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IU Northwest shifts to Federal Direct Loans for 2008-09

Indiana University Northwest, along with all Indiana University campuses, will begin using the William D. Ford Federal Direct Loan Program as its source for federally backed student loans, beginning in Fall Semester 2008

The decision, announced earlier this month by Associate Vice Chancellor for Enrollment Management Joe Pellicciotti, is expected to ensure that IU Northwest students have access to a predictable and dependable source of college funding for the coming academic year. Administered by the U.S. Department of Education, the William D. Ford Federal Direct Loan Program obtains funds directly from the U.S. Department of the Treasury.

IU Vice President and Chief Financial Officer Neil Theobald said that Indiana University would review its program options each year to ensure that students continue to receive the best loan services and pay the best price for those services.

“For 2008-09, we are convinced this is the right decision for all IU campuses,” he said.

Theobald cites dual factors as the impetus behind IU’s decision to utilize the federal Direct Loan Program. The first is concern about the availability of private student loans for the coming academic year. Because funds from the federal program come directly from the U.S. Treasury, they should not be affected by uncertainty in the private loan market.

The second reason is that private lenders are beginning to charge a 1-percent or higher origination fee for Federal Family Education Loan Program (FFELP) loans, while the federal direct lending program’s origination fee is only 0.5 percent. This results in savings on IU's federal loan portfolio totaling $393 million, of which $18 million comprises IU Northwest’s loan portfolio. In the 2007-08 academic year, more than 65 percent of IU Northwest undergraduate students year received federally subsidized loans to finance their education.

Despite the move to utilize the federal Direct Loan Program, Pellicciotti said that IU Northwest would also continue to work with private lender Sallie Mae, or with any other lenders a student might choose.

All IU campuses have used Sallie Mae as their preferred student-loan provider under the FFELP since 2004. Sallie Mae, chosen from among eight prospective companies on the basis of best overall package of borrower benefits for students, services loans with funds from private markets.

“The primary difference between direct loans and FFELP is the source of the loan funding,” said IU Northwest spokesperson Michelle Searer. “Direct Loans come straight from the U.S. Department of Education using funds obtained from the U.S. Treasury. One major advantage is that this program offers students one single source of contact and the comfort of knowing that their loan will not be sold to a third-party lender.

“Currently, the federal direct lending program provides the most stable source of loan funding available, because the funds are provided by the federal government,” Searer added. “The current instability of the debt markets strongly influenced IU’s decision to find the most secure solution possible for our students.”

One of the major benefits to students of using Sallie Mae was that the company did not charge processing fees. But Sallie Mae recently announced that it would begin charging fees of 1-percent or higher with the start of the 2008-09 academic year. The federal program only charges a 0.5 percent origination fee.

The U.S. Department of Education exercises oversight on both the Direct Loan Program and the privately funded FFELP program. Both programs provide what are generally known as Stafford Loans for students and PLUS loans for parents. Eligibility rules and loan amounts are the same under both programs, although repayment plans and loan fees differ somewhat.

Students apply for a Direct Stafford or PLUS Loan by completing the Free Application for Federal Student Aid (FAFSA). In addition, all new and continuing IU Northwest students will need to complete a new Master Promissory Note (MPN) for 2008-09. They may do so by going to the Direct Loan website If students have questions they can contact the Financial Aid Office via e-mailing or by calling (219) 980-6778 for more information.

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The William D. Ford Federal Direct Student Loan Program was named in 1994 for William D. Ford, former U.S. Representative from Michigan who spent three decades on Capitol Hill and dedicated himself to expanding educational opportunities for children. A House member from 1965 to 1995, Ford served as Chairman of the House Committee on Education and Labor and as Chairman of the House Committee on Post Office and Civil Service. He authored the Middle Income Student Assistance Act and the Plant Closing Act and orchestrated the passage of the Family Medical Leave Act.

Indiana University Northwest is one of eight campuses in the statewide Indiana University system. IU Northwest serves nearly 5,000 students from the seven-county Northwest Indiana area, which includes Lake, Porter, LaPorte, Jasper, Newton, Starke, and Pulaski Counties. The University offers a wide range of master’s, bachelor’s and associate’s degrees, along with some certificate programs and has conferred more than 22,000 degrees to Northwest Indiana students. IU Northwest is organized into six degree-granting academic units: the College of Arts & Sciences; the School of Business & Economics; the School of Education; the School of Public & Environmental Affairs; the Division of Continuing Studies; and the newly formed College of Health and Human Services (CHHS). CHHS brings together the School of Nursing, Dental Education, Allied Health, and Social Work, providing a unified yet multidimensional learning environment. IU Northwest is also the host site for the Indiana University School of Medicine – Northwest (IUSM-NW), the only medical school program in Northwest Indiana and partner in the CHHS.



Media Contact:

Christopher Sheid

Michelle Searer
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