Direct Loan Issues
The University of Memphis
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).
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
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
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
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.
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
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.
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.