On March 30, 2010 President Obama signed “The Healthcare and Education Reconciliation Act of 2010” which made several changes to federal student aid programs. This new law will make significant investments in the Federal Pell Grant program as well as other student and higher education programs.  It will also eliminate the Federal Family Education Loan Program (FFELP) and prohibit any new FFELP loans from being disbursed after July 1, 2010.

Below are some frequently asked questions

Why is WCU changing from Federal Family Education Loan Program (FFELP) to the Direct Loan Program?
The US Treasury is a stable source of funding, as this program is not impacted by changes in the economy. Volatility in the credit markets and reductions in lender subsidies have caused many FFEL lenders to stop offering borrower benefits and reduce levels of customer service   The Direct Loan Program provides a single point of contact for managing student loans. Loans borrowed through the FFELP can be sold multiple times which can be confusing for the borrower during repayment whereas Direct Loans are not sold to third-party servicers or lenders.  Ultimately, Direct Loans will provide a more streamlined, stable and predictable borrowing experience for you.

Can the students still borrow with the same lender as last year?
No, if funds were borrowed via a Federal Stafford or Federal PLUS loan all additional loans that require funding after 7/1/2010 will be required to borrow through the Direct Loan program. This change will require a newly completed Master Promissory Note (MPN).

Loans were originally borrowed loans through the FFELP. Will I have to repay two different lenders?
Yes. Any loans previously borrowed from other lenders will be serviced by the original lender/servicer selected. However, many loans were sold to the Department of Education so it is realistic that students will end up repaying a different lender/servicer then the one from which was originally borrowed.
After graduation a student may choose to make individual payments to previous lender(s) and to the Department of Education for your Direct Loans, or can consolidate loans into one payment with the Department of Education. Please visit the Department of Education's website for more information about loan consolidation at loanconsolidation.ed.gov.

What is the difference between the Direct Loan Program and the FFELP?
The most important difference between the Direct Loan Program and the FFELP is the source of loan funding. Direct loans are funded through the US Department of Education using funds obtained from the US Treasury. This program offers students and parents one point of contact-the Department of Education. In the FFELP, funds come from banks and lenders and can result in multiple points of contact for students. There are also some differences in interest rate, fees and repayment options.

* Direct Loan Fee Rebate: The Subsidized and Unsubsidized Federal Direct Stafford Loans have a 1.0% origination fee and a 0.5% up-front interest rebate (for 2010-2011 academic year loans) on the origination fee - resulting in a net fee of .5%, which will be deducted from the gross amount of the loan borrowed. Once you enter repayment, if you make your first 12 monthly payments on time, the rebate becomes permanent. If you fail to make 12 on-time monthly payments; a charge for the initial rebate will be added to the outstanding balance of the loan.
The Federal Direct PLUS Loan has a 4% origination fee and a 1.5% up-front interest rebate (for 2010-2011 academic year loans) on the origination fee - resulting in a net fee of 2.5%, which will be deducted from the gross amount of the loan borrowed. Once in repayment, if the parent borrower makes the first 12 monthly payments on time, the rebate becomes permanent. If a parent borrower fails to make 12 on-time monthly payments; a charge for the initial rebate will be added to the outstanding balance of the loan.

** Forecasted

Will this change impact my current private alternative loan?
No, your private loans will continue to fund as originally forecasted.

What do I need to do now?
If you are due to graduate from any program at WCU between June – August 2010 nothing needs to be done.  If the graduation dates do not apply your first step would be to ensure that you have signed an electronic Master Promissory Note (MPN) to allow for a smooth transition of funds.  You will need your PIN (Personal Identification Number) provided to you via the Department of Education.  If you need to request your PIN or reactivate please proceed in doing so at https://studentloans.gov.  Once an established PIN is provided you will proceed in signing the electronic MPN using the website provided.   The website https://studentsloans.gov provides all the functionality you will need for the Direct Loan program and will assist you in managing your student loans. 

The Financial Aid Dept at WCU is here to assist you through this migration.  Please allow us to help answer any and all questions you may to allow for a smooth transition.