The University announced this week it will change its student loan provider from the Federal Direct Loan program to the Federal Family Education Loan program. The adjustment will allow students to receive tuition loans through the University's preferred lender, Bank of America, or choose their own lender, instead of directly from the federal government, Student Financial Services Director Yvonne B. Hubbard said.
The program will go into effect next year.
Switching to Bank of America as a preferred lender will allow the University to receive special offers that will help students save money on tuition loans, Hubbard said. The program also will offer improved rates on alternative loans, which include loans for international students.
"We negotiated with Bank of America rates that are some of the best in the nation," Hubbard said. "Rates on alternative loans, which are usually the most expensive, are absolutely the best in the country."
According to a press release from Student Financial Services, unlike the policy under the FDL program, Bank of America does not require a co-signer on international loans.
"I think this is a fabulous thing," said Rebecca Brown, International Studies Office director. "Anything that the University can do to help international students with their financial needs is a very positive step -- specifically the removal of the requirement for a cosigner."
Although the program is not directly related to the University's recent financial aid initiative, "Access U.Va.," which commits $16 million annually to ease undergraduate loan debt, University Spokesperson Carol Wood said she expects it will work to accomplish similar goals.
"In the long run it is going to be easier and it's going to save students money," Wood said. "It complements what we are doing with 'Access U.Va.' in focusing on students and their financial situations and continually trying to ease the financial burdens on our undergraduate students."
The University has been receiving financial aid funds through the FDL program since 1997, Hubbard said.
According to Hubbard, last fall, the University performed a systematic inquiry to receive competitive bids from lenders, or a Request for Purchase, in order to evaluate whether the FFEL Program would be more beneficial for those receiving financial loans.
"We wrote an RFP that said exactly what we wanted in a delivery system for student loans," Hubbard said. "The RFP process would reveal which system is better economically."
The University selected Bank of America from a list of twelve lenders that responded to the RFP, according to Hubbard.
Hubbard said the selection was not directly related to Bank of America serving as the University's bank.
"It wasn't a deciding factor but it was certainly a factor," she said. "We want a bank that cares about the University. We want to be important to the lender that is handling our students' loans."
According to Hubbard, under the FDL program, parents and students could not choose their lender. With the FFEL program, the University recommends but does not obligate parents and students to use Bank of America for tuition loans.
"It is really an issue of what is best for the person," Hubbard said. "We want to make sure that parents have flexibility -- they weren't allowed to do anything but a Direct Loan which for parents is not the always the best."
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