May 12, 2008

2 Purdue campuses shift to federal Direct Loan Program

Purdue University Calumet already uses the Direct Loan Program.

Previously, the two campuses processed student and parent federal loans through private lenders and service providers that were part of the Federal Family Education Loan Program (FFELP). Until the last few months, these lenders offered attractive benefits to Purdue borrowers, said Morgan R. Olsen, executive vice president and treasurer.

"Recent volatility in the national credit markets and reductions in federal subsidies available to lenders participating in FFELP have led many lenders and service providers to stop offering borrower discounts or to discontinue participation in FFELP altogether," he said. "In the Direct Loan Program, the U.S. Department of Education acts as the lender, providing funds for Stafford and PLUS loans. Since borrowing is directly through the federal government, loan availability is not expected to be affected by credit market turmoil.

"Also, since many FFELP lenders have stopped offering discounts and changes in their terms are occurring on a regular basis, the Direct Loan Program, which started in 1994, is now offering the more stable, attractive terms for Purdue borrowers."

Maintaining a stable and predictable source of student loan funding was one of the key reasons that Purdue made the change, said Pam Horne, assistant vice president of enrollment management and dean of admissions.

"We worked to identify sources for student loans that can provide stability and predictability to our families with a minimum of disruption," she said. "After a review of all the loan options for Purdue students in the current climate, we've made the decision to encourage Purdue students and parents to borrow directly from the federal government's student loan program, which is known as the Direct Loan Program."

The federal Direct Loan Program offers students a streamlined process with a known lender, said Larry Barrett, vice chancellor of enrollment and student services at Purdue North Central.

"Borrowing from the federal government is the best solution for student loans at this time," he said. "It is consistent with our need to ensure a high-quality, cost-effective, dependable loan program for Purdue families. Direct loans are not sold, so students and parents will make payments to the Department of Education through the life of their loans."

The benefits to borrowers through the Direct Loan Program are competitive with benefits offered by the lending community, such as banks, credit unions or other lenders, said Joyce Hall, executive director of the Division of Financial Aid at the West Lafayette campus.

"One convenience of the Direct Loan Program is that the loan application is the Free Application for Federal Student Aid that most families already complete when they seek financial assistance," she said. "The customer service process also is streamlined because there is a single point of contact for schools and students. Eligibility rules and loan amounts are identical under both federal programs, but repayment plans may differ.

"We believe that parents and students will find the Direct Loan Program very easy to work with. We will continue to monitor loan programs in the future so that we continue to offer students and their parents the best available loan options."

More than 23,000 Purdue West Lafayette students and 5,500 parents borrowed $125 million through federal loan programs during the 2006-07 academic year. The Purdue North Central campus had 5,118 students and 108 parents borrow $9 million from the federal loan programs during the same time frame.

Loans processed for the 2008 summer session will continue to be processed through regular Federal Family Education Loan Program lender channels.

Writer: Christy Jones, (765) 494-1089, christyjones@purdue.edu

Sources: Joyce Hall, (765) 494-5090, jjhall@purdue.edu

Pam Horne, (765) 494-9116, pamhorne@purdue.edu

Larry Barrett, (219) 785-5730, lbarrett@pnc.edu

Bryant Dabney, director of financial aid at Purdue North Central, (219) 785-5502, bdabney@pnc.edu

Purdue News Service: (765) 494-2096; purduenews@purdue.edu

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