Questions & Answers about Direct Loans
Q1:
Why is UT Austin switching to direct loans?
Q2:
Who may borrow direct loans?
Q3:
For what purpose may I borrow a direct loan?
Q4:
What do I have to do to get a direct loan?
Q5:
Will I have to undergo a credit check to borrow a direct loan?
Q6:
When will UT Austin begin processing direct loans?
Q7:
What are the primary differences between FFELP and direct loans?
Q8:
How much per year do UT Austin students and parents borrow?
Q9:
How much may I borrow in direct loans?
Q10:
How much debt do students take on while attending UT Austin?
Q11:
What does it cost to borrow a direct loan?
Q12:
What are the repayment terms and conditions for direct loans?
Q13:
Do UT Austin students have difficulty repaying their loans?
Q14:
If I previously borrowed FFELP loans from private lenders, will I have to repay two different lenders now?
Q15:
What happens to the loans I previously borrowed from private lenders under FFELP? Are they still deferred once UT Austin changes to the Direct Loan Program?
Q16:
Does this affect my access to private (alternative) educational loans made by private lenders, or B-On-Time and College Access Loans made by the State of Texas?
A:
UT Austin is making this move to ensure continuity of service for its federal student loan recipients
in light of uncertainties surrounding the future of the bank-based Federal Family Education Loan Program
(FFELP). Many lenders have withdrawn from FFELP in the last two years, and federal legislation that could
bring FFELP to an end as early as July 2010 is pending before Congress.
A:
Eligibility requirements for direct loans are the same as for FFELP loans. In general, undergraduate,
graduate, and professional students may borrow direct loans. The parents of dependent undergraduates
may borrow direct PLUS loans, as may graduate and professional students.
As with FFELP and other forms of federal student aid, you may also need to meet certain specific federal
eligibility requirements to qualify for direct loans.
A:
As in FFELP, your direct loan proceeds must be used to help cover the cost of attending UT Austin,
including tuition, books and supplies, room and board, transportation, and miscellaneous living expenses.
A:
The process you will go through to obtain a direct loan will be almost identical to the process used
to obtain your FFELP loan.
As in prior years, students and parents will need to complete the Free Application for Federal Student
Aid (FAFSA) to establish their loan eligibility. March 31 is the priority date for completing FAFSAs
for UT Austin’s summer, fall and spring semesters.
Beginning in March, the Office of Student Financial Services (OSFS) will notify students and parents
about their loan awards via OSFS’s Electronic Financial Aid Notice (E-FAN). As in the past, students
and parents will have the opportunity to accept or decline loan awards via the E-FAN.
If they accept their loans, students will be required to complete on-line entrance counseling to learn
their rights and responsibilities as direct loan borrowers. Both students and parents will be required
to complete on-line Master Promissory Notes in which they pledge to repay their loans as required by
federal law and regulation.
Students and parents who complete entrance counseling and Master Promissory Notes before tuition is due
will continue to have the opportunity to pay tuition with their loan proceeds. UT will continue its
practice of depositing any remaining amounts directly into their bank accounts.
Go to the U.S.
Department of Education's Direct Loan Program web site for more information on direct loans.
A:
Neither FFELP nor the Direct Loan Program requires credit checks for students seeking Subsidized or
Unsubsidized loans.
Borrowers of Graduate and Parent PLUS loans are subject to credit checks, and they may not borrow if
they have adverse credit histories — defined as being 90 or more days delinquent on any debt,
or having been the subject of a default determination, bankruptcy discharge, foreclosure, repossession,
tax lien, wage garnishment, or write-off on any federal student loan debt within 5 years of the date
of the credit report.
A:
UT Austin will begin processing direct loans in March 2010 for students and parents who accept their
Direct Subsidized/Unsubsidized and PLUS loans for Summer 2010 and subsequent semesters.
A:
The principal difference is that FFELP loans are made by private, federally subsidized lenders, while
direct loans are made by the U.S. Department of Education.
Students and parents who previously borrowed FFELP loans will need to complete a new promissory note before
obtaining direct loans, and students will be required to complete entrance counseling before they may receive
such loans. These are federal, not UT Austin requirements. The Office of Student Financial Services (OSFS)
will provide instructions on how students and parents can go about completing these requirements as it awards
Subsidized/Unsubsidized and PLUS loans for Summer 2010 and future semesters.
The other difference is a 7.9% interest rate on direct PLUS loans, which is 0.6% lower than the interest rate
private lenders may charge on PLUS loans made under FFELP. Otherwise, direct and FFELP loans have the same
interest rates and repayment terms and conditions.
A:
In 2008-2009, UT Austin students and parents borrowed almost $231 million in federal Stafford and PLUS Loans.
This was more than 89% of all the loan dollars disbursed to UT Austin students in 2008-09 and more than 53%
of all the financial aid received by UT Austin students in that year.
| 2008-2009 Federal Stafford and PLUS Loans at UT Austin | ||
|---|---|---|
| Loan | Unduplicated Number of Borrowers | Amount |
| Subsidized Stafford Loan | 16,670 | $86,569,302 |
| Unsubsidized Stafford Loan | 12,925 | $82,461,366 |
| Parent PLUS Loan | 3,472 | $43,736,681 |
| Graduate PLUS Loan | 1,621 | $17,875,372 |
| Total | Does Not Apply | $230,642,721 |
A:
Annual and aggregate loan limits are the same under both FFELP and the Direct Loan Program. For Stafford
loans, these limits are:
| Federal Stafford Loan Limits | ||||
|---|---|---|---|---|
| Annual Limit | Aggregate Limit | |||
| Total | Subsidized Maximum | Total | Subsidized Maximum | |
| Dependent Undergraduates | ||||
| Freshmen | $5,500 | $3,500 | $31,000 | $23,000 |
| Sophomores | $6,500 | $4,500 | ||
| Juniors and Seniors | $7,500 | $5,500 | ||
| Independent Students | ||||
| Freshmen | $9,500 | $3,500 | $57,500 | $23,000 |
| Sophomores | $10,500 | $4,500 | ||
| Juniors and Seniors | $12,500 | $7,500 | ||
| Graduate and Professional Students | $20,500 | $8,500 | $138,500 | $65,500 |
The maximum PLUS loan amount a student or parent may borrow is equal to the student's cost of attending UT Austin
minus other financial assistance (including Stafford loans borrowed by the student) that the student has been or
will be awarded. The Office of Student Financial Services (OSFS) determines the amount of PLUS loan a student or
parent may borrow.
A:
Undergraduates who borrowed took out an average of $21,368 — including federal, state and private
(alternative) loans -- before graduating from UT Austin in May 2009. This average was higher for graduate
and professional (law and pharmacy) students who graduated in May 2009.
| Average Amount Borrowed by May Graduates | |
|---|---|
| Degree | Amount |
| Bachelor Degrees | $21,368 |
| Graduate Degrees | $43,235 |
| Professional Degrees | $70,959 |
A:
Three components drive the cost of borrowing Stafford and PLUS loans — interest rates, federal
origination fees and federal default fees:
- Interest Rates. Interest rates on all loans made under FFELP and the Direct Loan Program are fixed for the life of the loan. For information on direct loan interest rates, go to the Federal Student Aid's interest rate web site.
- Fees. The fees charged in the Direct loan program are generally the same as in FFELP. For specific information about fees, please see your Master Promissory Note.
A:
As is the case for FFELP loans, repayment must begin six months after the student for whom the loan was
borrowed graduates, drops out, or otherwise stops being enrolled on at least a half-time basis. You make
payments on a monthly basis for 10 to 30 years depending on which repayment plans you choose.
If you do not choose a repayment plan, you will be placed in a Standard Repayment Plan, with fixed monthly
payments for up to 10 years. In the past, most borrowers stayed with Standard Repayment Plans, although
other plans are available to them, including the new Income-Based Repayment (IBR) Plan. Under IBR, the
amount you repay each month is one-twelfth of 15% of the difference between your Adjusted Gross Income and
150% of the Department of Health and Human Services Poverty Guidelines, adjusted for family size.
If you have trouble making payments, you may take advantage of several loan management options. These include:
Students and parents that have trouble making payments may take advantage of several loan management options.
These include:
- Changing your repayment plans, which can provide you with more time to repay and lower your monthly payments. You may change repayment plans at any time;
- Deferments, which allow you to temporarily stop making payments on your loans if you return to college, who are unemployed, or who suffer economic hardship; and
- Forbearance, if you do not meet deferment eligibility requirements but need to temporarily stop making payments or make smaller payments.
A:
No. The latest data from the U.S. Department of Education show a 2.7% default rate for UT students who
borrowed Stafford loans. While this is an increase from last year’s rate of 1.9%, it remains much lower
than the state rate (which rose from 7.2% to 9.3%), the national rate for all postsecondary institutions
(which rose from 5.2% to 6.7%) and the national rate for 4-year public colleges and universities (which
rose from 3.4% to 4.3%).
A:
Direct loans are serviced by the U.S. Department of Education, so you could end up having to make payments
to both the U.S. Department of Education and your private lenders. However, you also have the option of
consolidating all of your FFELP and direct loans. Students may consolidate after they graduate or leave
school. Parents may consolidate at any time. If you choose this option, the loans you consolidate will
be paid in full and all of your payments will be made to the Direct Loan Program.
A:
As long as students remain enrolled in school on at least a half-time basis, prior FFELP loans will continue
to be deferred. UT Austin will continue to report enrollment information to FFELP lenders on a regularly
scheduled basis to assure that such deferments remain active.
A:
No. This change only affects federal Stafford and PLUS loans.
Related Links:
Contact OSFS