To provide loan capital directly from the Federal
government (rather than through private lenders) to vocational, undergraduate,
and graduate postsecondary school students and their parents.
TYPES OF ASSISTANCE:
Direct Loans. Place Cursor Here for Definition
USES AND USE RESTRICTIONS:
To help defray costs of education at a participating
school. Generally, a student borrower is not required to make any payments on
the principal of a direct subsidized or unsubsidized loan during the time the
borrower is in school. Repayment on these loans will begin six months after
the student ceases to carry at least one-half the normal full-time academic
workload. The repayment period for a Direct PLUS loan begins on the day after
the loan is fully disbursed. The repayment period for a Direct Consolidation
Loan begins on the day the loan is disbursed, unless the consolidation loan
includes a Direct Loan or a Federal Family Education Loan program for which
the borrower is in an in-school period at the time of consolidation. In this
case, the repayment period begins six months after the borrower ceases at
least half-time enrollment.
ELIGIBILITY REQUIREMENTS:
Applicant Eligibility: The applicant must be a U.S.
citizen, national, or person in the United States for other than a temporary
purpose. A student borrower must be enrolled or accepted for enrollment in a
degree or certificate program on at least a half-time basis as an
undergraduate, graduate, or professional student at a participating
postsecondary school. An otherwise eligible student is eligible for loans
during a single twelve-month period in which the student is enrolled in a
non-degree/non-certificate course of study that the school has determined is
necessary in order for the student to enroll in a program leading to a degree
or certificate. Under the Direct PLUS program, parents may borrow for
dependent students. Direct Unsubsidized and PLUS loans are non-need based
programs. In order to receive a Direct Subsidized Loan, all borrowers must
undergo a financial need analysis to determine eligibility for Federal
interest. A student that is presently enrolled at a participating institution
must be maintaining satisfactory academic progress in the course of study that
they are pursuing. The borrower may not owe a refund on any Title IV grant or
be in default on any Title IV loan received for attendance at any school. The
borrower must also file a Statement of Registration compliance (Selective
Service). Borrowers that are unable to obtain consolidation loans from lenders
under FFEL or who are unable to obtain a consolidation loan with income
sensitive repayment terms acceptable to the borrower from a lender, shall be
eligible for a Direct Consolidation Loan. Married couples may consolidate
eligible loans.
Beneficiary Eligibility:
Vocational, undergraduate, and graduate postsecondary school students and
their parents.
Credentials/Documentation:
The borrower will need certification of eligibility from the school and may be
required to supply documentation to verify the accuracy of data used in the
Direct Subsidized loan need analysis.
Pre-application Coordination: Information regarding
application procedures may be obtained from the school and the Department of
Education. This program is excluded from coverage under OMB Circular No.
A-102. This program is excluded from coverage under E.O. 12372.
Application Procedure:
Applications for the Direct Subsidized and Unsubsidized loans are obtained
from the school. Direct consolidation loan applications are obtained from the
Department of Education. To obtain a Direct Subsidized or Unsubsidized loan, a
student shall complete and submit a Free Application for Federal Student Aid (FAFSA).
All applications (with the exception of PLUS) for Direct Loans are processed
by the Central Processor System (CPS) in the initial step to determine a
student's Title IV eligibility. Schools will receive official output from CPS.
With this official output, the school will be able to assemble a financial aid
award package. A school participating in the Direct Loan Program may award
Direct Loans as part of the financial aid package. If a Direct Loan is not
included in the aid package, a student may contact the school to request loan
information.
Award Procedure: Schools
participate in the Direct Loan Program either by originating loans or by using
an alternative originator to originate loans. The school must certify the
borrower's eligibility to receive the funds. To obtain a Direct PLUS loan, the
parent shall complete an application and authorize a credit check. If the
parent does not have an adverse credit history the loan maybe disbursed.
Schools may disburse funds by crediting them directly to the student's account
at the school, issuing a check or cash, or by initiating an electronic fund
transfer.
Deadlines: None.
Range of Approval/Disapproval Time:
None.
Appeals: None.
Renewals: None.
ASSISTANCE CONSIDERATIONS:
Formula and Matching Requirements: None.
Length and Time Phasing of Assistance:
Applicants may apply for a loan for any year of school. There are four
repayment plans that are available for Direct Loan borrowers: (1) A standard
repayment plan with a fixed monthly payment amount over a period of up to 10
years; (2) an extended repayment plan with a fixed monthly payment amount paid
over a period of 12 to 30 years, depending on the amount owed; (3) a graduated
repayment plan with a monthly payment that will increase generally every 2
years. The repayment period varies from 12 to 30 years, depending on the
amount owed; and (4) except for Direct PLUS Loan borrowers, an income
contingent repayment (ICR) plan with a monthly payment that is adjusted
annually based on the income of the borrower and paid over a extended period
of time not to exceed 25 years. Any unpaid balance remaining after 25 years in
the ICR plan is forgiven by the Secretary of Education. However, under current
IRS rules, the amount written off is considered taxable income to the borrower
in the year it is written off. A legislative change removing this taxable
treatment has been sought.
POST ASSISTANCE REQUIREMENTS:
Reports: The Department will produce a variety of
management information system accounting, and financial management reports.
Schools must submit all reports required by 34 CFR 685 and 34 CFR 668.
Audits: Schools are
subject to examination and program review by the Department of Education.
Program reviews are performed on a fiscal year basis.
Records: Schools must
maintain proper administrative and fiscal procedures and all necessary records
as set forth in the regulations in 34 CFR 685 and 34 CFR 668. Schools must
keep all records involved in any loan, claim, or expenditure questioned by a
Federal audit until resolution of any audit questions. In addition to records
required by 34 CFR 668, for each Direct Loan received under 34 CFR 685 by or
on behalf of this student, a school shall maintain a copy of the loan
application and data electronically submitted to the Secretary.
FINANCIAL INFORMATION:
Account Identification: 91-0243-0-1-502.
Obligations: (Loan volume)
FY 01 $18,395,000,000; FY 02 est $20,047,000,000; and FY 03 est
$17,538,000,000. Direct Loan Consolidation volume: FY 01 $7,760,000,000; FY 02
est $8,643,000,000; and FY 03 est $5,307,000,000.
Range and Average of Financial Assistance:
A range is not available.
As of January 2001, over 1,200 schools were
participating in the program.
REGULATIONS, GUIDELINES, AND LITERATURE:
Student Loan Reform Act of 1993, Public Law 103-66, 34
CFR 685.
INFORMATION CONTACTS:
Regional or Local Office: See the list of Regional
Offices listed in Appendix 5 of the FFEL Catalog.
Headquarters Office:
Federal Direct Loans, Office of Student Financial Assistance, Department of
Education, Washington, DC 20202. Telephone: (800) 433-3243.
