private banks will officially be out of the student loan business,

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On July 1, private banks will officially be out of the student loan business, including the nation`s only state-owned bank. The Bank of North Dakota (B.N.D.).

Students will now go directly through the federal government for student loans instead of choosing a local lender. The idea is to save money. The Congressional Budget Office predicts it could save the nation $67 million that could be pumped into Pell grants, and other financial aid programs for students.

The Financial Aid Office at Bismarck State College (B.S.C.) has been fielding questions all week on how the change will effect students. The college says, for new students, the process should actually be less complicated than it is now, but there may be confusion for current students who will end up having two types of loans that they`ll eventually need to consolidate.

"It`s called a federal consolidation loan so they will have to apply for that once they`re done with their program and so we just don`t have the information as to where they`re going to consolidate their loans," said B.S.C. Financial Aid Director Jeff Jacobs.

B.S.C. administrators expect confusion at first, but they`re working with the university system to get answers quickly. It`s a big change. The B.N.D. has about a billion dollars invested in student loans, with nearly 60,000 customers. Since the bank is owned by the state, its revenues directly impact the state`s economy.

"In the near term it`s not going to have a significant impact on our earnings. Longer term as rates continue to probably rise, margins would have increased, profitability would have increased on those, so we`re just going to have to look for other opportunities," said B.N.D. President Eric Hardmeyer.

Hardmeyer says they`re not making any rash decisions. They`re sorting through the bill to look for opportunities, like becoming a federal contractor for the direct loan program. Right now there are only four, and the government is opening up bidding to the private sector next year. B.N.D. says 75 percent of student loans are made through private banks and Hardmeyer is skeptical the federal government will be able to handle the large influx in July.

"We`re concerned about that. We`re concerned about customer service on the back end of these loans. We don`t think these federal contractors can provide the service we have," said Hardmeyer.

B.N.D. says there is some concern about the future, but it will find another way to promote North Dakota. B.N.D. will continue its Dakota Educational Alternative Loan program. It`s designed to meet gap needs behind the federal loan program.