Students who receive Stafford Loans through a lender to pay for their tuition will be affected by some recent changes in the loan process.
Beginning with loans that are dispersed for the summer 2009 semester, students will have to borrow money through the Federal Direct Program instead of the Federal Family Education Loan Program.
“Emporia State has always been authorized to do direct loan,” said Elaine Henrie, director of financial aid and registrar. “The only difference is, instead of going through a lender or a servicer, we are just going through the department of education. It’s just a different process in where the money is coming from.”
Henrie also said that there are not benefits or disadvantages to either program. For students, the main difference will be that banks, or other types of lenders, will not provide loans for Emporia State students.
“If you are a student who has had the same lender all the way through, you wouldn’t see a bit of difference,” Henrie said.
This change does not affect how much money students are eligible for or the amount of money that is available.
“All of that money kind of comes from the same place,” Henrie said. “It’s all backed by the federal government. The federal legislation determines how much money you can borrow.”
In the FFELP, lenders can choose whether they want to issue student loans. When a lender decides to discontinue service, the students who received loans from that lender have to change lenders.
“Every time a lender drops out of the program, you have to sign a new master promissory note,” Henrie said. “It was a problem for some students. We had some students who had to do multiple master promissory notes.”
With the direct program, students will not have to worry about signing a new master promissory note whenever lenders decide to stop lending, which is one reason why the university decided to make the change.
“When we decided to go just direct loan, it takes all of those different possibilities that you could have selected a lender who no longer participates in the program,” Henrie said.
Another reason the university decided to switch lending programs is that the amount of lenders that were available for ESU students to choose from was becoming too small. With the FFELP, there has to be a minimum of three lenders, who are not affiliated with each other, from which students can choose.
“We started out with about six at this time last year,” Henrie said. “As it got closer and closer to August, we had three. There were other lenders, but they might have been affiliated.”
For the Financial Aid Office, going through only one lender makes processing easier.
“It’s easier to process from one source but it’s also much cleaner for students because you know that you’re loan is going to be in the mix of loans to get certified,” Henrie said. “It’s much more expedient.”
The decision to change programs was made by the ESU administration. They have had the opportunity to make the change for several years.
“It was a joint administrative decision,” Henrie said. “We’ve been authorized to do this for at least 10 years, maybe longer. When we looked at our student population, some of our students have had to do master promissory notes several times. This is really in their best interest.”
Other universities that participate in the direct loan program were researched to see how the program would benefit ESU.
“We did research with lots of who participate in the direct loan program,” Henrie said. “We’ve done direct loan program training. There is a group of schools who are direct lenders and they have been direct lenders for a long time. They have a good knowledge base of how it works and they can kind of be your mentors.”
The University of Kansas has had the direct loan program for about 10 years.
“It is just a convenience for the students with the direct loan,” said Jose Trujillo, financial aid counselor at the University of Kansas. “There shouldn’t be any problems.”
The parent version of the Stafford Loan, the PLUS loan, will also be changed to the direct program.
When students begin to pay back their loans, payments will not need to be made to different locations. The direct program allows students to consolidate all of their loans and make one payment to the direct program.
“When you get ready to go into repayment, at this point, to my knowledge, direct lending is the only place that will consolidate,” Henrie said. “You should still have the opportunity to make all of your payments to one place.”
If students have a Stafford Loan with a lender, they need to do several things to ensure that their loan money is dispersed on time.
All students should sign a new promissory note at least 30 days before they start their next semester of classes.
“Even though they don’t have an award letter yet, students can sign their master promissory note,” Henrie said. “That way, you know you’ve done what you needed to do. That gives us time to get it sent to be processed so that the funds are here on the day that you expect them to be here.”
Students will also need to complete the Stafford Loan counseling program again.
“We are going to have everyone do new entrance loan counseling,” Henrie said. “It tells you your responsibilities for borrowing. Having everyone do a new entrance loan counseling will impress that on folks again. There is a big push for more financial literacy. Part of that is a reminder of, ‘I have signed my name to borrow money and I have an obligation.’”
Students will not receive their loan money until both of these processes are complete.
“There’s not a penalty but they can’t get their money,” Henrie said. “Any penalty would be self imposed because you didn’t do the paperwork. We try to help students who don’t do the things that they need to do, or if they don’t do it timely. It’s just in everybody’s best interest to just get it done as quickly as possible.”
Henrie also said that students should not borrow money that they don’t need right away because unsubsidized loans accrue interest. The longer students wait to take out a loan, the less interest the loan will gain.
“If you worked over summer and you saved some money and you don’t really need a loan to pay your tuition when you are starting school in the fall, don’t burrow it then,” Henrie said. “Wait. Within a week usually, we can get that money. We really discourage people from borrowing it before they need it.”
To complete a new master promissory note, students should go to www.dlenote.ed.gov. According to the Web site, students need to have their U.S. Department of Education issued PIN ready to start the new master promissory note.
Ashley Peaches/The Bulletin