Easier to receive and repay. Direct loans require less application paperwork and, unlike the guaranteed program, all borrowers have just one account with a single point of contact. Favorable refinancing terms. Loan consolidation allows students to better manage their debt and lock in favorable loan terms. For taxpayers, the student loan reform means billions in savings.
Direct loans are much cheaper for taxpayers.
Federal costs of guaranteed loans have also fallen. The default rate has fallen for seven straight years, from 22.4 percent at the start of this Administration to a record-low 8.8 percent today. For schools, student loan reform slashed administrative burdens. Over 1,200 schools chose to leave the guaranteed loan program and join Direct Lending during its first three years. Direct lending offers one set of procedures, fast and reliable delivery of funds, less paperwork, electronic loan processing, and a customer service emphasis.