Session Session 33 Direct Loan by gjmpzlaezgx


									Session 33
                Direct Loan Issues

                   Karen Smith
             The University of Memphis
         General Information
   The University of Memphis is a public state-
    funded university (under the Board of Regents
   Fall 2004 enrollment -over 20,000 students
    (includes undergraduate, graduate and law
   Direct Lending school since 1994-1995 (one of
    the original 104 institutions).
             System Information
   Currently we utilize the SCT PLUS system to
    process all financial aid, including student loans.
   Switching to SCT BANNER – implementation
    process to take two to three years since all
    current systems (i.e. ADS, FRS, HRS and SIS)
    are converting to new system.
    Direct Loans Facts and Figures
   The University of Memphis has the second
    largest loan volume in the state of Tennessee.
    We currently have the largest loan volume in the
    Board of Regents system.
   In the 2003-2004 year, we had over $70 million
    in booked loan disbursements. We process both
    Stafford and PLUS Loans through Direct Loans.
    Direct Loan Facts and Figures
 Number of Direct Loan Recipients:
2004/05 year - 12,400 (projected)
2003/04 year - 11,600
2002/03 year - 10,452

 Loan Volume: (includes Stafford and PLUS)
2004/05 year - $80,000,000 (projected)
2003/04 year - $70,605,414
2002/03 year - $59,447,877
               PLUS Loans
 2004/05 year – 500 recipients (projected)
  2003/04 year – 468 recipients
  2002/03 year - 315 recipients
NOTE: Total Loan Volume – includes both
  Stafford and PLUS Loans. PLUS LOAN
  volume listed separately below:
2004/05 year - $2,500,000 (projected)
2003/04 year - $2,220,485
2002/03 year - $1,376,865
Direct Loan Volume -2002/03 year

                          13.07% all loans
                         63.33 % all loans
     Top 10    Top 100
       Benefits of Direct Lending
   Stream-lined delivery
   Greater control over loan process
   Timely delivery of loan funds
   Can track loans easily over time
   Loan adjustments/refunds handled more easily
   No third party to deal with and loans are not sold
Disadvantages of Direct Lending
   Currently, lending institutions are offering no or smaller
    origination fees on student loans
   Lack of choice
   Reconciliation is difficult and cumbersome
   Schools and borrowers miss out on borrower benefit
   Hard to sell sometimes since the program is constantly
    under scrutiny
        Question – Do the Benefits
       Outweigh the Disadvantages?
   Each institution needs to decide what is best for their
   At The University of Memphis, we have gone through
    many loan processing changes. In our first year, we
    used the EDE Express software to process student
    loans and it was very labor intensive. Then we used
    SCT PLUS to process student loans with paper
    promissory notes and manifests. We also used our
    automated packaging system to process estimated
    Stafford Loans. Estimated Stafford Loans were then
    converted to actual loans for enrolled students through
    a loan conversion program.
             Question continued
   In March 2003, we went to electronic Master
    Promissory Notes. The following year, we went to
    electronic PLUS promissory notes. For the current
    year, we became a full COD participant. Now loan
    problems/promissory note issues can be easily
    handled/viewed using the COD website.
   Our students were happy when we started with Direct
    Lending, since they no longer had to wait for their loan
    checks. We now had a three day turn around on loan
           Question continued
   Today students can complete on-line Master
    Promissory Notes in our computer lab. We can
    immediately view the COD website to see that
    the promissory notes and/or Entrance
    Interviews (through DL Servicing) are
    completed and code our system to disburse the
    loans. Our biggest complaint now is: “You
    mean I cannot get my money today!” Our
    Bursar’s Office disburses all funds either
    through Direct Deposit or check by mail.
             Return to FFELP
   The University of Memphis has no plans at this time to
    return to the FFELP program. In the last two years,
    our institution has been approached by at least five
    major lending agencies to either get out of Direct
    Lending entirely or act as a School of Lender program.
    NOTE: We are one of the top 100 Direct Loan
   Currently we process many private loans through a
    variety of lending agencies. We have a good rapport
    with these lenders.
      Return to FFELP continued
   Nevertheless, we have weighed the advantages
    and disadvantages and have decided that Direct
    Loans works best for our institution and our
    students. For us, service delivery is number one.
    We have worked hard over the last 11 years to
    make the whole student loan process as
    automated as possible. In fact, over the years, we
    have reduced staffing in the loans area and
    moved employees to more customer service
 Stay or Leave FFELP/Direct Loans
FFELP To Direct Loans – Reasons to Leave:

   Not satisfied with current loan process
   Too many lenders and too many choices
   Want to streamline the loan process
   Expect the Direct Loan system to be easier
         Stay or Leave continued
Direct Loans to FFELP- Reasons to Leave:

   Not satisfied with certain aspects of the loan process,
    like reconciliation – too much work
   Little or no computer support
   Too much political/administration pressure
   Better borrower benefits
   Lower or no origination fees
    Reasons to Stay for Both Programs
   Happy with the current loan process.
   It works, why fix it!
   Do not want to be pressured to leave current loan
   Respect both loan processes – competition is great.
         Other Considerations
Reauthorization Issues:
 Curtailment or elimination of school as lender
 Elimination of borrower origination fees.

 Elimination of 9.5% Return Tax Exempt Bonds.

 Direct Loan Reward Program.

 Elimination of Student Rate/Lender Rate Payment
 Pilot Program – IRS Direct Loan Collection.

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