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Direct Loans

On March 30, 2010, President Obama signed the Health Care and Education Reconciliation Act of 2010 (HCERA), which, among other things, makes significant changes to the federal student loans programs. One of the changes is the termination, as of July 1, 2010, of the authority for lenders to make new loans under the Federal Family Education Loan (FFEL) Program. Therefore, beginning July 1, 2010, all new Stafford, PLUS, and Consolidation loans can only be made under the William D. Ford Federal Direct Loan (Direct Loan) Program.

What does this mean for students?

  • Current loans remain with student's chosen lender and can be repaid to that lender and will not go into repayment as long as the student remains enrolled at least half-time.
  • Once a student's loans go into repayment they will have a choice to make separate payments to each lender they currently have and to the federal government (they are a separate lender) or the student will be able to consolidate their loans into one payment.
  • Students can find out about consolidation through the Department of Education at
  • Students can keep track of what loans they have borrowed through private lenders and the Department of Education through the National Student Loan Data System's (NSLDS) at
  • Beginning July 1, 2010 all new loans will be guaranteed and disbursed by the Department of Education (DOE).
  • Selecting a lender outside of the Department of Education is no longer an option.

What is the next step?

  1. Complete a Free Application for Federal Student Aid (FAFSA) at
  2. Obtain a Personal Identification Number (PIN) to sign the FAFSA. The PIN will also be used to complete step 3.
  3. If a student wishes to be considered for a loan, (A) go to and complete the loan entrance interview, (B) complete a new Master Promissory Note (MPN). Because the DOE is considered a new lender, the student will be required to fill out a new Master Promissory Note (MPN).

What are the differences between the Federal Direct Loan Program and the Federal Family Education Loan Program (FFELP)?

The Federal Direct Loan Program allows students to borrow directly from one provider of funds-the U.S. Department of Education. All loan funds are received electronically from one source-the U.S. Department of Education. There is one electronic application process at the U.S. Department of Education. The program offers students one single source of contact because these federal loans are made, guaranteed and serviced by the U.S. Department of Education.