With student-loan lenders dropping at a fast pace over the past six months, many financial aid offices are dropping them to deal directly with the federal government.
Universities all across the country have been switching to the Direct Loan Program to receive loans directly from the government, rather than a private lender.
“Basically, it eliminates the middleman, which makes the process much easier for everyone involved,” said Roberta Johnson, chairwoman of the National Direct Student Loan Coalition.
In the more common Federal Family Education Loan Program, a student borrows money from a bank or other source that is subsidized by the government.
DLP loans come directly from the federal Stafford loan or other federal programs to the university or college, which then passes it along to the student.
In the past six months, several major FFELP lenders have ended or dramatically decreased their programs, leaving schools and students to search for a new way to pay tuition.
Schools such as Towson University, which has used direct loans for more than a decade, said they were able to escape this problem by using the more reliable option.
“We?re not having to deal with third-party lenders and whether they will stay in the program or not,” said Vince Pecora, Towson?s director of financial aid. “In that respect, it is a much more stable program.”
That stability is persuading major universities ? Penn State, Michigan State and Indiana universities, for instance ? to make the switch.
Loyola College in Maryland is one school that previously offered multiple options. Director of Financial Aid Mark Lindenmeyer said that starting in the fall semester, direct loans will be the only ones available.
“Based on all of the problems and issues that have occurred over the past year regarding the college?s ability to maintain a recommended lender list, we decided that this was the best move,” Lindenmeyer said.
The change will help students by eliminating the search process and simplifying payments.
