
    • After a loan is rehabilitated, you will not be in default anymore, and you will have all the normal loan benefits, such as deferments.  

For more information on resolving your defaulted federal student loan, click here.

Am I eligible to receive financial aid if I filed for bankruptcy?

If you include a non-defaulted federal student loan in an active bankruptcy claim, so that collection on the loan is stayed:

  • You are eligible for aid as long as you have no loans in default (including the stayed loan).

If you list a defaulted federal student loan or grant overpayment in an active bankruptcy claim:

  • You are eligible for further federal student aid funds if you provide documentation from the holder of the debt stating it is dischargeable.

If you have had a federal student loan or grant overpayment discharged in bankruptcy:

  • You remain eligible for federal student loans, grants, and work-study.
  • You do not have to reaffirm a loan discharged in bankruptcy in order to be eligible. The Bankruptcy Reform Act of 1994 prohibits denial of aid based solely on filing for, or having a debt discharged in, bankruptcy.

If you filed Chapter 7 or Chapter 13 bankruptcy, you may have your loan discharged only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents.  

For more information on bankruptcy and receiving federal student aid click here.

Am I eligible to receive a federal student aid if I had a loan discharged due to total and permanent disability?

If you had a prior loan discharged due to a total and permanent disability and wish to take out another federal student loan or wish to receive a TEACH grant, you must submit the following.

  • A certification from your physician that the borrower has the ability to engage in substantial gainful activity.
  • A signed statement acknowledging that the new federal student loan or TEACH Grant service obligation can’t later be discharged for any present impairment unless it deteriorates so that the borrower is again totally and permanently disabled. (Please contact the Financial Aid Office to obtain a copy of this statement).

If you are in the three-year post-discharge monitoring period:

  • You must resume payment on the discharged loan before receipt of the new loan or TEACH grant and provide our office with proof from your loan servicer that you have resumed repayment.
  • If you received a discharge based on a determination from the VA, you are not required to resume payment on the discharged loan.

If a defaulted loan was conditionally discharged and then reinstated:

  • You must make satisfactory repayment arrangements before receiving federal student aid. You must provide our office with proof of your satisfactory repayment arrangements with your lender.

For more information on Total and Permanent Disability click here.

Am I eligible for federal aid if I have borrowed over my federal loan limits?

You are not eligible for new aid until the over-borrowing of loans has been resolved with satisfactory payment arrangements.

  • You can sign an agreement acknowledging the debt and affirming your intention to repay the excess amount as part of the normal repayment process. This is called a reaffirmation.
  • A federal loan consolidation can also be considered a satisfactory repayment arrangement and acts the same as reaffirmation.

Contact your loan servicer directly for instructions to complete the reaffirmation process.

The reaffirmation process includes the following steps:

  1. Either the institution or the student contacts the loan servicer and explains that the student has inadvertently over-borrowed and wishes to reaffirm the debt.
  2. The loan servicer sends the student a reaffirmation agreement.
  3. The student reads, signs, and returns to the servicer the reaffirmation agreement.
  4. The loan servicer sends the student confirmation that the reaffirmation agreement has been accepted. The student or loan servicer must provide a copy of the reaffirmation confirmation to the school.
  5. The inadvertent over-borrowing is considered to have been resolved as of the date the loan servicer receives the student’s signed reaffirmation agreement.

 

Additional Resources:

For more information, visit our Glossary of Loan Related Terms or Other Loan Related Links.

 

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