Student loans will see changes in lenders, repayment options

Change is on its way this year to the 75 percent of Augustana students who rely on Federal Stafford Loans.

Last September, the Student Aid and Fiscal Responsibility Act (SAFRA) passed in the U.S. House of Representatives by more than 80 votes, advancing to the Senate for final approval. This bill determines whether the federal student loan program will undergo a nationwide transformation.

"The act passed in the House with flying colors," Brenda Murtha, director of financial aid, said. "Then it got to the Senate right when healthcare took center stage."

If the transformation happens, the government will terminate the Federal Stafford Loan program and replace it with the Federal Direct Loan program. The difference between the two is the lending source. Federal Stafford Loans require an external lender that students choose, such as Wells Fargo or Citi Bank, whereas Federal Direct Loans come straight from the government.

"Obama wanted to take over," Murtha said. "The Direct Loan program cuts out the middle man. Lenders have been mad, but they know they'll still have business with private loans."

A couple benefits of the Direct Loan program include public service cancellations and more repayment options. Direct Loans also do not require students to shop around for lenders.
Augustana sophomore Sawyer Vanden Heuvel accepted Federal Stafford Loans his freshman year. His lender was U.S. Bank, but in September the bank withdrew from the program.

"Between sophomore and junior year, we are all given more subsidized loans," Vanden Heuvel said. "After interim, I became junior status credit-wise. So instead of choosing a new lender, Financial Aid wanted me to test this Direct Loan program because most likely everyone will have to do it next year."

Because of this switch, Vanden Heuvel will have loans sitting in two places—one with U.S. Bank and the other with the government. Upon graduation, though, he has the option to consolidate.

"When I meet with seniors for their exit consultations, I don't like to see their loans in two or three different places," Murtha said. "The Direct Loan program allows students to consolidate, which will get all their loans coming though the federal government."

Though this bill still sits on the Senate's to-do list, Murtha, along with the rest of Financial Aid, anticipates the transition that seems to be inevitable.

"Financial Aid will get all the kinks out for students before the Senate passes the bill, and they'll already be experienced," Vanden Heuvel said.

What this transition means for Augustana students seeking Stafford Loans is to complete the Master Promissory note and the Entrance Counseling again. These are the first two steps necessary when accepting federal loans. Links to both can be found online at www.augie.edu/finaid.

"Direct Loans have worked well, and I'm pleasantly surprised so far," Murtha said. "What I fear, though, is that it will be more difficult to communicate with the government. People can call in, I just hope that if students have issues after graduation and during repayment they'll get help from the Department of Education."


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