Written by James Buce
Harding University is changing the lending process for fall 2010, and students will be receiving direct lending from the U.S. Treasury instead of banks or loan lenders.
“As a result of both the economy and the Obama administration, there has been a major shift in the way students will receive student loan funding for the coming fall,” Financial Aid Director Jon Roberts said.
Starting next fall, Harding will transition away from the Federal Family Education Loan Program (FFELP) and will begin receiving all loans from the U.S. Treasury. This is in part due to many lenders withdrawing their services from FFELP due to economic struggles over the last few years.
The FFELP was started in 1965 by Congress and includes loans such as Stafford loans, PLUS loans and Federal Consolidation loans.
Banks across the country have taken a large hit during the recession and are expected to be a large target for President Obama because of the federal bailouts.
“Big banks are deeply unpopular, making them a fat target for the president,” Ed Henry wrote in an article from CNN.com.
Many banks are now subject to added taxes on both their loan percentages as well as the executive bonuses. This has caused many of the FFELP lenders to scale back their participation in the program.
Another reason for the change came in September when the House of Representatives voted passing legislation that would expand student loans, taking away federal private lenders.
This bill requires all schools to participate in the program, saving the government an estimated $80 billion over the next ten years, according to Tamar Lewin of The New York Times.
The legislation is expected to be passed by the Senate, which was another reason Harding decided to go ahead with the change, according to the Financial Aid Department.
For Harding students, this change means lower interest rates on student loans.
The only duty that students have is to sign a new online Direct Loan Master Promissory Note and to complete an online loan counseling session specifically designed to assist students to understand more about direct loans, according to the Financial Aid Department.
