How will UAAs switch to Direct Loans from the FFEL program affect me as a federal student loan borrower?
The most important difference between the two programs is the source of loan funding. Federal Family Education Loan Program (FFELP) funds come from independent lenders (banks). The guarantor and servicer may be other agencies. Very often the students’s loan is “sold” to another lender or servicer. Direct loans come through the U.S. Department of Education and are obtained from the U.S. Treasury. This program offers students one point of contact because the loans are made, backed and serviced by the U.S. Department of Education. As you can see, from a student borrower perspective, the Direct Loan program often results in a much less confusing repayment process.
