Eastern to switch student loans to direct lending

College is all about new experiences: getting out on your own, meeting new people and pursuing your own career path. Another of these new experiences is learning how to manage money in order to pay for school-in other words, learning about scholarships and student loans. Last year alone, Eastern students had $71 million in loans.For the past 20 years, Eastern has been a part of a federal loan program known as the Federal Family Education Loan Program (FFELP). Through this program, students who receive federal loans borrow money through banks or student loan lenders.

As of fall 2010, though, Eastern will no longer participate in the FFELP. Instead, Eastern will switch to direct lending, a method where the U.S. Treasury will be the lender.

According to Shelley Park, the director of Student Financial Assistance, Eastern has been approved for the direct lending program for several years, but did not decide to make the switch until recently.

"We've known this was our direction since last summer when we first started considering it," Park said. "We believe that this is the best option for students."

The only type of loan that this program will affect is the Stafford loan. One of the reasons that Park said she believes direct lending is a better option is because many lenders have had to withdraw their participation in FFELP due to the economy. Recently, the House of Representatives passed legislation that requires all schools to participate in this program.

Even though this legislation has not been passed in the Senate, Park said that it is expected to pass, which is another reason Eastern made its decision.

Furthermore, some of the interest rates on loans are lower with direct lending than through FFELP. Parent Plus loans at present have an interest rate of 8.5 percent, but after the switch, the interest rate will only be 7.9 percent.

The only duty that students have to complete in this process is signing a new Master Promissory Note online next spring. This note is a document in which students agree to pay off their loans upon graduation. Even though students who currently have loans have already signed one of these notes, they will have to do so again in order to receive their loans next fall.

"[Signing] the Master Promissory Note is the big thing students have to do to get their loan here," Park said. "We will do the rest on our side."

She also said that students should not worry about changing to the new program. Any students with loans through a bank or lender now can consolidate their total amount of loans through the Department of Education. If a student decides to quit school, then he or she can consolidate their loans in repayment.

Students should not experience any lapse or interruption with access to their loans, Park said.

"As long as students sign a new Master Promissory Note, there should be no problems," she said.

Eastern is not the first school in Kentucky to participate in direct lending. Several schools, including Morehead State University, the University of Louisville, the University of Kentucky and Northern Kentucky University, are contemplating or have already made the decision to change to the direct lending program. In order to remind Eastern students, Park said the university will distribute information about direct lending through e-mail in the spring, strongly encourage students to sign their new promissory note and fill out their FAFSA as soon as possible.

"I'm not worried about making the switch," Park said. "I look forward to it."

If students have any questions about the program or want to learn more, contact Shelley Park at shelley.park@eku.edu or call 859-622-1752.