Direct Federal Student Loan or FFELP loan?The Direct Federal Student Loan is your only choice, now. The Health Care and Education Reconciliation Act of 2010 has eliminated FFELP loans. So whether you want an unsubsidized Stafford loan or a subsidized one, it will be a Direct loan. With over 130 lenders pulling out of the FFELP and a financial hole to plug in the Pell grant program, Congress decided to eliminate it entirely and use the subsidies (which had gone to lenders) for education spending. Students last year were scrambling to find new sources for their loans. Many were not informed until the last moment that their chosen lenders were pulling out. After that experience, many schools started to switch to Direct loans. The way it worked, colleges and universities had to make a choice about which federal program they go with. Last year, over 300 schools switched from the FFELP to the Direct federal student loan program. (The most publicized ones have been Penn State, Michigan State and Northeastern and the latest big defector is the University of Connecticut.) So the only choice you have left is... Federal Loans for College or Private loans?This may not be the most crucial factor when choosing a college, but it can make a difference. Remember, a Direct loan is a U.S. Department of Education loan and a private loan is any loan that is not guaranteed by the U.S. government.If you choose a college that costs more than the federal loan limits allow, you may need private student loans to close the gap. These are some of the benefits and drawbacks for Direct loans:
And for parents who are thinking about parent college loans and for graduate students: the federal direct plus loans have an interest rate of 7.9%. If parents have a good credit score, they can do better by cosigning a loan offered by a private loan lender. If you have more than one direct federal student loan, they can be consolidated. Check the student loan consolidation calculator to see if this will give you a better interest rate. What Do You Think about Direct Federal Student Loans as the Only Option?Can you think of any other benefits or drawbacks? Will this be good for students? for schools? for taxpayers? Tell us what you think! Only Direct Student Loans...Other OpinionsClick below to see the opinions of other visitors to this page...
Direct Federal Student Loans are a Mess
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The Benefits of Direct Federal Student Loans
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A Direct Federal Student Loan Will Be Easier to Keep Track of
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Direct Federal Student Loans Means More Choice
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Direct Federal Student Loans are Easier
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The Direct federal student loan program has one huge advantage over private loans- multiple payment plans to suit all income levels. Aside from deferment and forbearance, you can also choose a monthly payment formula based on your income, rather than on the amount you owe. Private loans do not have this sort of arrangement available. return from Direct Federal Student Loan to federal student loans return to college loan consultant homepage
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