Federal Direct Student Loans
Published on AidPage by IDILOGIC
on Jun 24, 2005
Purpose of this program:
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.
Possible uses and use restrictions...
To help defray costs of education at a participating school. Repayment on Federal Stafford loans begins six months after the student ceases to carry at least one-half the normal full-time academic workload. Repayment of principal and interest on PLUS loans generally begins within 60 days of disbursement of the last installment, repayment of a consolidation loan begins within 60 days after the proceeds of the loan have been used to discharge the liability of the borrower on the loans selected for consolidation. Deferments and forbearance of payment may be granted for certain authorized periods.
Who is eligible to apply...
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.
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.
Note:This is a brief description of the credentials or documentation required prior to, or along with, an application for assistance.
About this section:
This section indicates who can apply to the Federal government for assistance and the criteria the potential applicant must satisfy.
For example, individuals may be eligible for research grants, and the criteria to be satisfied may be that they have a professional or scientific degree,
3 years of research experience, and be a citizen of the United States. Universities, medical schools, hospitals, or State and local governments may also be eligible.
Where State governments are eligible, the type of State agency will be indicated (State welfare agency or State agency on aging) and the criteria that they
Certain federal programs (e.g., the Pell Grant program which provides grants to students) involve intermediate levels of application processing, i.e., applications
are transmitted through colleges or universities that are neither the direct applicant nor the ultimate beneficiary. For these programs,
the criteria that the intermediaries must satisfy are also indicated, along with intermediaries who are not eligible.
How to apply...
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.
Note: Each program will indicate whether applications are to be submitted to the Federal headquarters, regional or local office, or to a State or local government office.
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.
Note: Grant payments may be made by a letter of credit, advance by Treasury check, or reimbursement by Treasury check.
Awards may be made by the headquarters office directly to the applicant, an agency field office, a regional office,
or by an authorized county office. The assistance may pass through the initial applicant for further distribution by
intermediate level applicants to groups or individuals in the private sector.
Deadlines and process...
When available, this section indicates the deadlines for applications to the funding agency which will
be stated in terms of the date(s) or between what dates the application should be received.
When not available, applicants should contact the funding agency for deadline information.
Range of Approval/Disapproval Time
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.
This section indicates whether any prior coordination or approval is required with governmental or nongovernmental units
prior to the submission of a formal application to the federal funding agency.
In some cases, there are no provisions for appeal. Where applicable, this section discusses appeal procedures or allowable rework time for resubmission
of applications to be processed by the funding agency. Appeal procedures vary with individual programs and are either listed in this section or
applicants are referred to appeal procedures documented in the relevant Code of Federal Regulations (CFR).
In some instances, renewal procedures may be the same as for the application procedure, e.g., for projects of a non-continuing nature renewals will be treated as new, competing applications; for projects of an ongoing nature, renewals may be given annually.
Who can benefit...
Vocational, undergraduate, and graduate postsecondary school students and their parents.
About this section:
This section lists the ultimate beneficiaries of a program, the criteria they must satisfy and who specifically is not eligible. The applicant and beneficiary will generally be the same for programs that provide assistance directly from a Federal agency. However, financial assistance that passes through State or local governments will have different applicants and beneficiaries since the assistance is transmitted to private sector beneficiaries who are not obligated to request or apply for the assistance.
What types of assistance...
Financial assistance provided through the lending of Federal monies for a specific period of time, with a reasonable expectation of repayment. Such loans may or may not require the payment of interest.
How much financial aid...
Range and Average of Financial Assistance
A range is not available.
This section lists the representative range (smallest to largest) of the amount of financial assistance available. These figures are based upon funds awarded in the past fiscal year and the current fiscal year to date. Also indicated is an approximate average amount of awards which were made in the past and current fiscal years.
(Loan volume, net of consolidations) FY 03 $18,626,000,000; FY 04 est $19,496,000,000; and FY 05 est $20,649,000,000. Direct Loan Consolidation volume: FY 03 $6,657,000,000; FY 04 est $6,276,000,000; and FY 05 est $6,320,000,000.
The dollar amounts listed in this section represent obligations for the past fiscal year (PY), estimates for the current fiscal year (CY), and estimates for the budget fiscal year (BY) as reported by the Federal agencies. Obligations for non-financial assistance programs indicate the administrative expenses involved in the operation of a program.
Note: This 11-digit budget account identification code represents the account which funds a particular program.
This code should be consistent with the code given for the program area as specified in Appendix III of the Budget of the United States Government.
Examples of funded projects...
About this section
This section indicates the different types of projects which have been funded in the past. Only projects funded under Project Grants or Direct Payments for Specified Use should be listed here. The examples give potential applicants an idea of the types of projects that may be accepted for funding. The agency should list at least five examples of the most recently funded projects.
In 2003, over 3.2 million loans had been made.
Criteria for selecting proposals...
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.
Formula and Matching Requirements
A formula may be based on population, per capita income, and other statistical factors. Applicants are informed whether there are any matching requirements to be met when participating in the cost of a project. In general, the matching share represents that portion of the project costs not borne by the Federal government. Attachment F of OMB Circular No. A-102 (Office of Management and Budget) sets forth the criteria and procedures for the evaluation of matching share requirements which may be cash or in-kind contributions made by State and local governments or other agencies, institutions, private organizations, or individuals to satisfy matching requirements of Federal grants or loans.
Cash contributions represent the grantees' cash outlay, including the outlay of money contributed to the grantee by other public agencies, institutions, private organizations, or individuals. When authorized by Federal regulation, Federal funds received from other grants may be considered as the grantees' cash contribution.
In-kind contributions represent the value of noncash contributions provided by the grantee, other public agencies and institutions, private organizations or individuals. In-kind contributions may consist of charges for real property and equipment, and value of goods and services directly benefiting and specifically identifiable to the grant program. When authorized by Federal legislation, property purchased with Federal funds may be considered as grantees' in-kind contribution.
Maintenance of effort (MOE) is a requirement contained in certain legislation, regulations, or administrative policies stating that a grantee must maintain a specified level of financial effort in a specific area in order to receive Federal grant funds, and that the Federal grant funds may be used only to supplement, not supplant, the level of grantee funds.
Post assistance requirements...
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.
This section indicates whether program reports, expenditure reports, cash reports or performance monitoring are required by the Federal funding agency, and specifies at what time intervals (monthly, annually, etc.) this must be accomplished.
Schools are subject to examination and program review by the Department of Education. Program reviews are performed on a fiscal year basis.
This section discusses audits required by the Federal agency.
The procedures and requirements for State and local governments and nonprofit entities are set forth in OMB Circular No. A-133.
These requirements pertain to awards made within the respective State's fiscal year - not the Federal fiscal year,
as some State and local governments may use the calendar year or other variation of time span designated as the fiscal year period,
rather than that commonly known as the Federal fiscal year (from October 1st through September 30th).
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.
This section indicates the record retention requirements and the type of records the Federal agency may require.
Not included are the normally imposed requirements of the General Accounting Office.
For programs falling under the purview of OMB Circular No. A-102, record retention is set forth in Attachment C.
For other programs, record retention is governed by the funding agency's requirements.
Higher Education Act of 1965, Title IV, Part D, as amended.
This section lists the legal authority upon which a program is based (acts, amendments to acts, Public Law numbers, titles, sections, Statute Codes, citations to the U.S. Code, Executive Orders, Presidential Reorganization Plans, and Memoranda from an agency head).
Regulations, Guidelines, And Literature
Student Loan Reform Act of 1993, Public Law 103-66, 34 CFR 685.