Government’s Direct Lending Program Sees 43-Percent Increase in Volume

Student Loan Girl — Wed, 03 Sep 2008 00:36:00 GMT

As cash-strapped lenders continue to drop out of the Federal Family Education Loan Program, the number of student loans originated for the 2008–09 school year through the government’s Direct Loan Program has increased by 43 percent, reports The Chronicle of Higher Education (“As ‘Crisis’ Deters Loan Companies, Direct Lending Sees 43-Percent Jump,” Sept. 2, 2008).

Lenders in the FFEL Program — through which borrowers take out federal student loans through private, third-party lenders including banks, state agencies, and nonprofit lenders — have generally accounted for 80 percent of all federal student loan volume, according to the House Committee on Education and Labor (“The College Loan Landscape,” March 2008).

But the Direct Loan Program, which provides loans to students and parents directly from the Department of Education, is gaining ground. As of August 8, the Direct Loan Program had already originated more than $10.84 billion in federal student loans at 1,156 colleges and universities. At this time last year, the direct-lending program, had originated just $7.55 billion in loans at 851 institutions.

And although the exact figures have yet to be released, the Education Department estimates that the Direct Loan Program, which has generally made up 20 percent of all federal college loan volume, will soon be comparable in size to the FFEL program. FFELP lenders have only issued $13 billion in federal student loans at 3,230 colleges and universities this academic year, compared to the $55.8 billion in student loans they originated at 4,612 schools last year.

So Far, A Smooth Transition to Direct Lending

Government subsidy cuts to FFELP lenders enacted by the College Cost Reduction and Access Act last September, as well as continued fallout from the subprime mortgage crisis, have led more than 100 lenders to suspend their participation in the FFEL program.

By April of this year, some 5.8 percent of lenders remaining in the FFEL program had switched over to the direct-lending program and another 19.3 percent said they were considering the switch, according to Student Lending Analytics, a company that provides financial aid administrators with data about lenders (“Drift Toward Direct Lending (Update),” Inside Higher Ed, April 30, 2008).

Although some lenders questioned the Education Department’s ability to handle an increase in loan volume through its Direct Loan Program, some financial aid administrators say the Department of Education has done well in handling the influx of business.

Anna Griswold, executive director of student aid and assistant vice president for undergraduate education at Penn State, says she has been “pretty pleased” with the Direct Loan Program and has not experienced any glitches. Penn State, the 10th-largest FFELP lender last year, became a direct-lending school this year after its FFELP lender, the Pennsylvania Higher Education Assistance Agency, stopped offering federal student loans in February.

Penn State borrowers have already taken out $100 million in student loans this year through the direct-lending program.

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All Work for Little Play: Less Popular Collegiate Sports Teams Forced to Fundraise

Student Loan Girl — Tue, 04 Sep 2007 00:15:00 GMT

We imagine the life of a standout college athlete as being a glamorous foray into a fame-filled world of celebrity status. For former student sports superstars like Matt Leinart, Diana Taurasi and Carmelo Anthony, strolling through their respective college campuses in their heyday must have been like walking on air.

But life isn’t so light and fluffy for the college athletes playing less mainstream sports.

Due to the lack of visibility and revenue-generating popularity with the TV-watching public for sports like fencing, swimming, softball and soccer, more and more Division I college athletes find themselves participating in “high-schoolish” fundraisers and working in sometimes exhausting odd jobs just to keep their teams alive, according to a New York Times article by Teddy Kider (“Odd Jobs Help College Teams Stay Afloat,” Aug. 24, 2007).

Year after year, NCAA Division I football and basketball teams generate millions of dollars in revenue for their schools from ticket sales, donors and national sponsors, while their coaches rack up salaries of $3 million and $4 million. Meanwhile, their less-followed sports siblings struggle to come up with even the most basic funding.

And it isn’t always a matter of dollars following success on the field or on the court. Football and basketball teams with persistent losing records may not land lucrative TV deals, but they could still receive millions in donations, while top-ranked sports programs that will never make the ESPN highlight reel must pay for themselves or risk being pushed out of the way.

In January, Butler University, for example, axed its men’s lacrosse team after 14 years and its men’s swimming program after 79 years. According to Butler Athletic Director, Barry Collier, in an announcement released by the university, the decision was made as a means to focus effort and financial support on Butler’s remaining 19 teams (“Butler University Announces Changes to Athletic Program,” Jan. 26, 2007).

Butler’s football team, on the other hand, despite an ongoing decisively losing record (2-9 in 2003, 1-10 in 2004, 0-11 in 2005, and 3-8 in 2006), raised $2.3 million for a renovation of its stadium.

Student Athletes Trade In Sticks and Rackets for Trash Bags and Brooms

It has become increasingly common for lower-revenue college sports to rely on their own means for funding, which often involve services for their cash-producing fellow teams.

As an annual team fundraiser, Kider explains, members of the Penn State co-ed championship fencing team spend one Sunday morning a year ridding their school’s 107,000-seat football stadium of trash left behind by the game-going crowds. The fencing team continues its efforts by selling school merchandise at football games throughout the season.

Members of the University of Utah swimming team also work football games, serving as hospitality workers for the stadium suites. Butler’s softball players work as gate attendants at football games and as concessionaires at basketball games, in addition to cleaning the school basketball arena.

Although the NCAA places restrictions on how much time student athletes can spend on team-related activities, those constraints don’t apply to fundraising, Kider notes.

Jeanne Rayman, Butler’s softball coach, uses fundraisers to provide about 15 percent of her team’s annual budget, but has concerns about how much strain the additional work—serving at school football and basketball games, as well as directing traffic at home games for the Indiana Pacers and Indianapolis Colts—creates for her players.

“They have so much going on in their college lives, trying to be the best athletes they can be and trying to have somewhat of a social life,” Rayman’s quoted as saying in Kider’s piece. “It just becomes a daily grind. It’s more of a drain on them than a morale booster.”

What’s Fair Got to Do With It?

Not all out-of-the-spotlight teams resort to types of fundraising that take additional time away from their athletes. Instead, they find other ways of financially supporting themselves.

For instance, says Kider, sports in need of extra funding at Baylor University rely on alumni and other donations to avoid overexerting their players with yearly moneymaking activities.

Some coaches outright object to their student athletes having to work to financially support their teams, particularly since the practice is blatantly unequal, required only of the non-darlings of the college sports world.

“You’re not going to ask a major Division I football or basketball athlete to do a car wash,” says Bob Reasso, the men’s soccer coach at Rutgers. “We have the same caliber athletes.”

These coaches, writes Kider, maintain it’s “unreasonable to ask Division I athletes to participate in small moneymaking projects, especially those that involve working for more profitable programs”— the haloed college football and basketball teams that exist in a whole other isolated dimension from their school’s other sports, regardless of how superior those other teams’ win-loss records may be.

Whereas the financial livelihood of the Penn State fencing team depends on the money it makes by cleaning the school’s football stadium every year, the football team itself has only faced one year where it had to clean its own stadium—and not to fund its existence, but as a coach-imposed punishment for some of its players’ suspected connection to an off-campus fight.

Some of the fencers on Penn’s team, which won its 10^th national title in 18 years last season, still don’t see the situation as fair, but they’re happy to know their football-playing fellow athletes can partake in their cleaning experience.

“I’m glad for once that they’ll have to do it,” says Penn State fencer Jimmy Moody in Kider’s article. “They’ll get a taste of it. They get to see what we do every year.”

But perhaps the lacrosse and rugby players, the softball and soccer players, the fencers and swimmers and rowers of the college world have at least one thing on their more pampered contemporaries: a hard-earned appreciation for the opportunity they’ve been given.

“It’s unfair that we have to put in extra work because our sport might not be as fun to watch. … But it is fair that the school is giving us a chance to work to keep the program around,” says Andrew Brown, a senior swimmer at Utah. “I’m just happy we still have a swimming team.”

The student loan advisors at NextStudent are helpful and knowledgeable about student loans. They’re a trusted source in getting you the appropriate information about your student loan consolidation, student loan options and in helping students get the college financing they need. Go to www.nextstudent.com for more information.

Student Loan Girl

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Student Loan Blog : Penn State

Government’s Direct Lending Program Sees 43-Percent Increase in Volume

All Work for Little Play: Less Popular Collegiate Sports Teams Forced to Fundraise