By Maegan Clearwood
America is buzzing with debates about Medicare, coverage reforms, and insurance benefits. Details about the health care bill, however, have overshadowed an equally important issue: the newly-approved student loan bill. The bill, as of March 25, has officially passed through the senate, and will go into effect this 2010-2011 academic year.
According to The Washington Post, new legislation will shift student loans from private lenders to federal control. The bill will eliminate programs supporting private student loans, giving the Education Department direct control over financial aid. This overhaul will save over $60 million over the next decade.
Over half of these savings would assist the Pell Grant, which an increasing number of higher education students use for financial aid. The remaining savings would support community colleges, historically black colleges, and early education and lower monthly loan payments for borrowers from 10 to 15 percent of income. Many of these changes will take time to go into effect; students can, however, expect some immediate changes in Washington College financial aid.
“It will affect financial aid,” said director of admissions Kevin Coveney. “The new legislations impact student borrowing. Borrowing from private lenders will be phased out and it will be through federal government.”
Jeani Narcum, Director of Financial Aid, is ready for any subsequent challenges.
�We knew about the possibility [of federalized loans] for a few years now,� she said. �However, most schools did not want to have to make the change unless we had no other choice. Most of our families were happy with the banks they selected to handle their loans and we didn�t see the need to make them change their way of doing business, unless there was no choice.�
The financial aid department sent out a letter to WC families last week detailing how the new bill will effect loan payments. The letter said that �Washington College will transition from commercial bank-based lending to the William D. Ford Federal Direct Loan Program�The new program, referred to as �Direct Lending,� means all student and parent PLUS loans will now be applied for and received directly from the Federal Government. Schools can no longer participate in the Federal Family Educational Loan Program�With Direct Lending, all students and parents will have the same lender.�
Although the changes sound daunting, the financial aid department is going to make the transition as smooth as possible.
�The loan is the same,� said Narcum. �Same interest rates, same terms, conditions. The only difference is the name�And the other is the banks used to put their own dollars out on behalf of the federal government.�
If anything, the financial aid department is worried about students� misinterpreting the new bill.
�Our biggest concern is that students will think that this new federal direct loan program will replace all student loans,� said Narcum. �It is only replacing the Federal Stafford and PLUS loan process. This will in no way have any effect on the private educational loan programs�If students or families need to borrow additional loans above and beyond the annual amounts available through the federal programs they will still have to deal with private lenders.�
According to the letter, changes in how students and families go through their loan payment processes will not be major. They must register for a master promissory note and an online Entrance Counceling form. Families planning to use the Federal Direct PLUS loan program have additional steps they must follow, but nothing particularly difficult.
�It will mean more of an inconvenience than anything else, but it�s not hard to do,� said Narcum. �Some families will be happy because it did get a little confusing for some when they had to select a bank to handle their federal loans. Now, everyone is the same flavor.�
This shift to federalized loans has gotten mixed responses from students.
�Private companies can manipulate things,� said freshman Kaylee Topper. �If it�s a federal thing, it�s better because private companies would cheat you more than federal ones would. More regulation, I guess.�
This new legislation means definite changes for WC, but thanks to a well-prepared financial aid department, students should have little to worry about.
�In financial aid, there are always changes in how we have to do business,� said Narcum. �Whenever you deal with the federal and state governments, change is the one thing you can count on.�