William D. Ford Federal Direct Loans

The William D. Ford Federal Direct Loan Program is a loan program in which the federal government is the lender. (The Stafford Loan Program is a loan program in which individual banks are the lenders.) Direct loans are owned by the federal government and loan repayments are made to the government through the Direct Loan Servicing Center. Direct loans are not sold to the secondary market as are many Stafford loans.

To apply for a William D. Ford Federal Direct loan, please contact the MU Student Financial Aid Office. A William D. Ford Federal Direct loan can be either subsidized or unsubsidized. A subsidized loan is one in which the borrower is not charged any interest before repayment begins and is not charged any interest during authorized periods of deferment. The amount of subsidized loan a borrower may receive is based on financial need. An unsubsidized loan is one in which the borrower is charged interest from the day the loan is disbursed. Interest is also charged during authorized periods of deferment. The amount of unsubsidized loan a borrower may receive is not based on financial need.


Repayment and Interest Information

The Federal Direct loan interest rate is variable and is adjusted each year on July 1. Please contact the Direct Loan Servicing Center at 1-800-848-0979 for information on your interest rate or visit their website at www.dl.ed.gov.By current law your annual interest rate cannot exceed 8.25%.

If you have Direct unsubsidized loans and you have not been paying the interest as it accumulates; such as during an in-school status; the accumulated interest will be capitalized when you enter repayment. Accumulate means to accrue. Capitalized means that the unpaid interest is added to the principal balance of your loans which will increase the total cost of repaying your loans because interest is now accumulating on a new and higher principal balance. It is best to pay your interest as it accumulates so that you can avoid capitalization.

Once you graduate or drop to less than half time status your Direct loan will start counting down its six month grace period. One to two months into your grace period you should receive a Repayment Plan Selection form. If you do not receive a Repayment Plan Selection form, you MUST contact the Direct Loan Servicing Center at 1-800-848-0979. Borrowers who do not choose a repayment plan are automatically put into the standard plan where your loan is scheduled to be repaid within 10 years.


Repayment Plans

STANDARD repayment plan - Your loan is repaid within 10 years at a $50 minimum monthly payment. For some borrowers, this plan results in the lowest total interest paid, because the repayment period is shorter than it would be under the other plans.
EXTENDED repayment plan - Your loan is repaid in 12-30 years depending on the total amount of Direct loans you owe when your loans go into repayment. The minimum monthly payment is $50. This plan generally results in a lower monthly payment than the Standard plan because you are taking a longer time to repay your loan. However, the total amount you repay over the life of your loan will be greater because you will pay more interest.
GRADUATED repayment plan - Your payments start out low, then increase every 2 years. The length of the repayment period is 12-30 years depending on the total amount of Direct loans you owe when your loans go into repayment. Generally, the amount you'll repay over the term of the loan will be higher under the graduated plan compared to the extended plan. However, if your income is low when you first leave school, but is likely to steadily increase, then the graduated repayment plan might be a good fit for you.
INCOME CONTINGENT repayment plan - Your monthly payment is based on your adjusted gross income. Please contact the Direct Loan Servicing Center at 1-800-848-0979 for more information regarding this repayment plan.

You can also change your repayment plan if you need to. However; the maximum repayment period under your new plan must be longer than the amount of time your loans have already been in repayment. Please check with the Direct Loan Servicing Center for further information on changing your repayment plan.

You can prepay on your Direct loan at any time and there is no prepayment penalty. Prepay means that you make extra payments on your loan. This will reduce the interest paid over the life of your loan. Prepayments are applied to charges and collection costs first and then to interest. Prepayments are applied to principal last.


Deferments

Disability Rehabilitation Program - Enrolled in course of study that is part of a rehabilitation program for disabled individuals.
Economic Hardship - must meet qualifications regarding income and federal loan debt level. Also available to Peace Corp volunteers. 3 year limit.
Graduate/Post-Graduate Fellowship - Engaged in graduate fellowship program. May not be in a medical internship or residency.
Student - must be enrolled at least half-time in a degree-seeking program at an eligible institution
Unemployment - Unemployed but seeking full time employment. 3 year limit.


Cancellations

Teacher at a low income school - Only for borrowers whose first loan was disbursed on or after 10/1/98.
Child Care Provider - Only for borrowers whose first loan was disbursed on or after 10/1/98.

The following have 100% cancellation:
Death of the borrower - certified copy of the death certificate is required.
Total and permanent disability - borrower is unable to work and earn money because of an impairment that is expected to continue indefinitely or result in death. Physician certification and documentation is required.