“The nonprofit student loan lenders should be the principal partners in the delivery of federal student loans, rather than a bloated federal bureaucracy or the many greedy for-profit lenders,” he said.

‘The writing is on the wall’

Yale University, which previously had resisted the switch, will adopt the Direct Loan approach beginning next year, Director of Student Financial Services Caesar Storlazzi said Nov. 17.

Yale will make the switch before being mandated by Congress, because the university must install new software and adopt new administrative procedures in preparation for direct lending, Storlazzi said. “The writing is on the wall, and we want to make sure that there is a smooth transition to the Direct Loan program when it passes,” he told the Yale Daily News.

Discussion about whether Yale should adopt the Direct Loan program has been going on for more than two years, Storlazzi told the campus newspaper. Yale has been reluctant to make the switch before, because private lenders traditionally offered better service and borrower benefits, such as lower interest rates, he said. But he noted that, owing to the economic crisis, such benefits have all but disappeared–making FFELP and direct loans very similar.

Rollins College in Florida has been a direct-loan institution since the mid-1990s, said Financial Aid Director Steve Booker, and he said there are many benefits to providing federal loans directly to students.

“The benefits to the student really are the same. There is no difference to the student. They’re going to get the funds regardless, and the Department of Education really runs both programs,” he said. “For the school, you have a little more control over it. You can disperse the funds a little bit faster.”

The steps involved in making the switch, Booker said, mostly depend on what kind of technology a school has in place.

“[For] those schools that have the major [software] systems [such as] Banner and PeopleSoft, it’s not an issue, because there are plenty of schools that are on direct lending and FFELP, and those systems have been around for a number of years and have supported both direct lending and FFELP,” he said.

Schools that are likely to have the most trouble, Booker said, are those that have homegrown student information systems that don’t support direct loans.

“With homegrown systems, it’s really up to you to come up with the modifications and to work out communications back and forth. If you’re on a homegrown system … then someone on your campus has to write all that code and all that programming language” to set up the system for direct lending, he said.

Booker said that while he was with his previous institution a few years ago, the school saw the declining economy and the need for a switch to direct lending coming and decided to begin making the change then.

He also noted that many banks and private lenders are no longer offering student loans or have to sell their loans to the federal government, so he doesn’t understand why opponents to the Direct Loan Program claim the switch is a government takeover.

“The Department of Education controls the program regardless. It’s just how they deliver the funds. And direct lending is similar to how we get all the other funds from the federal government right now. So we get our Pell Grants, our work-study funds, and so on, the same exact way that we get our Direct Loan funds,” he said.


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