Spring Break
Economic instability plays role in changes to loan application process
Michelle Firestone
Issue date: 1/26/09 Section: News
Starting next September, UConn will change the way it processes Federal Stafford, Plus and Grad Plus loans.
UConn currently uses the Federal Family Education Loan (FFEL) program, which is backed by various private banks. The financial aid office recommends six lenders for federal loans: Accessgroup, Citibank, Chase, Citizen's Bank, Connecticut Student Loan Foundation and Sallie Mae Education Trust.
According to Jean Main, the director of the Office of Financial Aid Services, UConn students borrowed approximately $73 million in Stafford Loans, $26 million in Plus loans and $3.7 million in Grad Plus loans in the fiscal year that ended in July 2008.
The new program, called the William D. Ford Federal Direct Loan program, is backed by the United States Department of Education.
The university originally chose the FFEL program because it offered more benefits than the direct loan program. With the exception of a few lenders, these benefits are no longer available. The instability of the economy has forced many lenders to reduce their subsidies and stop offering benefits and other services to students and parents taking out loans.
"There was a lack of profitability for students," Main said.
Many vendors were forced to fire customer service representatives, and as a result, customer service declined, said Victoria Hampton, the assistant director of loan programs at the Office of Financial Aid Services.
The direct loan program, funded by the U.S. Department of Education, will be a much better option for students and their parents because it will be a smoother, more streamlined process.
"It will be easier, in my opinion, because it will be one point of contact," Hampton said. "We are switching to the direct loan program so students can have a more seamless process."
Another advantage of the direct loan program is that it offers an income-contingent repayment plan. The standard repayment is 10 years, but borrowers can request changes to their payment plan by providing documentation of their income. To request a change, they submit W2 forms, income tax returns or pay stubs. If accepted, the payment amount will be adjusted based on their income. Main was unsure of the cut-off point for this payment plan.
UConn currently uses the Federal Family Education Loan (FFEL) program, which is backed by various private banks. The financial aid office recommends six lenders for federal loans: Accessgroup, Citibank, Chase, Citizen's Bank, Connecticut Student Loan Foundation and Sallie Mae Education Trust.
According to Jean Main, the director of the Office of Financial Aid Services, UConn students borrowed approximately $73 million in Stafford Loans, $26 million in Plus loans and $3.7 million in Grad Plus loans in the fiscal year that ended in July 2008.
The new program, called the William D. Ford Federal Direct Loan program, is backed by the United States Department of Education.
The university originally chose the FFEL program because it offered more benefits than the direct loan program. With the exception of a few lenders, these benefits are no longer available. The instability of the economy has forced many lenders to reduce their subsidies and stop offering benefits and other services to students and parents taking out loans.
"There was a lack of profitability for students," Main said.
Many vendors were forced to fire customer service representatives, and as a result, customer service declined, said Victoria Hampton, the assistant director of loan programs at the Office of Financial Aid Services.
The direct loan program, funded by the U.S. Department of Education, will be a much better option for students and their parents because it will be a smoother, more streamlined process.
"It will be easier, in my opinion, because it will be one point of contact," Hampton said. "We are switching to the direct loan program so students can have a more seamless process."
Another advantage of the direct loan program is that it offers an income-contingent repayment plan. The standard repayment is 10 years, but borrowers can request changes to their payment plan by providing documentation of their income. To request a change, they submit W2 forms, income tax returns or pay stubs. If accepted, the payment amount will be adjusted based on their income. Main was unsure of the cut-off point for this payment plan.
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