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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 system). Fall 2004 enrollment -over 20,000 students (includes undergraduate, graduate and law students). 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 Continued 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 50 45 40 35 30 13.07% all loans 25 63.33 % all loans 20 $12,599,187,280 15 10 5 0 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 programs. 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 institution. 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 disbursements. 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 institutions. 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 areas. 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 process. Respect both loan processes – competition is great. Other Considerations Reauthorization Issues: Curtailment or elimination of school as lender programs. Elimination of borrower origination fees. Elimination of 9.5% Return Tax Exempt Bonds. Direct Loan Reward Program. Elimination of Student Rate/Lender Rate Payment Mismatch. Pilot Program – IRS Direct Loan Collection.
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