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Financial Aid

Frequently Asked Questions

Why is UALR changing to the Direct Loan Program?

  • Federal Direct Lending provides a stable source of student loan funding because the funds are provided by the U.S. Treasury.
  • The Direct Lending Program is not impacted by changes in the economy.
  • Direct Lending provides a single point of contact for managing student loans.
  • Loans are never sold in the Direct Loan Program. Loans through the FFELP Program can be sold multiple times which can be confusing for the borrower upon repayment.
  • Direct Lending offers a more lenient credit assessment for Grad PLUS and Parent PLUS loan programs.


What is the difference between the Direct Loan Program and the Federal Family Education Loan Program (FFELP)?

The most important difference between Direct Lending and the FFELP program is the source of loan funding. Direct loans are funded through the U.S. Department of Education using funds obtained from the U.S. Treasury. This program offers students and parents one point of contact because the loans are made, backed, and serviced by the U.S. Department of Education. In the FFEL program, funds come from banks and lenders creating multiple points of contact for students. There are also some differences in interest rate, fees and repayment options which make the Direct Loan Program more beneficial for borrowers.


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

No, if you borrow a Federal Stafford, Federal Parent PLUS or Federal Grad PLUS loan for the 2010-2011 academic year, you will be required to borrow through the Direct Loan program. While this change will require you to complete a new Master Promissory Note (MPN) for the Federal Stafford and Federal Grad PLUS loan, we feel confident that the new streamlined process will benefit all UALR student borrowers.


What will happen to the existing loans that I have borrowed from other lenders?

Any previous loans you borrowed from another lender will be serviced by the lender/servicer you selected when you signed your original MPN.

After graduation you have a choice to make individual payments to your previous lender(s) and to the Department of Education for your Direct Loans, or you can consolidate your loans into one payment with the Department of Education. Please visit the Department of Education’s website for more information about Loan Consolidation.


Do I have to complete another Master Promissory Note?

Yes, you must sign a new Direct Loan Master Promissory Note (MPN) because you will be borrowing from a new lender, the Department of Education. You will need to have your Federal PIN number that was used to complete your FAFSA in order to electronically sign the MPN.


How and when do I complete a Direct Loan Master Promissory Note?

If you plan to borrow a Stafford Loan next year, we encourage you to complete your MPN as soon as possible. If you are going to borrow a PLUS loan, please wait until 75 days prior to the start of classes to apply for the loan. The PLUS loan requires a credit approval, and the approval is only valid for 90 days. The MPN can be completed at


What is the interest rate and fees charged in Direct Loans?

Interest rates and fees for 2010-2011 are:

Direct Loan Program Interest Fees*
Subsidized Federal Direct Loan (for undergraduates only) 5.6% 0.5%
Subsidized Federal Direct Loan (for all other students) 6.8% 0.5%
Unsubsidized Federal Direct Loan 6.8% 0.5%
Federal Direct PLUS or Graduate PLUS Loan 7.9% 2.5%

*Direct Loan Fee Rebate: The Subsidized and Unsubsidized Federal Direct Loans have a 1.0% origination fee and also offer a .5% rebate on the origination fee – resulting in a net fee of .5%, which will be deducted from the gross amount of the loan borrowed. Once you enter repayment, if you make your first 12 monthly payments on time, the rebate becomes permanent. If you fail to make 12 on-time monthly payments; however, a charge for the initial rebate will be added to the outstanding balance of the loan.

The Federal Direct PLUS Loan has a 4% origination fee and also offers a 1.5% rebate on the origination fee – resulting in a net fee of 2.5%, which will be deducted from the gross amount of the loan borrowed. The 12 on-time payment rule also applies to the PLUS loan in order to keep the rebate.


I have previously completed entrance counseling under the FFELP Program, do I have to complete Direct Loan entrance counseling?

Yes, you will be required to complete entrance counseling even if you have previously completed it for a similar Federal loan under the FFEL program.


Will the Stafford Loans I borrowed through my bank or lender in prior years still be deferred now that UALR is participating in the Direct Loan Program?

As long as you are enrolled in school on at least a half-time basis, your prior year federal loans will continue to be deferred. Enrollment information is reported to lenders by the school on a regular basis.


What steps should I take to obtain a Parent PLUS loan?

Under the Federal Direct PLUS loan program parents may borrow up to the full cost of their student’s education minus other financial aid received. Credit checks are required however the Direct Lending Program uses a more lenient credit assessment.
You should not apply through any lender other than the Department of Education. Applying through multiple lenders will cause unnecessary hits on your credit report and delay processing of your loan. Application instructions are provided on our website to apply for a PLUS loan. After you have completed an application for the PLUS loan, UALR will submit your information to the Department of Education for a credit check so there is no need to be preapproved through another lender.


How do the Direct Loan repayment options differ from FFELP?

With the exception of one, all repayment options offered to FFELP borrowers are also available for Direct Loan Borrowers. There are five repayment options available for Direct Loans
Income Contingent Repayment
Income-Based Repayment


How do I contact the Direct Loan Program?

The U. S. Department of Education Direct Loan Program Customer Service phone number is 800-848- 0979.


Direct Loan Program Website:

Updated 6.8.2010