Frequently Asked Questions
MidAmerica Nazarene University will join the Federal Direct Loan Program for the 2008/2009 aid year. The following questions and answers should help students and families understand how the change will affect them and how to proceed with the loan process.
Q. Why did MidAmerica decide to go with the Direct Loan Program now?
A. The university was approved for Direct Loans in 1994 but favorable loan conditions for students at the time did not warrant the change until recently when many lenders began leaving the student loan business due to tightening credit. This exodus meant that students might have difficulty finding a lender which in turn could delay the arrival of their loan funds.
Q. What is the difference between the Direct Loan Program and the Federal Family Education Loan Program (FFELP)?
A. The most important difference between the two programs is the source of loan funding. Direct loans come through the U.S. Department of Education and are obtained from the U.S. Treasury. This program offers student one point of contact because the loans are made, backed and serviced by the U.S. Department of Education. FFELP funds come from independent lenders (banks). The guarantor and servicer may be other agencies. Very often the student's loan is "sold" to another lender or servicer. This can be confusing for the student and can complicate the repayment process.
MidAmerica's new system will give students and the university just one contact point in case of problems or questions with loans.
Q. Do the interest rates differ for Direct Loans and FFELP?
A. In 2009-10 the percentage of interest rates and fees are as follows:
| Direct Loan Interest | Net Fees* | FFELP Interest | Fees | |
| Undergrad Subsidized Stafford Loan | 5.6% | .5% | 5.6% | 1-2% |
| Graduate Subsidized Stafford Loan | 6.8% | .5% | 6.8% | 1-2% |
| All Unsubsidized Stafford Loans | 6.8% | .5% | 6.8% | 1-2% |
| Parent PLUS loan | 7.9% | 2.5% | 8.5% | 3% |
| Graduate PLUS | 7.9% | 2.5% | 8.5% | 3% |
*The government pays 1.0% of your origination fee at disbursement. You are eligible to keep this benefit as long as you make the first 12 monthly payments of your student loan on time.
Q. How and when do I complete a Direct Loan Master Promissory Note?
A. We would like for you to complete a promissory note as soon as possible. You may do so at: https://dlenote.ed.gov/empn/index.jsp.
Q. If I have already completed a Direct Loan Master Promissory Note for another school, do I have to complete another one for MNU?
A. As long as you have been continuously enrolled at least half time, you will not have to complete a new note. However, if you have had a break in your enrollment for more than one semester, please contact our office to determine if you will need to complete a new note.
Q. What are the benefits of the Direct Loan Program?
A. There are several benefits in the Direct Loan Program:
- Provides a guaranteed source of funding for student loans.
- The option of an income-contingent repayment plan or an income-based repayment plan when a student enters repayment. This means a student has the option of ensuring that the loan repayment amount will always be affordable based on what the borrower's income will allow.
- Students in the Direct Loan Program who enter into public service jobs can have any remaining balance on the loans forgiven after 10 years of repayment while in public service work. (While this option does not exist in the FFEL Program, students who borrowed in that program can consolidate their loans into the Direct Loan Program in order to take advantage of this forgiveness.)
- The PLUS loan for parents and/or graduate and professional students through Direct Loan uses a more liberal credit assessment. More parents and graduate students may qualify for these programs under the Direct Loan Program than in the FFEL Program.
- The interest rate for the parent PLUS loan and the graduate PLUS loan is lower in the Direct Loan Program than in the FFELP.
- Most lenders offer benefits during repayment after a student makes payments for two to four years. Very few students end up receiving those benefits. In the Direct Loan Program students earn benefits after only one year.
- There is a .25% interest rate reduction for automatically debiting the payment from your checking account, once you enter repayment.
- If a student makes late payments under the Direct Loan Program, the late fees charged are less than the late fees charged by lenders in the FFELP.
Q. What if I find a lender that offers a better loan than the Direct Loan?
A. The interest rates and fees in the Direct Loan Program are comparable to those in the FFELP. MNU believes the student will benefit from the stability and ease of the DLP and that these benefits outweigh the possibility of a slightly lower fee in FFELP.
Q. Why can't I choose which lender to use for my student loan?
A. Most students just want to know that their loans will be there when they need them. Since fewer banks will continue to offer discounts and benefits while the student is in school, the best time for students to exercise a choice in lenders is when they enter repayment. A student can choose to consolidate their loans with any lender they wish during repayment.
Q. What happens if some of my federal student loans are from another lender and my new loans will be through the U.S. Department of Education?
A. The combination of FFELP and Direct Loan funding is not unusual. Since the choice to participate in either FFELP or Direct Loans is a decision that each school must make, it already happens that students could have loans in both programs. In order to make repayment to one source students may consolidate their loans when they enter repayment if they wish.
Q. How does the consolidation process work?
A. Once a student graduates or no longer attends school on a half-time basis, the student can contact the Direct Loan Program for an application for a Direct Consolidation Loan, which will combine the FFELP and Direct Loans into a single loan. When it is time to begin repayment, the borrower will be provided with several options concerning consolidation and will be able to choose which option has the greatest advantage. Students can move all their loans to Direct Loans or to FFELP. The choice is up to the student.
Q. I have heard that private lenders such as banks do a better job than the federal government in processing and servicing my loans. Is this true?
A. The U.S. Department of Education uses private contractors to help administer and service direct student loans. Some of those contractors could be the same ones a bank might use in servicing its loans. Therefore there is no guarantee private lenders will do a better job.
For more information on the Direct Loan program or questions about financial aid at MNU, contact Student Financial Services at 913-971-3298.
Contacts for the Direct Loan Program: 1-800-848-0979
PIN Website: http://www.pin.ed.gov/PINWebApp/pinindex.jsp
Entrance Counseling: https://www.dl.ed.gov/borrower/BorrowerWelcomePage.jsp
Master Promissory Note: http://dlenote.ed.gov/empn/index.jsp
Account Information: https://www.dl.ed.gov/borrower/BorrowerWelcomePage.jsp
