Obtaining student loans will now not only be easier, but also faster.
Beginning with the first summer session of 2010, the University’s loan program will switch from private lending to Direct Lending from the government — a change that will allow students quicker access to funds and provide a small reduction in fees.
Through Direct Lending, the government will lend to students instead of subsidizing and guaranteeing loans through private lenders.
This change comes as part of the Student Aid and Fiscal Responsibility Act passed by the U.S. House of Representatives in September.
The new Direct Lending program replaces the currently used Federal Family and Education Loan Program. Penn students taking out loans under FFELP will only have to sign a new promissory note to switch to Direct Lending.
Without private lenders as middlemen, “borrowers will see a .05 percent reduction of fees, and disbursement of funds to their student account will likely occur more quickly,” according to Student Financial Services.
Graduate and professional students will also see a lower interest rate.
Under Direct Lending, their rates will drop from FFELP’s 8.5 percent to 7.9 percent, according to a statement from SFS.
Although the changes to the financial-aid policy will not affect students’ total loan amounts, the new program will allow SFS to work with one lender, avoiding the confusion of lenders entering and exiting the market.
Such inconsistency negates the benefits of being able to choose from multiple lenders, as Sharon Pepe, SFS senior director for credit services, explained in the statement.
With buzz of Direct Lending in Washington, the University began planning for the potential switch in August 2008.
In September, Senior Director of Student Financial Services Bill Schilling said this advanced preparation had already put Penn in a better position than many other universities.
Students with further questions regarding Direct Lending may submit them to “askBEN,” located at the top of the SFS web site.Comments powered by Disqus
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