Skip Navigation

Direct Loan Program Questions and Answers


Loan and Disbursement Processing
Master Promissory Note
Direct PLUS Loan Processing (both parents and
Graduate/Professional Students)
Borrower Benefits and Communication
Customer Service for Borrowers


Direct Loan Program Processing – Loan and Disbursement Processing

Q1. Is there a loan application for a Direct Loan?
A1. There is no separate loan application for Direct Loans. A borrower only completes a Free Application for Federal Student Aid (FAFSA) and a Master Promissory Note (MPN). The school determines the borrower’s eligibility and loan amount.

Q2. What fees are borrowers charged to originate the loan?
A2. We charge a loan fee (also called an origination fee) on Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. The loan fee is an expense of borrowing one of these loans. The loan fee is a percentage of the amount of each loan the borrower receives, and is subtracted proportionately from each loan disbursement.

  • Direct Subsidized Loans and Direct Unsubsidized Loans with a first disbursement date on or after December 1, 2013, and before October 1, 2014, have a loan fee of 1.072%.
  • All Direct PLUS Loans (parent and graduate/professional) with a first disbursement date on or after December 1, 2013, and before October 1, 2014, have a loan fee of 4.288%.


Master Promissory Note (MPN) Processing

Q1. Who handles follow-up with borrowers with incomplete MPNs?
A1. The Direct Loan Electronic MPN Web site performs edits during the MPN completion process, which eliminates most errors and the need for follow-up. Paper MPNs submitted with errors are returned to the school/borrower for correction. As such, the school generally interacts with the borrower. However, COD Applicant Services (800-557-7394) is available to assist borrowers (and endorsers, when applicable) with Direct Loan MPNs and related documents.

Q2. How many reminder notices are sent to a borrower after an MPN is sent?
A2. If a school chooses to have the COD System print and mail their MPNs, a reminder package is sent at 30-day and 60-day intervals. If a school chooses to print their own MPNs, the school determines the reminder notice process.


Direct PLUS Loan Processing

Q1. Do you have a dedicated phone number for Direct PLUS Loan borrowers?
A1. Yes, the COD Applicant Services team at the COD School Relations Center can assist Direct PLUS Loan borrowers with credit appeals or endorser questions. The phone number is (800) 557-7394.

Q2. Do you accept “parent increase requests” by phone?
A2. Parent borrowers work with their child’s school to request changes in loan amounts.

Q3. Do you have a Web site on which parents and graduate/professional students can submit a request for a Direct PLUS Loan?
A3. Yes. As an alternative to a school-based PLUS application process, parents and graduate/professional student borrowers can request a Direct PLUS Loan, complete an MPN, and initiate a credit check at Before submitting a PLUS Loan request online, parents and graduate students should verify with the school's financial aid office that they will accept and process the request. Note: If a school does not wish to use the Direct PLUS Loan Request process, we will still initiate a credit check upon receipt of the origination record from the school.

Q4. How does the credit check process work?
A4. Once a parent or graduate/professional student completes an MPN (which includes the applicant’s authorization for a credit check to be completed) or the school’s credit check authorization form, a credit check can be processed. A credit check can be initiated by the school via the COD Web site or by the COD System upon receipt of the Direct PLUS Loan origination data. The COD System will not initiate another credit check if one was completed within the past 90 days. Borrowers will receive written confirmation of the credit check result.

Q5. For how long are credit checks valid?
A5. A credit check is valid for 90 days.

Q6. Can endorsers of Direct PLUS Loans complete the endorser addendum online?
A6. Yes. Direct PLUS Loan endorsers will be able to complete an online Endorser Addendum at


Borrower Benefits and Communication

Q1. Do you offer in-school deferment for graduate/professional student Direct PLUS Loan borrowers?
A1. Yes. Graduate and professional students who have Direct PLUS Loans are placed into an in-school deferment status based on the information reported by schools through the Enrollment Reporting process (formerly SSCR).

Q2. Do you allow borrowers to enter forbearance upon request?
A2. Yes, the Direct Loan Program regulations allow a borrower to receive a forbearance if he or she is temporarily unable to make loan payments due to poor health or other acceptable reasons. The borrower must request the forbearance.

Q3. Do you offer an extended repayment plan?
A3. Yes. In addition, there are other repayment plans available to borrowers. Detailed information about repayment plans is available on the Student Aid on the Web.

Q4. Do you allow borrowers to defer payment? If yes, for what time period?
A4. Yes. The Direct Loan Program offers the same deferments that are available to borrowers in the Federal Family Education Loan (FFEL) Program. The maximum period for which a borrower may receive a deferment is determined in accordance with the Direct Loan Program regulations, and depends on the deferment type. Information about deferments is available on the Student Aid on the Web.

Q5. How does your servicer capitalize interest?
A5. Direct Loan Servicing capitalizes all unpaid interest:

  • Upon entering repayment
  • Upon expiration of a deferment period
  • Upon expiration of a forbearance period
  • Annually for any borrowers repaying under the Income Contingent Repayment (ICR) plan who have payments that do not cover monthly interest accrual.

Q6. Do you notify Direct Loan borrowers of available benefits?
A6. Yes. We provide borrower benefit information, including:

  • Eligibility requirements
  • Ways of losing benefits
  • If and how lost benefits can be regained

Q7. How is this information communicated to borrowers?
A7. We use a variety of ways to inform borrowers about their benefits, including:

  • MPNs and related documents
  • Direct Loan Counseling materials
  • Disclosure statements
  • Quarterly statements
  • Brochures
  • Letters and/or e-mail
  • Special outreach initiatives

Q8. When is this information communicated to borrowers?
A8. This information is provided to the borrowers at multiple points, including:

Customer Service for Borrowers

Q1. Are there dedicated customer service representatives (CSRs) for each school’s borrowers?
A1. No. Trained CSRs are available to all borrowers regardless of the school.

Q2. Does the same CSR handle repayment as well as new borrower inquiries?
A2. No. During the origination process, borrowers will work with the COD Applicant Services Team. Once the Direct Loan is booked, the borrower will work with the loan servicer for the life of the loan.

Q3. If a borrower has a complex problem requiring multiple calls, will the borrower be able to contact the same CSR?
A3. In most cases, a borrower can resolve an issue on the first call. If additional follow-up is needed, any of the CSRs can assist a borrower even if the issue was discussed previously with a different CSR. In addition, notes about the contact and issue are logged and maintained in the system. Therefore, any CSR can see information about a previous call or issue. Note: an escalation process is in place should an upper-level manager be requested.

Q4. Can callers bypass the VRU menu and opt to speak with a customer service representative?
A4. No. To assist in preparing a CSR with personalized borrower information and account history, callers must enter identifiers (including account number, date of birth, and zip code) before the option to speak to a CSR is presented. These steps take approximately 45–60 seconds to complete.


Last updated May 21, 2015

End of Page