Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, December 1, 1994 TAG: 9412010101
SECTION: VIRGINIA PAGE: C-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
A total of 1,495 schools representing 40 percent of the whole student-loan volume now are in the program, according to Education Secretary Richard Riley.
``We are determined to take the expense and confusion out of how students finance and pay for higher education,'' Riley said at a news conference at American University, one of the schools already participating. ``We are working hard to make this loan process simple, easy and efficient.''
The government guarantees about $18 billion in student loans issued under the Federal Family Education Loan Program. Riley said the direct-lending program will save taxpayers $4.3 billion over five years that otherwise would have gone to lenders for insurance fees.
The eight Virginia schools added to the list are: Alliance Tractor Trailer Training II in Wytheville, Dominion Business School in Roanoke, Indian River Beauty Academy in Virginia Beach, James Madison University in Harrisonburg, New Technology University in Annandale, St. Pauls College in Lawrenceville, Virginia Military Institute in Lexington and Virginia State University in Petersburg.
Under direct lending, the federal government makes the loans to students through schools, eliminating the need for students to go through banks and other private lenders.
Benjamin Ladner, president of American University, called direct loans ``an extraordinary program that has made a great deal of difference.
``In general, it has meant for us that these loans have been processed in record time,'' he said. ``Parents do not get late-night phone calls to transfer funds immediately.''
To prove his point, Ladner had his financial aid office demonstrate the program for reporters. Jennifer Graham, a senior from Newport News, signed a form accepting her loan award. A financial aid officer then called up her application on a computer screen, executed a few commands and within moments, three copies of her loan papers popped up on a printer. Graham signed the papers and the loan was final. The money will be in her bank account today, compared to a six weeks from now under the old system.
Critics of direct lending point to the problems the government has had in reining in default costs. The Coalition for Student Loan Reform, a group of three dozen nonprofit guarantors of student loans, issued a statement urging schools to reconsider joining the program.
Mark R. Cannon, executive director of the coalition, said many colleges and universities already are taking a wait-and-see approach before signing up for ``this untested government experiment.''
The government has been phasing in the direct-loan program, beginning at 104 colleges in the 1994-95 school year. Riley said Wednesday he has a list of 500 schools waiting to join.
But Cannon said ``a number of institutions that showed up on previous lists as having expressed interest in being part of the program have subsequently withdrawn.'' He declined to name them but said they were ``universities of various sizes.''
As part of the program, borrowers with low incomes can choose a 25-year payback plan with monthly payments of between 4 percent and 15 percent of their salaries. After 25 years of repayment, any remaining debt would be forgiven.
Others could choose a 30-year payback plan, or the traditional 10-year loan.
by CNB