For the 2009-2010 academic school year, Plymouth State students are asked to sign yet another promissory note as the university switched from the Federal Family Educational Loan Program to the Federal Direct Loan program. However, the switch may not be as beneficial to the students as Financial Aid had hoped.
According to the PSU Financial Aid website, the school is “very EXCITED about this change in access loan funds which [they] know will have a positive impact on [their] ability to serve … students.” The information provided regarding the Direct Loans program certainly appeals to the financial aid offices as it “smoothes the delivery of funds, and simplifies the administration and oversight of the loan funds”.
However, the change is affecting students in a way that may not necessarily be good. “I mostly leave the financial stuff to my parents,” says sophomore Kristin DiMatteo, “and they didn’t really like the change. They wanted to be able to dictate how the money was spent as far as tuition, school books, etc. “
PSU Financial Aid supports that the Direct Loan program does in fact benefit students by creating an easier access to funds as the program is government-funded which alleviates concerns that students and parent may not be able to get the same funds from outside lenders as they are accustomed to.
There is also an additional repayment plan option through the Direct Loan program, the income contingent plan. This allows loans to be forgiven if they are not paid after 25 years of regular payment. It also prevents the interest from going over 10 percent of the loan itself.
There is a public service forgiveness clause within the Direct Loan program which means that graduates working in public service, including careers in teaching, government, social work, law enforcement, and non-profits, will experience loan forgiveness after 10 years of employment and regular loan payments.
Perhaps one of the most appealing aspects of the Direct Loan program for some is that there is only one lender. ” Students will be able to track their Direct loans with one lender and in one location”. Also loans are never sold in the Direct Loan program, whereas they can be sold in the FFELP. Finally, “All federal loans can be consolidated to the Direct Loan program, or to the FFELP program”, and PSU students still have a choice in repayment options.
The Direct Loan program is also supposed to be helping out by lowering the costs for parents through the Federal PLUS Loan. This loan, offered to parents of dependent students, has a 7.9 percent interest rate. Compared to an 8.5 percent interest rate in FFELP, this is a small, but important drop.
“My parents didn’t know what to do with my refund check this semester, ” says DiMatteo, “Because they spent more money out of pocket this semester they need to keep the refund check to make up for their losses. It’s really put them in hole where loans are concerned”.
Financial Aid still feels that this switch to the Direct Loans program is really going to “Better serve PSU students” for all of these reasons. Any questions or concerns should be directed towards the Financial Aid office. To learn more about the Direct Loan program and to view this information in depth go online to PSU’s Financial Aid webpage.