IU switches to federal direct loans

This fall, students on the IU-Bloomington campus will be borrowing directly from the federal treasury instead of Sallie Mae, a private lender, said Roger Thompson, vice provost for enrollment management.\nThe switch, Thompson said, is the result of uncertainty in the amount of funding Sallie Mae will be able to provide. Sallie Mae was chosen as IU’s primary lender four years ago because students weren’t charged a processing fee, Thompson said. However, Sallie Mae recently informed the University that, starting in the fall, students would be charged a minimum processing fee of 1 percent or more. The federal Direct Loan Program will allow students to borrow at a rate of a half percent, Thompson said.\nThompson said the administration kept students’ best interests in mind during the change from private to federal loan funding.\n“We wanted to keep student costs as low as we could,” he said.\nOver the past few months, Thompson said banks have also begun to pull out of the Federal Family Education Loan Program, which partners private and public lenders to provide student loans. There’s a lot of “turmoil and uncertainty” in private lending at the moment, IU spokesman Larry MacIntyre said.\nAbout 39 percent of IU-Bloomington students will be affected by the change, according to an IU press release. But, MacIntyre said, students shouldn’t notice a change in how they obtain loans.\n“It will probably be exactly the same in terms of how money is applied for and accessed,” MacIntyre said. “The student doesn’t see a difference under the federal loan.”\nStudents will still have to fill out a FAFSA form, Thompson said. The only difference will be that they will be borrowing money directly through the Department of Treasury rather than through a lending institution such as Sallie Mae.\nIU’s seven other campuses have not yet decided to make the change, Thompson said, but could decide to do so in upcoming weeks.