The University's Financial Aid Office will introduce several changes to the student loan process this summer to fall into accordance with a student-loan provision in the 2010 Federal Health Care Law.\nThe loan overhaul will make the government sole lender of student loans, thus eliminating banks as institutional intermediaries. The office will assign servicing agents to students.
"The federal government believes it is a less expensive way of providing student loans," said Chris Doran, communications manager of Student Financial Services. "The savings will go to Pell Grants for the most needy students."
The University already had been working toward switching to a direct loan system, Doran said, and therefore already began preparing for the transition. As a result, the University has prepared the Student Information System for the changeover.
Beginning this summer, students will be able to see their new loan information on SIS. Further information, such as the specific servicing agent of one's loans, can be obtained online through the National Student Loan Data System.
"Loans get bought and sold, so you can see who has yours," Doran said.
The NSLDS also is more comprehensive in that it includes alternative loans that students can still obtain through outside banks. Such loans, Director of Student Financial Services Yvonne Hubbard said, often go beyond what financial aid offices deem necessary, meaning this method of funding college can lead to crushing debt.
"Students are tempted by those because you can borrow beyond what you absolutely have to have," she said. "Those loans are of last resort for us."
Second-year Engineering student Sam Hewitt expressed discomfort with the government's primary control over loans.
"I understand that it cuts cost," Hewitt said, "but the government will essentially have a monopoly over student loans, which goes against our free-market society."
Because of the new system, second- through fourth-year students may have a "hybrid" of loans set to various fixed rates, Doran said. There will be no need to consolidate loans, but it may be possible to get better repayment rates after graduation.
First-time loan takers will be required to enroll in online Entrance Counseling, furthering the office's goal of increasing student financial literacy, Hubbard said.
Federal Stafford loans will switch to Direct Stafford loans, a beneficial language change, Doran said, because interest rates for these loans will decrease from 6.8 to 5.6 percent.
Students who accept loans as part of their financial aid award also will need to fill out new master promissory notes as part of the direct-lending system.
The Financial Aid Office reminded students to continue to fill out the Federal Application for Financial Student Aid paperwork every year.
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