Direct Loans


The Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872) eliminated the Federal Family Education Loan Program (FFELP) and requires all schools to participate in the William D. Ford Direct Lending Program. This means that East Central University Financial Aid must switch to the William D. Ford Direct Lending Program for student loans. Currently, loan funding comes from lenders that participate in the federal loan program; with this change, funding will now be obtained through one direct lending source, the U.S. Department of Education.  This scheduled change will affect students utilizing the Federal Stafford Loans (subsidized and unsubsidized) as well as the Federal Parent Plus Loan.

Beginning with the Summer 2010 Semester, all students who plan on receiving student loans must complete a new master promissory note regardless of previously completed promissory notes. This includes any Plus loans granted to parents as well.  In addition, all students must complete new entrance counseling.

 Entrance Counseling

All students, even returning student borrowers, will need to complete a new Direct Loan Master Promissory Note (MPN) and new Direct Loan Entrance Counseling. Complete the MPN and entrance counseling on-line at


For more information on the William D. Ford Direct Loan Program visit our web page at or go to


Direct Lending Information - FAQs

Does this change impact me?

If you are a new or continuing student borrower who plans to borrow federal loans in the 2010-2011 aid year, this change will impact you. As of summer 2010 all Federal Stafford, Grad PLUS and Parent PLUS loans will be processed through the Direct Loan Program.

What are the benefits in the Direct Loan Program? 

The Direct Loan Program offers:

  • A guaranteed source of funding for students loans
  • A single point of service for students during repayment

  • Additional repayment options for students and interest rate reductions for on time payments
  • The Public Service Loan Forgiveness Program


Will I still be able to continue borrowing through the same lender as last year? 

No. As of summer 2010 all Federal Stafford, Grad PLUS and Parent PLUS loans will be processed exclusively through the Direct Loan Program. You will be borrowing directly from the government. You may still apply for and receive private loans from any bank offering those.


Are there any differences in interest rates and fees between the two programs?

The interest rate for Direct Subsidized and Unsubsidized loans is the same as that of the FFEL program, 6.8%.


What happens to the Stafford loans I borrowed this year and in previous years? 

Your Stafford loans from previous years should remain in deferment as long as you are enrolled at half time status or above for your program. You are responsible for notifying your lender if your enrollment status changes.


How will repayment work if I have FFEL and Direct loans? 

You will have to make separate payments to each lender. You may also choose to consolidate with the Direct Loan Program if you would like to make only one payment each month.


Will there be any additional requirements for me to receive my aid from the Direct Loan Program?

Students must complete the Free Application for Federal Student Aid (FAFSA) and the East Central University Loan Acceptance Form.  All students, even returning student borrowers, will need to complete a new Direct Loan Master Promissory Note (MPN).


How can I receive Direct Loans? 

US Citizens or permanent residents can apply for Direct Loans by completing both the FAFSA ( and the East Central University Loan Acceptance Form. The Financial Aid Office will process your application and send you an award notification. Once you have accepted your loans by completing and returning the Loan Acceptance Form and completed a new Direct Loan MPN your loans should be set to arrive in a timely manner.


Why do I have to complete another Master Promissory Note (MPN)?

You will have to complete a new MPN because you will be borrowing from a new lender - the federal government.  This will be the last promissory note you will have to sign as long as you continue to attend East Central University.


Where can I find information about who services my other federal loans?

You can find information about the servicing of your other federal loans at You will need your pin number from the FAFSA to access this information.


Will I still be able to borrow private loans through an outside lender? 

Yes, if you meet the qualifications of the individual lender and the amount you request does not exceed your cost of attendance, you will still be able to borrow private loans through an outside lender. You will be responsible for complying with the rules of the lender you choose.

East Central University recommends that you exhaust all grant, scholarship, and federal loan options prior to obtaining a private student loan.


How can I consolidate my loans with the Direct Loan Program? 

Students can go to for information about loan consolidation. You are not able to consolidate while in school.


Do I have to sign a new Master Promissory Note? 

Yes, all new and returning students will need to complete a new Master Promissory Note. You will need your FAFSA pin number.


What is Public Service Loan Forgiveness? 

There is a new loan forgiveness program for public service employees. Under this program, the amount forgiven is the remaining outstanding balance of principal and accrued interest on an eligible Direct Loan for a borrower who is not in default and who makes 120 monthly payments on the loans after October 1, 2007. The borrower must be employed full-time in a public service job during the same period in which the qualifying payments are made and at the time that the cancellation is granted. Students can go to the Public Service Loan Forgiveness fact sheet for more information on the terms and conditions of the program and to understand what types of public service jobs qualify.


What are the five repayment options?

  • Standard Repayment - With the standard plan, you will pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you will have up to 10 years to repay your loans.
  • Extended Repayment – To be eligible for the extended plan, you must have more than $30,000 in Direct Loan debt, but you have 25 years to repay it. Under the extended plan you have two options: fixed or graduated payments.

1.     Fixed Payments- Fixed payments are the same amount each month you are in repayment, as with the standard plan, while graduated payments start low and increase every two years, as with the graduated plan below

2.     Graduated Repayment- With this plan your payments start out low and increase every two years. The length of your repayment period will be up to ten years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.

  • Income Contingent Repayment – This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse’s income if you are married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:

1.    ​​The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or

2.    20 percent of your monthly discretionary income.

If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized (added to the loan principal). The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged. As of July 1, 2009, graduate and professional student Direct PLUS Loan borrowers are eligible to use the ICR plan. Parent Direct PLUS Loan borrowers are not eligible for the ICR repayment plan.

To calculate your estimated loan payments, go to the ICR plan calculator


  • Income Based Repayment (IBR) – Effective July 1, 2009
    Income Based Repayment is a new repayment plan for the major types of federal loans made to students. Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans. For more important information about IBR go to IBR Plan Information.


 Contacts for Borrowers
General Federal Student Aid Information                         800/433-3243
Direct Loan Servicing Center                                           800/848-0979
Direct Loan Consolidation Center                                    800/557-7392
Federal Student Aid Ombudsman                                    877/557-2575
Direct Loan Information
Online Direct Loan Master Promissory Note
Online Direct Loan Entrance Counseling
Online Direct Loan and FFEL Exit Counseling

COD School Relations Center – Applicant Services         800/557-7394
Overnight Address for Credit Decision Appeal Process Documentation

U.S. Department of Education
Attn: Credit Appeals Team
2429 Military Rd., Suite 200
Niagara Falls,


   Origination Fees and Up-Front Interest Rebate
 Loan Type  First Disbursement Date  Origination Fee  Up-Front Interest Rebate
 Direct Subsidized & Unsubsidized on/after 07/01/2009 & before 07/01/2010  1.5 %  1.0%
 Direct Subsidized & Unsubsidized  on/after 07/01/2010  1.0%  0.5%
 Direct PLUS  N/A  4.0%  1.5%


Interest Rates
Loan Type Fixed Interest Rate

Direct Subsidized for Undergraduate Students:

     First disbursement on/after 07/01/2009 & before 07/01/2010

     First disbursement on/after 07/01/2010 & before 07/01/2011

     First disbursement on/after 07/01/2011 & before 07/01/2012





Direct Subsidized for Graduate/Professional Students

Direct Unsubsidized (for all students)

Direct PLUS 7.9%
Direct Consolidation weighted average (maximum 8.25%)