Penn State’s Switch to Direct Loan Program Underway, So Far So Good
Pennsylvania State University said its transition over to the federal Direct Loan Program is going “smoothly.” Already about 3,000 borrowers have taken out $5 million in student loans under the new program this summer, according to an article in The Daily Collegian (“PSU Direct Loan Program Successful,” July 11, 2008).
The university made the switch to the federal Direct Loan Program — in which students and parents borrow federal Stafford, graduate PLUS, or parent PLUS loans directly from the federal government — in March after the state’s student loan agency announced it would no longer be able to issue federal student loans.
More than 90 percent of Penn State’s borrowers were dropped by their federal student loan lenders after these private lenders, who were affected by the volatility of the nation’s credit markets, left the Federal Family Education Loan Program.
Wishing to offer students a more stable and predictable system of lending, Penn State decided to join the Direct Loan Program and move away from the FFEL program under which students could take out student loans through banks and private lenders.
“Our concern was that students might pick a [FFELP] lender, and that lender might subsequently quit making loans,” said Anna Griswold, Pennsylvania State’s executive director of student aid.
In the fall, Griswold estimates that about 40,000 Penn State students will borrow $400 million in student loans through the Direct Loan Program.
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