Wayne State University to offer Federal Direct Loans for student financial aidApril 24, 2008
Move expected to improve service, simplify process and protect students from market volatility
Wayne State had previously subscribed to the Federal Family Education Loan (FFEL) Program, through which private lenders offer loans (guaranteed by the federal government) as well as other financial benefits to students and the university. With market forces and reduced federal subsidies crippling the ability of many private lenders to continue such benefits or even stay afloat, the university has acted to protect the interests of its students.
"We believe it is paramount for our students to get the financial aid they need," said Wayne State Director of Student Financial Aid Al Hermsen. "In this volatile economic environment, there is a legitimate risk that students won't be able to get the loans they need from private lenders and may be forced to explore other costly options. In most cases, Federal Direct Loans do not cost our students more than loans procured under the FFEL, yet they improve service and reliability by simplifying the process."
Hermsen added that the Federal Direct Loan Program is simple to understand and enables the university to focus its counseling resources on the loan decision-making process. The FFEL, in contrast, was confusing to students and difficult to explain.
According to Wayne State's Office of Student Financial Aid, the largest source of financial aid for Wayne State comes from the Federal Stafford Loan Program, under which the FFEL and Direct Loan program are the two funding options from which a university may choose in order to offer federally subsidized loans.
This past year $155 million of the $244 million our students received in student aid came from this program. Undergraduates borrowed $67 million and graduate students borrowed $88 million. Under the FFEL program, the university earned critical funds used to support need-based scholarship programs and earned subsidies that offset other administrative expenses. However, in the fall of 2007 the Federal Government reduced the subsidy provided to FFEL lenders in half, thereby impairing their ability to buy loans from schools or find funds to support their loans to students.
"In light of the current situation, Wayne State is taking the necessary action to ensure that students have a simple, reliable option for financing their educational pursuits," Hermsen said.
Wayne State University is a premier institution of higher education offering more than 350 academic programs through 11 schools and colleges to more than 33,000 students in metropolitan Detroit.
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