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Federal Direct Loans|Student Financial Aid

Subsidized Federal Direct Loan /Unsubsidized Federal Direct Loan

Federal Direct Loans are low-interest loans for eligible students to help cover the cost of higher education.

  • Subsidized Federal Direct LoansSubsidized Federal Direct Loans are for students with financial need. You are not charged interest while you’re in school at least half-time and during grace periods and deferment periods.
  • Unsubsidized Federal Direct LoansYou are not required to demonstrate financial need to receive a Direct Unsubsidized Loan. Interest accrues (accumulates) on an unsubsidized loan from the time it’s first paid out. You can pay the interest while you are in school and during grace periods and deferment or forbearance periods, or you can allow it to accrue and be capitalized (that is, added to the principal amount of your loan). If you choose not to pay the interest as it accrues, this will increase the total amount you have to repay because you will be charged interest on a higher principal amount.

PLUS Federal Direct Loans

Graduate PLUS Federal Direct Loan are for graduate and professional degree students to help cover education expenses beyond the Subsidized/Unsubsidized Direct Loan award.

Parent PLUS Federal Direct Loan are for parents of dependent students to help pay their child's education expenses. The loan is in the parent(s) name, but disbursed to the student.

Federal Direct Loan General Information

Beginning with the 2010 summer session, the University of Wyoming will participate exclusively in the Federal Direct Loan (FDL) program. Students and parents will be required to use the Federal Direct Loan program for all federal student and parent loans.  While UW and the Wyoming community colleges have long been strong advocates of the Federal Family Educational Loan Program (FFELP), this decision was made easier by the fact that legislation is currently before the Senate (having already been passed by the House) to eliminate FFELP requiring all colleges and universities to process only Federal Direct Loans beginning July 1, 2010.  This, of course, necessitated and accelerated the decision to implement Federal Direct Loans prior to financial aid awarding for the 2010-11 academic year, using the 2010 summer session to test our processes before the start of the new academic year.  In addition, many lenders that UW students have selected for their loan funding over the years have indicated that lessening profits and increasing cash flow issues have forced them out of the student lending business.

The traditional Federal Family Educational Loan Program (FFELP) loans (i.e., Stafford Loan, Parent PLUS Loan, and Grad PLUS Loan) through banks, credit unions, and other student loan lending companies will no longer be processed at UW, effective the end of the 2010 spring semester. The Federal Direct Loan program has been in existence since the early 1990's. So, UW is joining an established loan program. Nationally this past year Federal Direct Loans accounted for about 40% of student borrowing with FFELP accounting for approximately 60% of the borrowing.

Federal Direct Loan Program Should Prove Positive for UW Students

  • Federal Direct Loans are fully integrated into the Federal student aid delivery process. The Free Application for Federal Student Aid (FAFSA) serves as the student loan application for Federal Direct Loans, eliminating the FFELP bank loan delivery method.
  • Federal Direct Loans eliminate the need for Preferred Lender Lists and the resulting potential conflicts of interests that occurred in a few instances in the FFELP bank loan program.
  • Unlike the FFELP bank loan program, the Federal Government is the single source of funds for Federal Direct Loans which should reduce a source of confusion for students.
  • Using a single point of service may lower administrative costs for UW.
  • As a Federal Direct Loan school, the OSFA will not be subjected to marketing by lenders for the federal loan programs.
  • Borrowers are free to consolidate their loans once they graduate.
  • Federal Direct Loans offer an income contingent loan repayment option with loan forgiveness after 25 years of repayment. Borrowers with an interest in working in relatively low-paying, community service jobs can do so without fear of defaulting on the repayment of their student loans.
  • Federal Direct Loans have a 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
  • Federal Direct Loans are never sold by the Federal Government. Student borrowers always know who holds their loans and what the terms are. FFELP loans are frequently sold, with promised benefits not honored by the new loan holder(s). The U.S. Department of Education states that in the last 4 years on average, each FFELP loan was sold 2.5 times.
  • View the Federal Direct Loan Comparison Chart designed to help you understand the differences between the Federal Direct Loan Program and FFELP.
  • For answers to the most commonly asked questions concerning Federal Direct Loans, including the steps each borrower needs to take in order to apply for a Direct Loan, click here.

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