THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, September 21, 1994 TAG: 9409210414
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY PHILIP WALZER, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 87 lines
Anthony Hill, an Old Dominion University junior, got his Stafford loan check in mid-August, two months earlier than he did last year.
Lisa Loftin, a graduate student in humanities, is saving on phone calls. ``You don't have to call so many places to find out about your loan,'' she said. ``You can just call ODU and ask: Where's my loan? What stage is it in? When did you send my check?''
Hill and Loftin have become quick supporters of ODU's new direct-lending program, which eliminates banks and guarantee agencies to streamline the student-loan process.
Old Dominion is the only university in Virginia participating in the pilot program, which the Clinton administration promises will reduce the confusion surrounding student loans and save the public billions of dollars by cutting down on defaults and loan fees.
On Tuesday, Madeleine Kunin, U.S. deputy secretary for education, visited ODU's financial aid office to add her stamp of approval. Her appearance was part of an administration campaign to promote better customer service by the government.
With direct lending, Kunin said, ``you have a simplified process, it will serve the students better and, not to be forgotten, it will save taxpayers money.''
Under the old system, a loan application would go through a maze of hands, including a guarantee agency and bank, before a check was issued, said Helga A. Greenfield, director of ODU's financial aid office. In direct lending, there are virtually no middlemen; the university can approve the loan and pay the student directly, later billing the government.
The direct lending program also has reduced annual loan fees from about 6.5 percent to 4 percent, saving students up to roughly $60 a year, Greenfield said.
Loftin, the graduate student, said the new system spares students the cumbersome - and often futile - effort of figuring out how much money they're eligible for. ODU's computer automatically estimates it.
``You don't have to figure out how much money to borrow,'' she said. ``It's already done for you. Before, you were never quite so sure. You filled out the numbers even though they might not be correct.''
About 100 colleges and trade schools were selected by the Education Department to participate in the voluntary program this school year. Next year, better than 1,000 more will join. More than 30, including Hampton and Norfolk State universities, will be from Virginia.
Schools can decide how much of their loan volume to switch to the new method. ODU, which annually processes $33 million worth of loans, chose to transfer all its loans to direct lending. Nearly half the university's 17,000 students have loans, Greenfield said.
Other loan recipients at ODU had mixed reactions to the new program. Senior Jonathan Sturges said, ``I haven't seen any difference in speed. It's about the same to me.''
But Min O, a junior, said: ``It's less hectic in the financial aid office. It used to be backed up all around the corner, but you don't find a line anymore.''
Greenfield said she's heard some complaints from parents: ``Some think they have a relationship with a banker that can make it faster. They know Mr. So-and-So at the bank. But Mr. So-and-So is not processing the loan.''
The plan has faced more vocal opposition from bankers and guarantee agencies, who stand to lose money and clout with the change.
Clark McGhee, vice president for student lending at Crestar Bank in Richmond, said the government should focus on improving the old system, rather than replacing it. ``This business is not really broken,'' he said. ``You can continue to have a public-private partnership.''
But Kunin said government studies regularly documented ``confusion and waste in the program. Students sometimes need a road map to find their loans. The bank sells the loan to the secondary market, and they sell the loan again.
And Greenfield dismissed objections to giving the federal government a greater oversight role in the process: ``Yes, customer service is not always what it should have been'' from the government. ``But I can tell you, they have beefed that up. Since ODU has been selected for direct lending, we have received superb service from the Department of Education.''
With the advent of direct lending, Greenfield said, ``I know lending institutions have a lot to lose. But the people we have to keep in mind are the students. The program is for them.'' MEMO: For more information on direct lending, call the federal hot line,
1-800-4FED-AID, or Old Dominion University, 683-3683.
KEYWORDS: STUDENT LOANS EDUCATION DIRECT LENDING FINANCIAL AID by CNB