Saint Joseph's considers making changes to student loan policy

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Saint Joseph's considers making changes to student loan policy
Sean Coit '09

Issue date: 4/29/09 Section: News

Following a national trend, Saint Joseph's University is considering joining the Federal Direct Loan Program as early as next year, eliminating private lenders like Sallie Mae from the federal student loan process.

In the past year, more than 60 colleges have done the same, switching from a traditional student loan policy to a program in which the federal government directly lends to students.

As banks nationwide tighten their lending practices, most colleges that have switched to the direct federal lending say that ensuring that their students have access to money for college is a top priority. Before the recession, most colleges employed the Federal Family Education Loan Program (FFELP) through which private lenders provided students with loans backed by the federal government

"By using the FFELP program, students had opportunities to get better options on their loans," said Eileen Tucker, director of Financial Aid at St. Joe's. "The borrower benefits aren't necessarily there anymore."

Though most student loans are federal loans made through private lenders, loans directly from the government could simplify the process.

The Financial Aid Office at Penn State switched to the Direct Loan Program in 2008, said that working exclusively with the federal government will benefit its students.

"The initiative will give the 44,000 plus Penn State students who currently have federal loans a secure source of funding along with a streamlined process for obtaining loans," according to a March 2008 Penn State University press release.

Before 2008, most private lenders were able to turn a profit through student loans and offer incentives to students who repaid their debts on time or even early. Now, though, many financial aid officers are recommending that students get Stafford loans directly from the government and avoid possible complications with private lenders.

Depending on Congressional changes to the initial draft President Obama's proposed federal budget for 2009 could potentially make direct lending the norm at every college in the United States.

"Obama wants to cut out the banks ability to offer Stafford loans and only have the federal government do it," said Tucker, who said that St. Joe's becoming a direct lender is "just a question of signing up for the program with the Department of Education."

Mandating that schools provide loans to students directly from the federal government would fall in with colleges' recent drift from private lenders, but would likely face backlash from many schools.

Though St. Joe's is likely to ditch private companies and switch to direct lending next year, Tucker said she isn't sure that it is the best move.

"If I have a choice, I might hold out," she said. "The customer service access, more personal touch and service with FFELP (lenders) is key for me."

The final decision will be made by Saint Joseph's University President Timothy Lannon, S.J., though Brice Wachterhauser, provost, Tucker, and Lou Mayer, vice president for financial affairs, will assist in the decision-making process.

"Our focus in the long term is what will be best for the student and for students that wouldn't have access to higher education," said Tucker. "As far as the students are concerned, it's just a matter of where the money comes from."