Letting Students Choose: The Direct Lending/FFELP Conundrum

A recent article in the Chronicle of Higher Education as well as posts on this blog indicate the recent market share gains that Direct Lending has made at the expense of FFELP.  The principal reason behind this shift was the dislocation that started earlier this year caused by the combination of subsidy cuts and the credit crunch which led many lenders to leave the market.  For those lenders that remained, there were three rounds of modifications to their loan terms leaving many financial aid administrators scrambling to assemble their lender lists.  Traditionally, schools have made the choice for students as to whether to participate in the FFEL program or to go the Direct Lending route. 

I wondered whether there were some schools that participate in both programs and let the students decide.  Armed with recent Department of Education data on Direct and FFELP participant volume, I came across these schools which either offer students a choice of the two loan programs or participate in different programs with different student populations (it would be great to hear from these schools as to how these arrangements are working out):

• The University of Kansas provides Graduate/Professional and Law students with the choice of either DIRECT or FFELP Grad PLUS loans.

• Bryant University offers Direct Subsidized and Unsubsidized Stafford loans and utilizes FFELP lenders for the PLUS loan program. 

• Xavier University of Louisiana offers both Direct and FFELP Stafford and PLUS loans for their students.

• Valdosta State University indicates the following on their website:  "VSU participates in both the Federal Direct Loan Program and the Federal Family Education Loan (FFLEP). You may be offered loans under either program depending on your situation."

• University of Toledo provides graduate students with the option of participating in the FFELP or Direct Lending program for the Federal Stafford and Grad PLUS programs.

• Bradley University offers parents (for PLUS loans) and graduate students (for Grad PLUS loans) the choice of borrowing through the Direct Lending program or FFELP program.

Comments

[David Starr]

There are schools that participate in both programs.

Havings said that, one needs to be careful with the department's data. Many FFELP schools applied to become Direct Loan schools, but have not actually particpated. They're listed as DL schools, but none of its students have receieved direct loans.