Federal Direct Loans

All Federal Loans Are Now Federal Direct Loans

Federal Direct Student Loans are loans made directly from the Federal government. All Federal student loans are now direct student loans.

The term Federal Direct Student Loan came into usage before July, 2010.  Before that date, students seeking a Federal student loan had two choices: they could go straight to the Federal government, or they could go to a private lender who participated in the Federal Family Education Loan Program (FFELP).  In return for a subsidy for each loan and for a guarantee that each loan would be repaid by the government in the event of borrower default, the private lenders agreed to award and administer student loans with no credit check and the same low interest rate, transparent contracts, and flexible repayment options as offered by the government itself.

The Health Care and Education Reconciliation Act of 2012 ended the Federal Family Education Loan Program. After July 1, 2010, all Federal loans come direct from the Federal government and are administered by the government. The tens of thousands of outstanding FFELP loans are still administered by private guarantee companies. To underscore the difference, the Federal site for student loans information and administration of outstanding loans is www.direct.ed.gov. For students currently seeking Federal loans, the distinction between “direct” and FFELP or “guaranteed loans is obsolete.