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Direct Loan Program is an A-plus for students
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Related Topics: BALTIMORE
BALTIMORE (Map, News) - 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.
daniel.murphy@baltimoreexaminer.com
Comments from Examiner Readers
2:58 PM MST on Wed., Jul. 23, 2008 re: "Direct Loan Program is an A-plus for students"
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Examiner Reader said:
FFELP's lifetime default rates are lower than the Direct Loan program's.
6 agree | 3 disagree
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Examiner Reader said:
Give me a break! Maybe the government can lend the money to students in a more streamline fashion than FFELP lenders, but when it come time to collect the money back, my vote is for the FFEL program. Does anyone know the FDLP default rate?
10 agree | 4 disagree
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Examiner Reader said:
If we cut the benefits in Maryland to illegal aliens we could fund free college tuition to all
3 agree | 3 disagree
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GAB said:
What do illegal immigrants have to do with this story? Not everything must be seen through the mirror of immigration. Rather, it is possible that too many students are getting loans they won't be able to pay off quickly, and it doesn't matter where they come from.
219 agree | 241 disagree
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Examiner Reader said:
"MD college aid fund has been nearly all awarded to children of illegal immigrants based on income tax records. Your kids have to take big loans with high interest to be paid for years after graduation . To change that , send O Malley home." There are two problems with this argument: 1. It's false - there are no "tax records" that say children of immigrants (illegal or otherwise) are hosing the system; and 2. O'Malley's policy has nothing to do with it, especially. Loan policies have not particularly changed under the current administration, so discharging the current administration will have little or no effect. I strongly suggest using facts when arguing in the future.
206 agree | 232 disagree
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Examiner Reader said:
MD college aid fund has been nearly all awarded to children of illegal immigrants based on income tax records. Your kids have to take big loans with high interest to be paid for years after graduation . To change that , send O Malley home.
236 agree | 198 disagree
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Jimmie said:
She may have been paid as a consultant by the lenders, but her concurrent employment as Director of Financial Aid placed her in a conflict of interest. As Director of Financial Aid she was supposed to be acting in the best interest of the students in counseling them on what financial aid package was best for them. Her allegiance to the lenders for which she was serving as a consultant clouded her objectivity and did a disservice to the students she was supposed to serve.
259 agree | 269 disagree
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Examiner Reader said:
I object to the wording regarding the former Dir of FA at Hopkins. The information we have is that she acted as a consultant for several lenders and was paid a consultant's fee. This article implies the funds were a gift - not so. Have we come to a time and place where every consultant must be wary of payment for services? This situation has totally missed the most important issue - our students are accumulating massive debt and we don't have the tools or training to impart financial guidance for their future. Graduates are being confronted with monthly payments of $1000 a month for 30 years. I find this terribly frightening, not only for the individuals but for the future economic stability of the United States. mmt
281 agree | 275 disagree
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