July 25, 2008

Can the government handle the student loan volume?

Posted in Student Loan News, The Financial Aid Process at 1:09 PM by Joe From Boston

Some schools are switching to the Direct Loan program in order to ensure their students get loans.  But can the government cope with the additional volume?  For those of you who aren’t sure what the Direct Loan program is, here’s a brief explanation:

Students who borrow a Federal student loan borrow either through the FFELP program or the Direct Loan program.  The FFELP program handles loans through private companies and banks, whereas with the Direct Loan program which means student borrow directly from the government.

With the credit crisis affecting student loans last fall, some schools switched to direct loans to make sure their students got loans.  But now with the increasing volume, some people , including Congressmen, are concerned that the Direct Loan program won’t be able to cope.

Congressmen Pete Hoekstra (R-MI) and Mark Souder (R-IN) sent a letter to the Government Accountability Office asking it to review the Direct Loan programs capabilities.  The Congressmen are very concerned.