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Difference Between Direct Plus Loans And FFEL Plus Loans

Article on Difference Between Direct Plus Loans And FFEL Plus Loans

Colleges choose which type of loan programs they want to participate in, and it is usually either a Direct Plus Loan program, or a Federal Family Education Loan program. The student doesn’t have any choice, and he or she must go along with the program the college has chosen when they apply for financial aid.

Cost of Programs

There has been much discussion and debate about the differences between Direct Plus Loans and the FFEL Plus loans program as to which one will actually cost the federal government less money. Up until a decade ago, the FFEL program was by far the more expensive of the two loan programs. However, there have been some changes made, and opinions now differ as to which loan is more expensive in the long term.

Who Funds What?

The U.S. Department of Education is responsible for funding the Direct Plus loans, while the FFEL Plus loans are financed through a third-party lender. The difference between Direct Plus loans and FFEL Plus loans is where the money goes for repayment. The money goes directly back to the government for a Direct Plus loan, and on to the third party for the FFEL.

Benefits of Plus Loans

Most of the time, the federally awarded grant is not sufficient to cover all college related expenses. The FAFSA application determines how much money any student will be allotted for education, and a Plus loan is one way to offset the expenses that occur, or in essence, bridge the gap between what is funded and how much the college will actually cost. In this way, there really is no difference between Direct Plus loans and FFEL Plus loans.

Plus Loan Limitations

There are a few limitations in garnering a Plus loan. The loan itself must be obtained by the parents, and not the students themselves; alternatively a legal guardian may also take out the loan for the student. For undergraduate students, it is not necessary to file a FAFSA form for a Plus loan. While it is a good idea to do so, it is not mandatory. Graduate students, however, must file the form.

Loan Defaulting

Another difference between Direct Plus loans and FFEL Plus loans is that the FFEL loan is much better at dealing with and preventing loan defaults than the Direct loan program. The FFEL lenders offer more tools and various repayment options to the borrower, resulting in much less loan defaulting.

Which Loan is Right for the Student?

When it comes to a college education, the only difference between Direct Plus loans and FFEL Plus loans is the college of choice. Each college deals with one of the two Plus programs, so it actually comes down to where the student is planning on attending college. Whichever school is chosen will have the Plus loan program in place that they choose to use, and the student has no say in the matter.

Check to see what each Plus loan program offers by way of interest and repayment. Ask which loan program the college you are thinking of attending will be using. They are both very good loan programs for students, which is why all colleges choose one or the other for their student funding.