USC remains committed to providing all eligible students with the most stable financial aid funding available. Due to the volatility of current credit markets, cuts in government subsidies and the uncertain future of pending legislation that may force a change in the nation’s student loan delivery system, the university is switching its participation from the Federal Family Education Loan Program to the Federal Direct Loan Program for the 2010-11 academic year.

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General Information
1. Why is USC switching to the Federal Direct Loan Program and what does this mean for me?

USC remains committed to providing all eligible students with the most stable financial aid funding available. Due to the volatility of current credit markets and cuts in government subsidies, many lenders have stopped participating in the Federal Family Educational Loans (FFEL) Stafford and PLUS loan programs, drastically reducing loan options for students and their families. With funding provided by the U.S. Treasury, the Federal Direct Loan program offers a stable funding source shielded from changes in the national economy. Federal Direct Loans will also provide students and parents a single point of contact for the management of loans. Your loans will never be sold to new lenders or servicers.

For those borrowing Federal Direct Parent PLUS and Federal Direct Graduate PLUS loans, interest rates will be slightly lower and credit assessments may be more lenient than those for previous loan programs.

All federal student and parent loans processed at USC for the 2010-11 academic year, including summer 2010, will be processed under the Federal Direct Loan Program.

2. How do Federal Direct Loans differ from the Federal Family Education Loan (FFEL) Program?

The primary difference between loan programs is the source of funding. All Federal Direct Loans are funded by the U.S. Department of Education, via the U.S. Treasury. Interest rates, fees and repayment options will be the same for all borrowers. In contrast, the FFEL program derived funds from various banks and private lending institutions, creating multiple points of contact and, at times, varying interest rates, fees and repayment options.

3. What are the benefits of the Federal Direct Loan Program?
The Federal Direct Loan Program offers:

• Stable funding. Because the program is backed by the U.S. Treasury, it is shielded from the volatility of the credit markets or from banks potentially withdrawing their participation.
• A lower interest rate for PLUS loans. Through Direct Lending, the interest rate drops from 8.5 to 7.9 percent.
• An Upfront Origination Fee Rebate that encourages responsible borrowing and repayment. Upon repayment, you must make your first 12 monthly payments on time for the rebate to become permanent.
• A simpler, streamlined process in which you are no longer required to select a lender or servicer.
• No loan sales. Your loan(s) will never be sold.
• A Public Service Loan Forgiveness program for students working full-time in low-income government and not-for-profit public service jobs.
4. Will there be any change to interest rates and fees under the Federal Direct Loan Program?
• Interest rates for Federal Direct Subsidized and Unsubsidized Stafford Loans will remain the same as those for FFEL Stafford loans.
• The interest rate for Federal Direct Parent PLUS and Graduate PLUS Loans will drop from 8.5 to 7.9 percent.

Please refer to the table below for a comparison of fees.

Fees Comparison: Federal Direct Loan Programs vs. Federal Family Educational Loan (FFEL) Programs
(for loans disbursed after 07/01/2010)
Direct Loans
FFEL Loans
Loan Type
Origination Fee
Rebate*
Origination Fee after Rebate
Loan Type
Default Fee
Federal Direct Subsidized Stafford Loans
1%
0.5%
0.5%
Federal Subsidized Stafford Loans
1%
Federal Direct Unsubsidized Stafford Loans
1%
0.5%
0.5%
Federal Unsubsidized Stafford Loans
1%
Federal Direct Parent PLUS Loans and Graduate PLUS Loans
4%
1.5%
2.5%
Federal Parent PLUS Loans and Graduate PLUS Loans
4%
*The rebate is applied when the loan is disbursed, increasing the disbursement amount. When you enter repayment, you must make your first 12 monthly payments on time for the rebate to become permanent. If payments are not made on time, the rebate amount is added to the loan balance.
5. I am a continuing USC student or the parent of a continuing USC student. Will I be able to               continue borrowing from the same FFEL lender I borrowed from last year?

No. If you wish to borrow a Federal Stafford, Federal Parent PLUS or Graduate PLUS loan at USC for the 2010-2011 academic year, including summer 2010, you will be required to borrow through the Federal Direct Loan Program.

6. Where can I get more information about the Federal Direct Loan Program?
For more information about the Federal Direct Loan program, please visit www.studentloans.gov.
Applying for a Federal Direct Stafford Loan
1. How do I apply for a Federal Direct Stafford Loan?

The process is essentially the same as it was for FFEL loans.  To apply for a Federal Direct Stafford Loan, you must apply for need-based financial aid by filing a Free Application for Federal Student Aid (FAFSA). Once your eligibility has been determined, the Financial Aid Office will send you a Financial Aid Award Summary. If it indicates you are eligible for a Federal Direct Stafford Loan, you will need to complete some additional steps to ensure proper receipt of your funds.

For more information, please visit www.usc.edu/financialaid/loans and click on "Federal Direct Stafford Loans."

2. Will I need to complete a Stafford Loan Request Form?

You will not be required to submit a Stafford Loan Request Form if you are a continuing USC student who borrowed your maximum Federal Stafford Loan eligibility for the 2009-2010 academic year. Once your 2010-2011 financial aid eligibility has been determined, USC will automatically process your Federal Direct Stafford Loan for your maximum eligibility.

You will need to submit a Stafford Loan Request Form if you:

• Are a continuing USC student who borrowed less than your maximum Federal Stafford Loan eligibility for the 2009-2010 academic year;
• Are a continuing student who wishes to borrow less than your maximum eligibility for the 2010-2011 academic year; or
• Are a first-time borrower at USC.

Once your financial aid eligibility has been determined, you will receive an e-mail reminder to complete a Stafford Loan Request Form, if you have not already submitted one. Request forms are available at www.usc.edu/financialaid.

3. Will I need to complete a Federal Direct Stafford Loan Master Promissory Note (MPN)?

All borrowers must sign a Federal Direct Stafford MPN, even if they have signed an FFEL Stafford MPN in a prior year.

You will be able to sign your MPN after the Financial Aid Office processes your loan and notifies the Department of Education of your eligibility. You will receive an e-mail reminder at that time.

If you previously borrowed a Federal Direct Stafford Loan at another school, and your existing Federal Direct Stafford Loan MPN is not more than 10 years old, you will not be required to complete a new MPN.

4. When can I sign my Federal Direct Stafford Loan MPN? How will I be able to sign it?

The USC Financial Aid Office must first process your loan application and notify the Department of Education of your eligibility.

Please allow three (3) weeks for the loan application to be processed.  You should then receive an e-mail notification, which will outline your next steps.

For your convenience, your MPN can be signed electronically at www.studentloans.gov.  You will need the Personal Identification Number (PIN) issued to you by the Department of Education when you completed your FAFSA. If you have forgotten your PIN, you will be able to retrieve it through www.studentloans.gov.

5. How soon will funds be disbursed after I sign the MPN? How will I receive these funds?

If you are registered for classes and have met all other eligibility requirements, funds should be credited to your account within 3-5 business days.  Loans for summer semester will not be credited earlier than your first day of class.  Loans for fall and spring semester will be credited no earlier than 10 days before your first day of class.  You can monitor your USC billing account online at www.usc.edu/epay to verify when your loan funds are credited.

Applying for Federal Direct PLUS Loan
1. How do I apply for a Federal Direct PLUS Loan?

Graduate students and parents of dependent undergraduates may apply for up to the full Cost of Attendance, less any other financial aid received, as determined by the Financial Aid Office.

Graduate students will be required to apply for need-based financial aid by filing a Free Application for Federal Student Aid (FAFSA). In addition, you will need to submit a Supplemental Form and a Graduate PLUS Loan Request Form to the Financial Aid Office. They must first exhaust their full Federal Stafford Loan eligibility to be considered for a PLUS loan. 

Parents of dependent undergraduates may apply for Federal Direct Parent PLUS Loans with or without applying for need-based financial aid.  They will need to submit a Parent PLUS Loan Request Form to the Financial Aid Office.  Undergraduates who do not apply for need-based financial aid will need to submit a Supplemental Form.

For more information, please visit www.usc.edu/financialaid/loans and click on "Federal Direct Parent PLUS Loan for Undergraduate Students" or "Federal Direct Graduate PLUS Loan."

2. Will I need to complete a PLUS Loan Request Form?

Yes. Graduate Students must complete a Graduate PLUS Loan Request Form.

Parents of dependent undergraduates must complete a Parent PLUS Loan Request Form. Additionally, students who did not apply for need-based financial aid will need to submit a Supplemental Form. All forms can be found at www.usc.edu/financialaid and should be submitted to the USC Financial Aid Office.

3. Will I need credit approval?

Yes, but you no longer need to select and contact a lender. The Financial Aid Office will process your loan request and forward your information to the Department of Education, which will perform the mandatory credit check. Under the Direct Loan Program, the criteria for evaluating your credit history may be more lenient than under the previous FFEL program.

4. Will I need to complete a Federal Direct PLUS Loan Master Promissory Note (MPN)?

All borrowers must sign a Federal Direct PLUS MPN, even if they have signed an FFEL PLUS MPN in a prior year.

You will be able to sign your MPN after your loan has received credit approval. You will receive an e-mail reminder at that time.

If you previously borrowed a Federal Direct PLUS Loan at another school, your existing Federal Direct PLUS Loan MPN is not more than 10 years old, and you were approved without an endorser, you will not be required to complete a new MPN.

5. When can I sign my Federal Direct PLUS Loan MPN?  How will I be able to sign it?

The USC Financial Aid Office must first process your loan application and notify the Department of Education of your eligibility.

Please allow three (3) weeks for the loan application to be processed and any necessary credit checks to be performed for PLUS Loan applications.  You should then receive an e-mail notification, which will outline your next steps.

For your convenience, your MPN can be signed electronically at www.studentloans.gov.  You will need the Personal Identification Number (PIN) issued to you by the Department of Education when you completed your FAFSA. If you have forgotten your PIN, or if you are a parent who did not file a FAFSA, you will be able to retrieve or obtain a PIN through www.studentloans.gov.

6.  How soon will funds be disbursed after I sign the MPN?  How will I receive these funds?

If you are registered for classes and have met all other eligibility requirements, funds should be credited to your account within 3-5 business days.  Loans for summer semester will not be credited earlier than your first day of class.  Loans for fall and spring semester will be credited no earlier than 10 days before your first day of class.  You can monitor your USC billing account online www.usc.edu/epay to verify when your loan funds are credited.

Entrance Loan Counseling
1. If I have already completed entrance loan counseling at USC under the FFEL program, will I be required to complete it again for the Direct Loan Program?

No. If you previously borrowed an FFEL loan and completed loan counseling online while at USC, you will not be required to complete it again to receive direct loans.

2. If this is my first loan at USC, will I be required to complete entrance loan counseling?

Yes. If you are a first-time borrower at USC, you will need to complete entrance loan counseling. We will send you an e-mail reminder when it is time.

First-time undergraduate borrowers will need to complete an in-person session, as well as an online session at www.studentloans.gov.

First-time graduate borrowers will be required to complete only an online session at www.studentloans.gov.

Your Previous Loans
1. What happens to the loans I borrowed previously through other lenders? Will I have to repay multiple lenders/servicers?

Any previous federal loans you have borrowed will continue to be maintained by the lender(s) with whom you signed your Master Promissory Note, or by the current holder of the loan if it was sold by your lender. For a detailed record of your federal loans, visit the National Student Loan Database at www.nslds.ed.gov.

PLEASE NOTE: As a result of the national credit crisis, some of your previous federal loans may have been sold to the Department of Education Loan Purchase Program under the Ensuring Continued Access to Student Loans Act (ECASLA). ECASLA does not, however, permit lenders to sell all your outstanding loans to the federal government. Only those loans from 2008-09 and 2009-10 may be sold, so you may have multiple servicers for any previous loans.

The Department of Education has pledged to service all Federal Direct Loans and loans acquired under the Loan Purchase Program via a single Direct Loan Servicer.

After you graduate or cease to be enrolled at least half-time, you will have the option to consolidate all existing federal loans through the Federal Direct Loan Consolidation Program. Consolidation will allow all your federal loans to be maintained by one servicer. Be aware, however, that non-federal (private) loans may not be included in a Federal Consolidation Loan. For more information, please visit loanconsolidation.ed.gov.

2. Will the Stafford Loans I borrowed in previous years still be deferred now that USC is changing its loan process?

Yes. Your loans from previous years will continue to be deferred as long as you are enrolled at least half-time in an approved course of study. USC reports enrollment information electronically through the National Student Clearinghouse and will continue to do so.

It is your responsibility to notify your previous lender, the Direct Loan Servicer and the USC Registrar’s Office of any changes to your anticipated graduation date, name or address.

Loan Repayment Information


Students who have recently graduated, dropped below half-time enrollment or have otherwise withdrawn from studies can find more information about loan repayment and borrower rights and responsibilities at www.usc.edu/admission/fa/loans/consolidation.html.

All students are encouraged to attend an exit loan counseling session during their last semester before leaving the university. These sessions offer valuable information about loan repayment, consolidation, budgeting and managing your credit. Sessions are generally offered in November and April each year. Please visit www.usc.edu/admission/fa/loans for more information.

Contact Information
1. How do I contact the Direct Loan Program or find additional information?

To receive a Personal Identification Number (PIN) required to sign your FAFSA or Master Promissory Note (MPN): www.studentloans.gov.

For Direct Loan Entrance Counseling (new borrowers only): www.studentloans.gov

To access and sign your Master Promissory Note (Stafford and PLUS loans):
www.studentloans.gov
1-800-557-7394

Federal PLUS Loan Credit Appeals and Endorser Applications:
www.studentloans.gov
1-800-557-7394

To access your personal account information:
www.studentloans.gov
1-800-848-0979

For more information about loan consolidation under the Federal Direct Loan Program:
www.loanconsolidation.ed.gov
1-800-557-7392

For more information about your previous federal loans, including FFEL program loans:
www.nslds.ed.gov
1-800-4-FED-AID

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