New loan system mirrors old

Although the University has announced plans to switch financial aid systems, University officials said the new system should mirror the direct lending program in many ways. Students receiving loans will not have to worry about loopholes or red tape most often associated with administrative switches. The 8.25 percent federal cap on interest rates for student loans will still apply when the switchover is complete in the fall of 2004.\n"Everything is the same," Bill Ehrich, associate director for client services for the Office of Student Financial Assistance, said. "The bank system is exactly the same as the previous (direct lending) program. The interest you pay, how much money you receive and the years you have to pay all remain the same."\nThose fearful that attaining loans or repaying outstanding loans in the future will be more difficult, should not be, Ehrich said.\n"The federal government doesn't ever deviate much from the rules," Ehrich said. "The interest rates should not change either."\nAccording to Ehrich, the previous two systems had the same interest rates, but the delivery of money under the old bank loan system was not nearly as efficient as what the University could attain under the direct lending program. \nBecause of direct lending, the banks were forced to provide better service, Ehrich said.\nDespite administrative confirmations that "all is well" regarding the future of the student loan system, others regard the current system as nothing short of confusing.\nFor freshman Heather Mourer, having her student loans gives her the ability to go to school.\n"My student loans pay for all of my tuition and fees," Mourer said. "But I wish they would explain how the system works more clearly for students. For the most part, (students) are the ones who will end up repaying these loans once they've graduated. But (IU) has never explained the process to me."\nMourer does not qualify for financial aid because her parents' salaries exceed the minimum. She has had to take out more than one loan in order to finance her college education. Her loans include two federal loans and one private loan borrowed through her bank. \nHer unsubsidized Stafford loan is a federal loan available to all students, regardless of need. The loan can be deferred until after graduation but doing so adds the interest payments to the loan balance. This ultimately increases the size and cost of the loan, according to www.finaid.org.\nMourer said she feels angered with the current student loan system because their restrictive policy for financial aid.\n"They just look at what your parents make, and not everything else they have to pay for," Mourer said. "My parents and many others' have mortgage payments and car payments."\nWhile Mourer said she is displeased with the current system, Ehrich offered some analysis of the current interest rates that might tweak the attitude of unhappy loan recipients.\n"The current interest rate, during in-school and deferment periods, is 5.39 percent," Ehrich said. "This number is reset annually every July 1, and is dependent upon the prime rate."\nInterest rates for those students who have graduated and repaying the money is currently 5.99 percent, but Ehrich said these figures could decrease if the economy continues to lag. \nUnder the new system, slated to begin in the fall of 2004, the new bank loan program will provide funding through federal private guarantee agencies.\nThese agencies will serve as the "middle-man" between the federal government and the university, Eric Pfeffinger, associate director of Financial aid for the MBA program, said.\nTheir main purpose is to serve as an authoritative and regulatory agency that is authorized to implement the federal loan system, Pfeffinger said..