Friday, Jul. 11, 2008

MNU students to use federal program for loans

MidAmerica Nazarene University students will use the Direct Loan program next year for all federally backed student loans.

The university made that decision in June because of a trend of private lenders leaving the loan business. Now, the university will coordinate loans directly with the U.S. Treasury Department instead of with private lenders, said Rhonda Cole, director of student financial services at the university.

“At last count, 90 education lenders have either exited the federal loan program or have suspended all or part of their participation,” Cole said.

With fewer private lenders, students might have had a hard time finding one and, as a result, a difficult time securing money for college on time, Cole said. The Direct Loan program is meant to solve that problem.

“...This stability means MNU students can feel secure about having the funding they need for college on time,” Cole said.

Although the university has been approved for Direct Loan since 1994, it hasn’t needed to use the program until this year, Cole said. At least 40 percent of the university’s students who had applied for private loans in 2008 were affected by the situation with private lenders, Cole said. Private loans have been “sold” to other lenders or services, often making the repayment process confusing, Cole said.

“MNU’s move to Direct Loan will give students and the university just one contact point in case of questions or problems with loans,” Cole said.

The move to Direct Loan is becoming more common at smaller schools.

A survey by Student Lending Analytics, a resource used by financial aid offices, reported that out of 428 college officials who responded, 39.5 percent said they were considering switching to direct lending. Regis College, a Catholic school in Massachusetts with similar enrollment numbers to MNU, announced a similar decision in June.

Indiana, Michigan State, Northeastern and Pennsylvania State universities have announced a shift to Direct Loan. The University of Kansas has used the program since 1996, said Joan Weaver, associate director of KU’s financial aid office. She said the school would continue to award federal financial aid and federal direct loans and allow students to “pick through private lenders.”

“We encourage students to look into it and decide what’s best for them and their family,” Weaver said. “We offer them a choice.”

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