Starting next fall, Metro State will change the way it processes federal student loans.
Following an extensive review by the Office of Financial Aid of how it processes, originates, guarantees and disburses federal student loans, the College has decided to switch federal loan programs, from the Federal Family Education Loan Program (FFELP) to the Federal Direct Loan Program (DL).
“The process for the Federal Family Education Loan Program has gone through many changes this past year, with some lenders changing how they wish to channel the loan funds to students and the continual changing of lender benefits,” said Director of Financial Aid Cindy Hejl. “This has caused some delays in our students receiving their loan disbursements. Plus we have experienced a substantial increase of over 3,300 more loan requests so far in 2008-09 than in 2007-08.We understand the importance of helping the financing of our student’s college education and after very careful analysis of both programs in the Federal Stafford Loan and Parent Loan Program, we believe the Direct Loan program will help better meet the needs of our students.”
The Direct Loan Program was developed in 1993 “to redress many of the problems that have grown over the last 25 years with the existing FFELP, primarily its complexity for schools and borrowers and its cost to the taxpayer,” according the Department of Education (see http://ifap.ed.gov/dlfsheets/doc0006_bodyoftext.htm).
Direct Loans streamline the process of applying for federal loans by involving only three players in the lending process: the student, the college and the Department of Education. Students continue to complete the Free Application for Federal Student Aid (FAFSA) and, according to Hejl, will continue to be able to accept their loans via MetroConnect.
“However,” Hejl says, “instead of submitting the loan requests to lenders and third party venders, as was the process under FFELP, the loan amounts will be electronically transmitted to the Department of Education.” When the loan is approved, the student signs a promissory note and the Metro State credits the student’s tuition account.
In the 2007-08 academic year, the Office of Financial Aid disbursed approximately $56 million in federal loans. In July 2008, annual federal loan limits increased by $2000 for every class and type of student. The increase in allowable loan amounts, combined with the current economic downturn and increased tuition costs, added up to a significant increase in loan volume for the Office of Financial Aid (over $75 million for the 2008-09 year). This trend is expected to continue in 2009. The increased volume of loan requests and disbursements were part of what prompted the Office of Financial Aid to re-examine its processing program.
The change will affect all students receiving federal Stafford loans and Parent Plus loans.
