IUPUI Switches to Federal Direct Loans for 2008-09

Indiana University-Purdue University Indianapolis announced today that it will begin using the federal Direct Loan Program as its source for federally backed student loans, beginning in the fall of 2008.

The decision was announced by Rebecca Porter, Executive Director of Enrollment Services and Associate Vice Chancellor for Student Services at IUPUI, who said the action is being taken to ensure students will have a predictable and reliable source of funds during the 2008-09 academic year.

Administered by the U.S. Department of Education, the Direct Loan Program obtains funding directly from the federal treasury.

More than 50 percent of the IUPUI's undergraduate students this year received federally subsidized loans

The decision to change was made by IUPUI Chancellor Charles Bantz.

All IU campuses have used Sallie Mae as its preferred servicer of student loans under the Federal Family Education Loan Program (FFELP) since 2004. Sallie Mae, chosen from among eight prospective companies on the basis of best overall package of borrower benefits for students, drew upon funds from private markets.

One of the major benefits enjoyed by IU students was that Sallie Mae charged them no processing fees. However, Sallie Mae has announced that it will begin charging processing fees again. The federal Direct Loan Program charges a half percent origination fee.

IUPUI will continue to work with Sallie Mae for private loans as well as any other lender that a student would chose.

The federal Direct Loan and the privately funded FFELP programs are both overseen by the U.S. Department of Education. They both 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.