As posted earlier, the Chronicle of Higher Education reported that schools constituting 96% of federal loan volume were currently in the DL program actively taking steps to prepare for their transition to Direct Lending. That was followed up a day later by an email from the Department of Education to college presidents and financial aid administrators.
Here is the detail behind that 96% figure based on information from the Department of Education:
The following are the four categories of Direct Loan Readiness as well as the percentage of schools and the percentage of 2008-2009 loan volume represented in each category as of January 14, 2010:
Direct Loan Ready – 44% of schools or 55% of 2008-2009 federal student loan volume ($)
A school is considered “Direct Loan Ready” if it has the capacity to originate a Direct Loan. The following factors were used to determine if a school has the capacity to originate a Direct Loan:
- The school originated a Direct Loan in 2008-2009 or 2009-2010;
- The school originated a Direct Loan in 2008-2009 or 2009-2010 and later cancelled that origination; or
- A main location and/or branch location of the school (by OPE ID) originated a Direct Loan in 2008-2009 or 2009-2010
A school is considered in transition if they have actively taken one or more steps to prepare for participation in the Direct Loan Program. These steps include Department notification of intent to participate in the Direct Loan Program, attendance at a U.S. Department of Education-sponsored Direct Loan training session, and completion of Direct Loan testing.
Pell Only (No transition activity) – 15% of schools or approximately 3.7% of 2008-2009 federal student loan volume ($)
This includes schools that participate in Pell, and therefore have familiarity with the Common Origination and Disbursement (COD) system, but have not taken any of additional steps addressed above to prepare to participate in the Direct Loan Program.
Inactive – 2% of schools or approximately 0.3% of 2008-2009 federal student loan volume ($)
A school is considered inactive if they do not participate in Pell and also have not taken any of the transition steps addressed above to participate in the Direct Loan Program."
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So, analyzing this data another way, about 17% or 850 schools have done no measurable activity (notified Dept. of intent to participate, attending DL Training session or completed DL testing) to transition to Direct Lending. These schools appear to be weighted toward lower loan volume schools, since those 17% of schools only represent 4.0% of loan volume. Many of these smaller schools had expressed their concerns given their limited resources and this appears to be playing out now. The other question would be how committed those 39% of schools "In Transition" are to Direct Lending. If I could ask one question, it would be what percentage of those 39% completed each of these steps, which provide another indication of the level of commitment:
- provided the Dept. with intent to participate in DL
- attended Direct Loan training session
- completed DL testing
Given this data at this late stage, I wonder if the Department has plans for a special outreach or resource plan to assist those 850 schools that are furthest behind at this late juncture.
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