-Students do not borrow from banks.
The Federal Government raises the loan funds
through its regular Treasury bill auctions, and the
Federal Government is the recipient of loan repayments.
-The process is simpler for borrowers. They
do not submit a separate loan application to a bank.
Instead, once they complete the Free Application for
Federal Student Aid, that's it.
Because borrowing is direct through the Federal
Government, Direct Loans are never sold. Borrowers
make a single loan payment to the Department of
Education for the life of their loans. It's
"one-stop-shopping" from loan application to payback.
-Students do not wait in lines to endorse bank
checks because schools receive loan funds electronically
from the Federal Government and disburse to students directly.
-Students borrow only what they need because
they are confident that if they need more, the funds will be
-Borrowers have more flexible repayment options with a Direct Loan,
including Income Contingent Repayment, and they can change
options when they need to without a fee.
-Schools do not wait for or process checks from
multiple lenders. Funds are transferred electronically from a
single source, the Federal Government, which means less
processing time at the school, so there is more time for
helping students, and better cash flow.
-The Federal Family Education Loan (FFEL) Program is not a private program.
Taxpayers pay billions of dollars annually to lenders, guarantee agencies, secondary
markets, and servicers in special allowances, administrative expense allowances,
default claims, and interest benefits. Without these subsidies, private lenders would
likely not participate.
-Schools have no greater liability while
participating in Direct Loans than they do while
participating in any other Title IV student financial aid program.
-Schools receive free software, training, and technical assistance.
In addition, Direct Loan schools are not charged for their electronic transactions, including
those related to obtaining student data through the Central Processing System.
Toll-free numbers ensure that students and schools receive the help they need.