Office of Student Aid : Loans : FFELP vs. Federal Direct Stafford
Federal Family Education Loan (FFEL) Program vs. Federal Direct Stafford Loan
Comparison of the FFEL Program vs. the Federal Direct Loan Program
The primary difference between the FFEL Program and Federal Direct Loan programs is the source of the loan application and loan funding, as listed below:
FFEL Program
This model combines the use of the three entities of lender, guarantor, servicer to provide loan funding.
Direct Loan
The Direct Loan model uses the U.S. Department of Education to provide the loan funding directly from the U.S. Treasury.
2008-09 Interest Rate and Fee Comparison table:
FFELP |
Direct |
|||
Interest |
Fees |
Interest |
Fees |
|
| Federal Subsidized Stafford | 6.0% |
0-2% |
6.0% |
0.5% |
| Federal Unsubsidized Stafford | 6.8% |
0-2% |
6.8% |
0.5% |
| Federal Parent PLUS | 8.5% |
3% |
7.9% |
2.5% |
| Federal Graduate PLUS | 8.5% |
3% |
7.9% |
2.5% |
Fees are subtracted from the gross amount of the loan disbursement. For example:
Gross Amount |
Net Amount |
|
| 0.5 % on First Year Stafford: | 1,750/1,750=3,500 | 1,742/1,741=3,482.50 |
| 2.5% on PLUS (Grad or Parent): | 5,000/5,000=10,000 | 4,875/4,875=9,750 |
Repayment Comparison
- Federal Stafford Loan: Both the FFEL Program and Direct Loan programs have a 6 month grace period and have a 10 year period in order to repay the loan.
- Federal Parent PLUS: A repayment period of 10 years begins immediately upon full disbursement of this loan in a given year. However, provisions to postpone repayment for up to four years is available in the Direct Lending program and through some private FFEL Program PLUS lenders.
- Federal Graduate PLUS: Both the FFEL Program and Direct Loan Programs have repayment deferred as long as you are enrolled at least half-time (5 credits). Once repayment begins, you will have up to ten years to pay off the loan.
Both the FFEL Program and DL Program for all loan types currently incorporate an interest rate reduction of an additional .25% interest if a person chooses to use auto debit in repayment.
Loan Forgiveness Programs
Both FFEL Program and Direct Lending offer loan forgiveness programs. However, recent legislation provides students in Direct Lending with a new partial forgiveness program for those who enter public service during their repayment period. For comprehensive information on loan forgiveness programs, visit the FinAid Web site.
For additional information, visit our Federal Direct Student Loan Program Questions and Answers section.