Student loans change hands

Your money is still there; you just have to run a different maze to get it.\nIU-Bloomington has changed from being a direct lender of Stafford and Plus loans to having Sallie Mae act as guarantor of the University's nearly $120 million loan portfolio. Many students and parents already have received e-mails from Sallie Mae detailing the new loan application and renewal process, but the transition hasn't been flawless.\n"It felt like an extra step and it's more paperwork than I remembered from last year," junior Ron Kautz said.\nThe new process requires students and parents who hold Plus loans to complete the Federal Application For Student Aid form online and electronically sign a master promissory note. Redoing the paperwork is designed to take less than 30 minutes and ease future red tape.\n"Plus loans used to take weeks to process, but with Sallie Mae the application takes approximately 20 minutes and the confirmation 60 seconds," said associate director of financial aid Bill Ehrich.\nThe Internet-based system is not without its shortcomings, however. Sallie Mae still is ironing problems out of the system.\n"Every day of the week it doesn't work perfectly, but we have been very impressed with the effort Sallie Mae has made to work the bugs out," Ehrich said.\nParents and students without Internet access can call Sallie Mae and fill out forms on paper and mail them in.\n"It was all done on paper before and I haven't seen any new paperwork at all," Scott Brown, father of junior Lauren Brown said.\nThe current contract between IU and Sallie Mae was finalized in February but is temporary. Negotiations for a permanent contract are still underway.\nIn the meantime, there is some confusion during the transition period.\n"It felt kind of backward because (Sallie Mae) contacted me before IU did," Kautz said.\nEhrich said there are benefits to the new system, however. \n"In past years you got 97 percent of the money," he said. "If you borrowed $5,000 you got $4,850 and $150 went to loan processing, but in our new contract Sallie Mae is eating the 3 percent. If a student borrows $5,000, he gets $5,000."\nSallie Mae is willing to waive the processing fee because they will own the loans through the lucrative repayment years. Under the direct loan system, the federal government owned the loans.\nUnder the current system, students who complete the online FAFSA are approved automatically for a Stafford loan and are re-approved every year. In contrast, parents must reapply for Plus loans every year. This service is often misunderstood by students who don't cancel their loans after acquiring other means of financing.\n"Junior year your Uncle Leroy says 'I'll pay for your school,' but if you signed a master promissory note you have to tell financial aid you don't want the money," Ehrich said.\nRepresentatives from Sallie Mae declined to comment for this story because of the ongoing negotiations with IU.\n"(The long term deal) should be done by now," IU's Assistant Director of Purchases Lorelei Meeker said. "We're in the middle of the process and it is sensitive"