If Desired, Complete the Federal PLUS Loan Application

ASU Moving To Federal Direct PLUS Loans Beginning Fall 2008

The federal government operates two student loan programs, the Federal Family Education Loan Program (FFELP) and the Federal Direct Lending program. Both share the goal of making affordable student loan resources available, but differ in their funding source. FFELP is funded through the private sector marketplace with private third-party lenders providing the capital necessary to fund student loans. The Direct Lending program is funded directly by the U.S. Treasury and does not involve private third-party lenders.

Over the last several months a number of FFELP lenders have announced their exit from the program, including National Education, College Loan Corp., Collegiate Solutions, Finansure and others. It is very possible more will follow.

In light of the ongoing difficulties in the private student loan marketplace, ASU has decided to move all Federal PLUS Loans for loans periods beginning fall 2008 to the Federal Direct Lending program. This will consolidate all federal student loan programs at ASU, with the exception of Federal Perkins Loans, under the Federal Direct Lending program.

When applying for a Federal PLUS Loan for enrollment periods on and after fall 2008, you must complete a Federal Direct Lending promissory note.

Some of the reasons for making this change are listed below:

  • There is no conflict of interest in Direct Lending. Therefore, the illegal, unethical, and/or questionable behaviors in FFELP as reported by Congress, the attorneys-general, and the media, do not affect Direct Lending.

  • Direct Lending loans for parents and graduate students offer a low variable interest rate that will never exceed 9.00% (the current rate is 7.9%). FFELP has variable rates that are reset quarterly and most have a high interest cap (the current rate is 8.5%).

  • In Direct Lending repayment, borrowers can change their payment plans when they believe it is in their best interest to do so; in FFELP, it is only allowed annually, and only with permission of the lender.

  • Many marketed benefits in FFELP do not stay with loans when they are sold. Most FFELP loans are sold to other lenders. In fact, the U.S. Dept. of Education states that in the last four years on average, each FFELP loan was sold 2.5 times. Direct Lending loans are never sold. Benefits stay with Direct Lending loans and are part of the promissory note.

  • One other major difference is that defaulted loans can be consolidated with the Direct Loan Consolidation program, a feature not available in an FFELP consolidation.

  • Grad PLUS Loans can also be consolidated with any Federal Direct Stafford Loans a student has borrowed, which will allow students to have only one payment after graduation (private/alternative loans cannot be consolidated with federal loans).

  • The credit check for the Grad PLUS Loan will not be as stringent as that of most private/alternative loans, which often look at debt to income ratio.

  • Quick disbursement turnaround through Direct Lending, immediate vs. weeks means faster loan delivery during high volume periods in the fall and spring.

  • Bottom line, ASU’s proven Direct Lending track record of faster, more efficient loan processing, problem resolution, and disbursement of loan funds exceeds that of FFELP.

Instructions - Select Correct Academic Year

Non-FAFSA Filers (undergraduates only)

If you will not be filing a 2008-09 FAFSA and your parent wants to apply for a Federal Direct PLUS Loan, please contact Student Financial Assistance to submit a request to be awarded a Federal Direct PLUS Loan. Once awarded, please follow the directions above.

 

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