Eastern to switch student loans to direct lending
All loans will come from U.S. Treasury Department
Lindsay Huffman
Issue date: 11/19/09 Section: News
College is all about new experiences: getting out on your own, meeting new people and pursuing your own career path. Another of these new experiences is learning how to manage money in order to pay for school-in other words, learning about scholarships and student loans. Last year alone, Eastern students had $71 million in loans.
For the past 20 years, Eastern has been a part of a federal loan program known as the Federal Family Education Loan Program (FFELP). Through this program, students who receive federal loans borrow money through banks or student loan lenders.
As of fall 2010, though, Eastern will no longer participate in the FFELP. Instead, Eastern will switch to direct lending, a method where the U.S. Treasury will be the lender.
According to Shelley Park, the director of Student Financial Assistance, Eastern has been approved for the direct lending program for several years, but did not decide to make the switch until recently.
"We've known this was our direction since last summer when we first started considering it," Park said. "We believe that this is the best option for students."
The only type of loan that this program will affect is the Stafford loan. One of the reasons that Park said she believes direct lending is a better option is because many lenders have had to withdraw their participation in FFELP due to the economy. Recently, the House of Representatives passed legislation that requires all schools to participate in this program.
Even though this legislation has not been passed in the Senate, Park said that it is expected to pass, which is another reason Eastern made its decision.
Furthermore, some of the interest rates on loans are lower with direct lending than through FFELP. Parent Plus loans at present have an interest rate of 8.5 percent, but after the switch, the interest rate will only be 7.9 percent.
The only duty that students have to complete in this process is signing a new Master Promissory Note online next spring. This note is a document in which students agree to pay off their loans upon graduation. Even though students who currently have loans have already signed one of these notes, they will have to do so again in order to receive their loans next fall.
For the past 20 years, Eastern has been a part of a federal loan program known as the Federal Family Education Loan Program (FFELP). Through this program, students who receive federal loans borrow money through banks or student loan lenders.
As of fall 2010, though, Eastern will no longer participate in the FFELP. Instead, Eastern will switch to direct lending, a method where the U.S. Treasury will be the lender.
According to Shelley Park, the director of Student Financial Assistance, Eastern has been approved for the direct lending program for several years, but did not decide to make the switch until recently.
"We've known this was our direction since last summer when we first started considering it," Park said. "We believe that this is the best option for students."
The only type of loan that this program will affect is the Stafford loan. One of the reasons that Park said she believes direct lending is a better option is because many lenders have had to withdraw their participation in FFELP due to the economy. Recently, the House of Representatives passed legislation that requires all schools to participate in this program.
Even though this legislation has not been passed in the Senate, Park said that it is expected to pass, which is another reason Eastern made its decision.
Furthermore, some of the interest rates on loans are lower with direct lending than through FFELP. Parent Plus loans at present have an interest rate of 8.5 percent, but after the switch, the interest rate will only be 7.9 percent.
The only duty that students have to complete in this process is signing a new Master Promissory Note online next spring. This note is a document in which students agree to pay off their loans upon graduation. Even though students who currently have loans have already signed one of these notes, they will have to do so again in order to receive their loans next fall.
Be the first to comment on this story