Auburn University Makes Loan Changes As Economy Worsens

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AU makes loan changes as economy worsens
BRITTANY WHITLEY
STAFF WRITER
Published: February 12, 2009

Auburn University will begin receiving student loans directly from the federal government beginning summer semester due to funding delays caused by a volatile economy.

Loans are now processed through banks and student loan companies.

In addition to funding delays, incentives for students to get bank loans, such as interest rate reductions, are drying up, said Mike Reynolds, director of the Office of Student Financial Services.

Instead of loans being processed through the Federal Family Educational Loan Program (FFELP), all loans will be processed through the William D. Ford Federal Direct Student Loan Program.

“They’re identical loans. It’s just where the money is coming from,” Reynolds said. “You receive the same amount of funds.”

Reynolds said banking industry problems prompted the change.

“We were losing banks,” he said. “We went from around 35 vendors down to around 10. Some banks were actually having problems getting money and paying on time.

“We would best be served if we switched back to direct lending, where the lending comes directly from the federal government. In a nut shell, we feel like this best assures that the money will be here.”

Because some banks are closing, many students had to scramble to find new loan companies and banks to fund their schooling.

“I’m trying to make this whole process as simple as I can for the student,” Reynolds said. “I want them to a least have the opportunity to borrow one loan under one company.”

Lauren Hayes, Student Government Association president at AU, said students have come to her concerned about the economy, especially how they can afford day-to-day college life.

“Students are generally concerned about the economic situation overall, but loans are part of that,” she said.

Hayes said she thinks the change will make students’ lives a bit easier.

“He (Reynolds) always has the student’s best interest at heart. If he’s recommending this, then I would definitely whole-heartedly support it,” she said.