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• Why APU

William D. Ford Direct Loan Program

  Watch brief videos with answers to your questions on Financial Aid TV.

APUS switched participation from FFELP to the William D. Ford Direct Loan Program in 2009. Students will be notified prior to the effective date. This program replaced the Federal Family Educational Loan Programs including Stafford subsidized and unsubsidized loans as well as Parent Plus and Grad Plus loans. The student will no longer borrow through a bank but directly through the federal government. Students who already have a FFELP loan in place will continue with their bank of choice until the student’s next academic year.

The APUS process for awarding and disbursing loans will not change however the source of funds and servicing of repayments will be different. This change should not be noticeable.

There are many reasons for choosing to make this change. Among them are opportunities for federal loan repayment programs such as Teacher loan forgiveness and Public Service loan forgiveness programs.

Plus and GradPlus loan interest rate is 7.9% as opposed to 8.5% under the FFELP program as well as the continued stability of the program itself.

All grace period, deferment, and forbearance eligibility criteria are the same as for the FFELP program. Students who already have loans through a FFELP lender are encouraged to research consolidation options with the U.S. Department of Education.

If a student has loans from both programs, he/she may receive billing from two servicers, the FFELP servicer and the Direct Loan servicer. Consolidation will ensure a single bill for both or all loans received. To check on where your current loans are serviced go to the National Student Loan Data System. You can retrieve your loan history for all schools attended and federal loans received.

Why the Change?
As a result of many legislative changes over the past few years, as well as recent economic issues, FFELP loans are often more costly to borrowers than Direct Loans. Additionally, many FFELP loans are being sold by lenders to the federal government. We hope the points below will help you understand the rationale, and why APUS is making this change. We conducted extensive research to determine which program would be in the best interest of our student and parent borrowers. That research led us to the conclusion that the Direct Loan Program offers a better, more affordable, product.

During our research it became evident that the Direct Loan program was the better loan program for our students, at this time, for a number of reasons.

1. FFELP funds are disbursed through private lenders (such as banks, credit unions and non-profit lenders, etc.). Those lenders tend to inundate students with “direct to consumer” marketing that is often very confusing and over whelming. The Direct Loan program is funded directly by the Federal Government, eliminating the middle man and the confusion.
   
   
2. There are more repayment plans through the Direct Loan program, specifically, the income contingent plan. If a student does not repay their loans in 25 years, the government forgives the balance of the loan. In addition, the interest never exceeds 10% of the loan principle.
   
   
3. Direct Lending has the new Public Service Loan Forgiveness program that will forgive remaining debt after 10 years of eligible employment and qualifying loan payments for people working in key public service professions such as teaching, government, social work, law enforcement, and non-profit 501(c)(3) organizations. American Public University System is a Public Service focused educational institution.
   
   
4. The Direct Loan program is fully integrated with the federal financial aid process, simplifying the administration and oversight of the government funds. American Public University System already has the software and business process in place to administer this program.
   
   
5. Students will only have to track their loans with one lender instead of multiple lenders.
   
   
6. Reconciliation of the Federal Direct Loan program is required, and ensures that the students are receiving the funds and are only repaying what they actually received.
   
   
7. Benefits advertised are part of their Master Promissory note, unlike the benefits advertised with the FFEL program which are not a part of the FFEL promissory note. Borrowers are assured to receive borrower benefits only if they are part of the signed promissory note.
   
   
8. Loans can be sold in FFEL, negating their borrow benefits. Loans are never sold in the Direct Loan program.
   
   
9. Direct Loans can be consolidated in the Direct Loan program, or in the FFEL program. There is still a choice in repayment options for American Public University System students.

We will begin the Direct Loan program for the new Federal Student Aid (FSA) Intent Form created beginning June 1st. Students who have not completed the Virtual Financial Aid Office (VFAO) for prior starts will be automatically redirected to Direct Lending as their lender in the VFAO. When you reach the point of lender selection in the VFAO, you will have to sign new Master Promissory Notes. Over the short term, students currently borrowing in the FFELP program will continue with their current lender through the end of their current academic year. Afterwards, all students will be integrated into the Federal Direct Lending Program.