UP student loan changes
UP will switch from private lenders to lending from the federal government
Sydney Syverson
Issue date: 11/19/09 Section: News
"I'm still going to have loans when I graduate," Mussio said. "So I guess it doesn't really matter to me who I pay them to, but it seems like this will be better for the federal government and U.S. Department of Education."
For now, the change seems minimal to students and parents.
The Financial Aid letter emphasizes that, "the switch to the Federal Direct Loan Program will offer our families a more predictable borrowing experience and will ensure uninterrupted access to student loans."
Calls for changing student loans intensified when the economy imploded and many private lenders decided to get out of the student loan business.
That prompted Congress to pass temporary legislation to ensure students could get loans directly through the government.
While permanent legislation - the Student Aid and Fiscal Responsibility Act - still has not made it through the U.S. Senate, financial aid offices at UP and other colleges are preparing to transition to direct lending.
President Obama was one of the early supporters of removing private lenders from federal college loans.
During a conference call with student reporters in 2007, he said, "One way we can help make college more affordable is by reforming a wasteful system of student loans that profit private banks at the cost of taxpayers. The system needs to be fixed. We shouldn't be providing billions in taxpayer-funded giveaways to private banks; we should be providing an affordable, accessible college education to every American."
The U.S. Department of Education Web site states that the current system - FFELP - was created in 1965 and is a public-private partnership.
The FFELP provides four types of loans; Stafford, Unsubsidized Stafford, PLUS and Consolidation.
Through the FFELP, private lenders make loans to students and parents.
Although, the loans are through private lenders, the FFELP does use government funds.
For example, if a student or parent does not make their payments, the private lender can be reimbursed for their losses by the federal government.
Under the William D. Ford Federal Direct Loan Program, the U.S. Department of Education will be the lender to students and parents.
Therefore, the student and/or parent borrow directly from the federal government with no use of private lenders.
For now, the change seems minimal to students and parents.
The Financial Aid letter emphasizes that, "the switch to the Federal Direct Loan Program will offer our families a more predictable borrowing experience and will ensure uninterrupted access to student loans."
Calls for changing student loans intensified when the economy imploded and many private lenders decided to get out of the student loan business.
That prompted Congress to pass temporary legislation to ensure students could get loans directly through the government.
While permanent legislation - the Student Aid and Fiscal Responsibility Act - still has not made it through the U.S. Senate, financial aid offices at UP and other colleges are preparing to transition to direct lending.
President Obama was one of the early supporters of removing private lenders from federal college loans.
During a conference call with student reporters in 2007, he said, "One way we can help make college more affordable is by reforming a wasteful system of student loans that profit private banks at the cost of taxpayers. The system needs to be fixed. We shouldn't be providing billions in taxpayer-funded giveaways to private banks; we should be providing an affordable, accessible college education to every American."
The U.S. Department of Education Web site states that the current system - FFELP - was created in 1965 and is a public-private partnership.
The FFELP provides four types of loans; Stafford, Unsubsidized Stafford, PLUS and Consolidation.
Through the FFELP, private lenders make loans to students and parents.
Although, the loans are through private lenders, the FFELP does use government funds.
For example, if a student or parent does not make their payments, the private lender can be reimbursed for their losses by the federal government.
Under the William D. Ford Federal Direct Loan Program, the U.S. Department of Education will be the lender to students and parents.
Therefore, the student and/or parent borrow directly from the federal government with no use of private lenders.
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