Banks for nothing: Loans to be colleges’ duty

by Amber Cox
On July 1, Rider and every other university and college in the nation will have to switch to a direct lending program for student loans.
President Obama signed the Health Care and Education Affordability Reconciliation Act on March 30, which will end the practice of banks skimming profits off government- backed loans.

According to Jamie O’Hara, vice president of enrollment management, students aren’t “going to notice that big of a difference.”

“It’s going to be more of a transitional piece we have,” he said. “As we start to work directly with the government, we’ll be communicating more to the students directly and walking them through the process.”

O’Hara also said that Rider is currently waiting on more details from the federal government.

“The government is telling us that they’re making it a lot easier at this point,” he said. “There’s a fair amount of support out there and right now, as of the latest figures, there’s about 60 percent of schools in the United States that are going to need to do it. It’s a type of stay-tuned situation because they’re not, obviously, going to leave anyone behind. The process, as we’re seeing it, looks much more direct than it used to look. We just need to have confidence that the support’s going to be there and we’re going to be able to make the transition. We do have confidence in that.”

Drew Aromando, executive director of enrollment management, stated that the direct lending program is similar to the Federal Family Education Loan Program (FFELP).

“The Stafford Loan Program was split into two different sides and the direct loan program is the same as the Stafford Loan program, but it’s provided by the funds coming from the federal government as opposed to the FFELP side, which we’re currently utilizing, where the funds come from the banks,” he said. “The difference is just the funding source. The school is the facilitator regardless of whether it’s direct loans or FFELP loans.”

By getting rid of the banks’ participation, the bill is going to generate $61 billion in savings over 10 years, $36 billion of which will go to the Pell Grants. Currently the maximum Pell Grant is $5,550, but it is set to increase about 10 percent by 2017. Much of the remainder of the money saved will help pay for deficit reduction and health care reform.

In 2007, an investigation was started when New York Attorney General Andrew Cuomo discovered that a number of colleges were receiving thousands of dollars in rebates from private lending companies if the college placed them on their preferred list of lenders.

According to John Williams, then-director of Rider’s student financial services, Rider was not one of the schools receiving payments.

“Outside entities do not influence our dedication to offering the best borrowing options to Rider students,” he said in a 2007 Rider News article.

Aromando stated that there will be a process but they are prepared to walk everyone through it.

One immediate benefit of the bill for students will be securing a funding stream for Pell Grants, to ensure that the increase that was put into place last year is guaranteed. In addition, in 2014 federal loans will be capped, and repayment will be no more than 10 percent of the borrower’s income.

Because the bill is so new, some things are still unclear.

“I would anticipate that next fall we’ll have much more clear definitions, once we get past the hurdle of July 2010, what are the benefits that are then rolled out to current students and what are future benefits?” O’Hara said.

O’Hara does not believe that the bill will have an immediate or short-term effect on enrollment because everyone is going through the transition.

“I think it’s a situation where people are still making decisions based upon the types of financial support they get from an institution and Pell is part of that, but there are other pieces in the equation,” he said. “How it impacts future enrollments, if anything, my hope and I think the federal government’s hope is that it’s going to encourage more folks to go to college that might not have considered any type of college opportunity, and ultimately, we benefit in the private sector from that.”

O’Hara also made it clear that students need to stay proactive throughout the process.

“The students need to be sensitive to any type of communication,” he said. “We’re going into a period now, April 5 to May 14, where I think, students are so busy with class work that they might not pay as close attention to the things that are coming out of the Financial Aid office.”

Aromando also said the department will do everything it can to make sure the correct information gets to students.

“We’re going to make every attempt we can to be proactive right now, and, as new information is coming in from the feds and the Department of Education, it’s important that students are proactive themselves and reading the communications that we send out, so that we can make this as simple a transition as possible.”

O’Hara and Aromando don’t want students to worry about the change and emphasized that everything is being done to make the transition simple.

“We definitely see the light at the end of the tunnel,” O’Hara said. “It’s going to be very beneficial to students. It’s just getting the process going and getting the partnerships with the federal government.”

Show More

Related Articles

Back to top button