Direct Lending

Beginning with the 2009-2010 academic year, the College of Saint Benedict and Saint John's University will participate in the Federal Direct Student Loan Program.  This means that if you borrow a federal Stafford or PLUS loan after May 8th, 2009, your funding will come directly from the federal government instead of a private lender as in the past. 

Why is CSB/SJU changing to Direct Lending?

In 2008, as a result of downturns in the credit markets and cuts in government subsidies, many lenders abruptly stopped their participation in the Stafford and PLUS loan programs.  This left many students and parents scrambling to find new funding sources.  Even those students and parents not forced to find a new lender were affected by the shrinking or elimination of the student loan benefits.  In an effort to ensure that students and parents will have stable funding, as well as a lower cost loan for most borrowers, CSB/SJU will change to Direct Lending.

What are the benefits of Direct Lending?

  • Stable funding.  Since the funding is coming directly from the U.S. Treasury, you do not have to be concerned which banks are ceasing loan programs.
  • Lower Stafford loan fees.  Direct Lending has a 0.5% fee after a 1% upfront rebate (if you do not make your first twelve payments ontime the 1% rebate will be added back on).  Most lenders charge 1.5% fees.
  • Lower PLUS interest rate.  Through Direct Lending there is a fixed 7.9% interest rate; lenders have a fixed 8.5% interest rate.
  • Additional repayment plans available through Direct Lending.
  • Loans are never sold.

How will this change affect current student/parent borrowers?

Student/parent borrowers will need to complete a new Master Promissory Note (MPN).  The previous MPN was only good for that specific lender.  Your new MPN will be good for the next 10 years.  Starting in June, information regarding how to complete the new MPN will be sent out with award letters.  

Students may have more than one place to repay.  Many lenders are selling their loans directly to the Federal Government, so it may be possible that the student only needs to repay one place although they took out a Stafford loan though a private lender and the Direct Loan program.  If there is more than one place to repay; loan consolidation may be a good option to consider.