Local colleges adjust to student loan demise
Baker College and Davenport University, already hit by cutbacks in a state student loan program for private schools, now are bracing for the demise of a federal student loan program.
The two multi-campus private colleges, as well as Cornerstone University in Grand Rapids, used the Federal Family Education Loan Program, which was wiped out in a bill that was piggy-backed onto health care reform. FFELP provided student loans through commercial banks, which received guaranteed federal subsidies. The bill also provides an additional $36 billion for Pell grants that help the lowest-income students.
“We are anticipating that internally at Davenport the changes will happen very smoothly,” Executive Director of Financial Aid David J. DeBoer said. “Months ago, we made sure that everything was set up with the federal government so there would be absolutely no disruption to students. The biggest change for students in the short term is that, in order to get new loans after July 1, they will have to do a new promissory note.”
In 2007, the New York state attorney general announced an investigation had found that many colleges nationwide were receiving kickbacks and other benefits for placing FFELP lenders on “preferred lender lists.” In some cases, students even found access to other lenders was denied or hampered.
After those events, and based on President Barack Obama’s plank during his campaign, many colleges and banks began laying plans to pull out of FFELP. The colleges turned instead to the federal Direct Loan program. The legislation that ended FFELP had been widely anticipated for some time.
Cornerstone University Assistant Director of Student Financial Services Kathy Lundin said the 2,825-student Christian organization in Grand Rapids is ready for the switch.
“We had to be approved to be a direct loan school and set up the ability to process loans with the Department of Education. We needed to program our computer system to process loans and we needed to communicate the change to our students,” Lundin explained. “We are computer-ready to process loans beginning with the summer term. Students have been notified in several ways of the change, and we have provided a link on our Web site to the Direct Loan site where students can e-sign a new promissory note.”
At Baker College, which has a campus in Muskegon, System Vice President for Student Services Ellis Salim said he hopes the federal government is prepared to handle the processing volume once it takes over all student loans July 1. He said Baker switched from the Direct Loan program to FFELP about seven years ago, prompted by frustration in dealing with the federal government.
“It was their failure to be able to handle the volumes of loans we were sending them through electronic transmissions and their continual inability to make reconciliation of funds on a monthly basis work smoothly,” Salim said.
Baker, with 15 campuses in the Lower Peninsula, does “well over $200 million a year in student loan volume,” he added.
He said he is hoping that services to help keep students from defaulting on loans are as robust as he has seen with service companies for the FFELP loans. Those duties are handled by loan servicers such as SLM Corp., known as Sallie Mae, which also issued loans. The banks on Baker’s preferred lenders’ list, including Fifth Third, have notified him that they are discontinuing student loans, he said.
“Many students default on their loans because they don’t know how not to,” Salim added. “That is my personal concern about only having one choice.”
Grand Valley State University switched entirely to direct loans once those were made available in the 1990s, Director of Financial Aid Ed Kerestly said. Only students who have transferred to GVSU have FFELP loans, he noted.
“On the positive side for Grand Valley students and students around the country, the identified savings of moving all the load through the federal government frees up dollars that will sustain Pell grants for needy students,” Kerestly said. “Our students and others will benefit as a result of that.”
Grand Rapids Community College moved away from FFELP and to direct loans in the 2008-09 academic year, Director of Financial Aid Jill Nutt said.
With nearly 9,000 Pell grant recipients, Nutt said she is pleased to see that the law includes using savings from ending federal guarantees in FFELP to bolster funding for Pell grants. With top awards of $5,350 this year and $5,550 next year, Pell grants are generous when stacked up against the cost of attending GRCC, Nutt said.
“I think it will (be important) for our non-residents,” Nutt said. “Even in its current state at $5,350, it more than covers the tuition, books, fees and living expenses for a resident student who lives in the Kent Intermediate School District. Non-resident students who pay the higher tuition rate are feeling the pinch. The program is just enough to cover that.
“This may make GRCC more accessible to those coming from out of the district.”