In an effort to ease the effects of the country's volatile credit markets on Tufts families, the university will switch federal student loan programs to circumvent third-party student lenders.
Tufts has changed from the Federal Family Education Loan Program (FFELP) to the Federal Direct Student Loan Program. The two systems offer the same subsidized and unsubsidized Stafford loans and federally guaranteed parent loans, or PLUS loans, but with FFELP, students receive financing through a third-party lender and the availability of these loans is more susceptible to fluctuations in the market. Through the Direct Loans program, meanwhile, funds come straight from the government at a fixed rate.
The change will take effect in the 2009-10 academic year. Current Tufts students who are receiving aid will continue to receive FFELP loans for the duration of their time here, according to Director of Financial Aid Patricia Reilly.
A university-wide committee, assembled earlier this year to investigate the possibility of switching programs, made its final decision about three weeks ago. "We've been working on implementation since then," Reilly said.
The committee looked at operational concerns, among other issues, since the Direct Loans program requires setting up a new infrastructure.
"The main negative consequence is that it is a greater administrative burden on the school," Mark Kantrowitz, publisher of finaid.org, told the Daily.
Through FFELP, the outgoing program, students go to a lender's Web site and apply for a loan there. Tufts then certifies the loan and receives the money from the lender, usually in the form of an electronic payment.
Under the Direct Loans program, Tufts will be responsible for producing the loans, and the Department of Education will then repay the university.
The Office of Financial Aid will reorganize to make the adjustment, but it does not expect a need to spend more to accommodate the change. "We'll have to re-deploy people," Reilly said. "It won't take additional staff. It will just mean retraining staff."
She was optimistic that the switch would eventually streamline Tufts' financial aid process. "In the end this will be simpler," Reilly said. "Instead of dealing with dozens of lenders all over the country we'll only be dealing with one entity."
But the primary motivation to change programs was the growing troubles in the credit markets that directly affect the student loan world. This year, 168 private lenders have stopped offering student loans.
This trend has prompted several schools to eschew FFELP for direct loans from the government. In June 2007, 1,173 schools used the Direct Loans program; by September 2008, this number had jumped to 2,399, according to information Sen. Edward Kennedy's (D-Mass.) office gave the Daily earlier this fall.
"Many schools have started switching to direct loan because of the greater stability of the program," Kantrowitz said. "There's no worrying about whether the lender is going to be there in the future."
Several universities in the Boston area, including Harvard, Northeastern and Boston University, already use the Direct Loans program.
"We are a Direct Lending school, and have been since the beginning of the program," Harvard's Director of Financial Aid Sally Donahue told the Daily in an e-mail in September. "It works well for us, and we have no plans to change."
Boston College still uses FFELP but applied earlier in the year to the Direct Loans program as a safeguard. Boston College, which has been accepted to the program, does not anticipate swapping programs for this year, largely for logistical reasons -- the school will start using new financial aid software in December of 2009.
"Since converting over to Direct Loans would require BC to modify the old software now and redo a new software package in December of 2009, we have delayed our decision until the 2010-2011 academic year process is finalized," Bernie Pekala, director of student financial strategies at BC, told the Daily in an e-mail.
Still, he added that BC could change its mind at any time and begin using Direct Loans.
Reilly underscored the fact that the student-loan world is changing daily. "There's a lot of action right now and a lot of schools are considering the same decision we just made," she said.
