College Students Seeking Financial Aid Should Start Now
Q & A with Larry Hollingsworth
The Oklahoman, 01/26/10

Q: How does the financial aid process begin?
A: Most financial aid providers ask the applicants to complete the Free Application for Federal Student Aid (FAFSA). So, every year college students should complete a FAFSA. The FAFSA results provide an indication of the family's financial strength. This is called an expected family contribution, which is viewed as how much money the student is expected to contribute for that year of college. The expected family contribution is determined by a variety of factors including family size, how many in the family are in college, and income and assets, to name a few. The expected family contribution is used to determine eligibility for programs including need-based federal Pell Grants, some scholarships, work-study jobs and federal student loans.

Q: When and how is the FAFSA completed?
A: Now is the time to start. The FAFSA can be completed after Jan. 1 for the next school year. It is imiportant to file early because most colleges set their priority deadlines for February through mid-March and the maximum amount of aid to be awarded is more likely to be received early in the cycle. Check with the collefe to see when the deadline is and apply early to optimize chances of receiving grants and scholarships. The aid deadline in Oklahoma is April 15 for the FAFSA to be received by colleges. The online FAFSA received some improvments this year to make it a bit simpler. Therefore, students are urged to complete the online FAFSA rather than the 107 question paper version.

Q: Is tax information needed?
A: The majority of the information needed for the FAFSA comes from tax returns. Most students under age 24 must provide parent income information as well. Therefore, students and parents should complete their taxes before they complete the FAFSA. A February college deadline for the FAFSA might make current tax information impossible to provide, so parents can estimate their earnings. If this is the case, estimates using the previous year's tax information are a good place to start. Estimates will have to be replaced with the actual figures once the tax returns are completed.

Q: How do I get started and what happens after it is submitted?
A: First, if the student does not have a Federal Student Aid PIN that enables him to electronically sign teh FAFSA, he must apply for one at www.pin.ed.gov. One parent also will need a PIN to sign, if appropriate. Once both student and parent have PINs, begin the FAFSA online at www.fafsa.gov. Free online help is available at that site or by calling (800) 433-3243. After the FAFSA is submitted, the U.S. Department of Education or the schools with which information is shared may request confirmation or clarification of information. Verify and correct any requests promptly. Students will receive information from each school they have listed on their FAFSA in order to determine how much financial aid is available from each school.

Changes for Student Loans are Expected
Tulsa World, 01/02/10

Colleges are preparing to switch to direct lending from the U.S. Department of Education

Big changes may be coming soon to the student loan industry, and those involved are preparing for the adjustments.

The Obama administration's plan is to eliminate the Federal Family Education Loan Program, which has provided education loans to students and parents through a public and private partnership with lenders since 1965, if Congress approves the measure. Direct lending from the U.S. Department of Education will take its place.

Lenders have been getting out of the student loan business during the last few years. The Oklahoma Student Loan Authority had 42 banks and credit unions in its lender network in 2007. That number has dwindled to eight.

The authority, which was created as a public trust by the Oklahoma Legistlature in 1972, processes loan applications and servers as a secondary market to provide funds to borrowers. The authority receives no state appropriated funds.

One reason for the decrease of lenders providing student loans is the enactment of the College Cost Reduction and Access Act of 2007. It reduces the progitability for nonprofit lenders by 1 percent and forprofit lenders by as much as 2.5 percent, said Michael Davis, teh authority's vice president.

When lenders began dropping student loan services, emergency legislation called Ensuring Continued Access to Student Loans Act of 2008 was enacted. It allowed banks to sell existing student loans to the U.S. Department of Education, freeing up funds so lenders could continue originating loans.

"There was a concern that students wouldn't have access to money for college," Davis said.

The reduction of lenders was the primary reaason Tulsa Community College switched to direct lending in July 2008. TCC and Oklahoma State University are the only colleges in Oklahoma that use direct lending from the Department of Education.

"A significant amount of lenders either announced to us formally or we found out infomally they were no longer providing loans," sid Jan Clayton, TCC's associate vice president of studnt affairs, adding that about 70 percent of lenders who provided loans to her school's students had stopped.

"As banks are making business decisions... institutions who were smaller in terms of borrowing befan to lose out on that relationship," Clayton said.

TCC had to upgrade some of its technology and systems to be compatible with the Department of Education, Clayton said, and the cost of those upgrades may be one reason that other colleges haven't made the switch.

Davis said more than 3,000 colleges still haven't moved to direct lending and teh deadline for the Federal Family Education Loan Program to end is June 30.

A request to push back the direct lending deadline to June 2011 and to extend teh Ensuring Continued Access to Student Loans Act has been proposed.

"For the banks that remain in our network, I think they hate to see the (Federal Family Education) program go. They're in it for more than teh profitability." Davis said.

Those lenders hoped to build banking relationships with those borrowers and expand their customer base, he said.

Student loan legislation is on teh back burner because of the health-care reform bill, but the authority expects state legislators to address student loans early next year.

"Whether the FFELP program is eliminated or not, the authority will be here," Davis said, offering services to existing portfolio customers and likely becoming a contract service provider for the U.S. Department of Education. "Some of those loans would be contracted to us. Those loans OSLA would be serving would still be Oklahoma loans and Oklahoma customers."

State Lenders Leaving the College Debt Arena
The Oklahoman, 12/28/09

Big changes may be coming soon to the student loan industry, and those involved are preparing for the adjustments.

The Obama administration's plan is to eliminate the Federal Family Education Loan Program, which has provided education loans to students and parents through a public and private partnership with lenders since 1965, if Congress approves. Direct lending from the U.S. Department of Eduication will take its place.

A trend of lenders departing the student loan business has been happening over the past few years. The Oklahoma Student Loan Authority had 42 banks and credit unions in its lender network in 2007. Now that network number has dwindled to eight.

Why the drop?
The state authority, which was created as a public trust by the Legislature in 1972, processes loan applications and serves as a secondary market to provide funds to borrowers. The authority receives on state-appropriated funds.

One reason for the decrease in participating lenders is the enactment of the College Cost Reduction and Access Act of 2007. It reduces the profitability for nonprofit lenders by 1 percent and as much as 2.5 percent for for-profit lenders, said Michael Davis, OSLA vice president.

When lenders began dropping student loan services, emergency legislation - the Ensuring Continued Access to Student Loans Act of 2008 - was enacted. It allows banks to sell existing student loans to the U.S. Department of Education, freeing up funds so that lenders could continue originating student loans.

"There was a concern that students wouldn't have access to money for college," Davis said.

The reduction of lenders was the primary reason Tulsa Community College switched to direct lending in July 2008. TCC and Oklahoma State University are the only colleges in Oklahoma - so far - using direct lending from the Department of Education.

Jan Clayton, associate vice president of student affairs at TCC, said about 70 percent of lenders who provided loans to TCC students had stopped.

"As banks are making business decisions, ...institutions who were smaller in terms of borrowing began to lose out on that relationship," Clayton said.

TCC had to upgrade some of its technology and systems to be compatible with the Department of Education, Clayton said. The cost of those upgrades may be one reason why otehr colleges haven't made the switch.

Davis said more than 3,000 colleges still haven't moved to direct lending and the deadline for the Federal Family Education Loan Program to end is June 30.

A request to push back the direct lending deadline to June 2011 and extend the Ensuring Continued Access to Student Loans Act has been proposed.

"For the banks that remain in our network, I think they hate to see the program go. They're in it for more than the profitability," Davis said.

Those lenders hoped to build banking relationships with those borrowers and expand their customer base, he said.

Student loan legislation is on the back burner for lawmakers because of the heath care reform bill, but Kay Brenzy, at the Oklahoma Student Loan Authority, said she expects legislators to address student loans early next year.

Big Changes are in the Works for Student Loan Program
Q & A with James T. Farha
The Oklahoman, 08/09

Q: The Obama administration has proposed removing private-sector lenders from student loans. Can you tell us what this means?
A: In its current form, the Student Aid and Fiscal Responsibility Act of 2009 would end the 44-year-old Federal Family Education and Loan Program (FFEL), which enables schools to choose the company that will best originate and service their student loans. The Act would leave only the Direct Loan program, creating a government administered monopoly where all loan origination and servicing decisions are made by the U.S. Department of Education.

Q: Would the government save money by adopting the Obama proposal?
A: The savings claim is $87 billion over 10 years, but the Congressional Budget Office recently recalculated the savings, reducing the estimated savings to $47 billion. What's not being assessed is the profound effect of ending FFELP's default prevention education, person-to-person programs and local customer service for students.

Q: What impact would this have on Oklahoma students and parents?
A: A giant impact. Nearly all Oklahoma colleges and universities participate in the FFELP, accounting for 88 percent of the student loans in our state. Nationwide, 70 percent of schools are in the FFELP. It's questionable whether the Department of Education's infrastucture can accomodate the volume of schools that would be forced to transition to the Direct Loan program.

Q: How can consumers share concerns?
A: The Oklahoma delegation supports FFELP. Contact them and ask for their continued efforts to let the FFELP or alternative reform proposals serve students and parents with choice, competition and innovation.

Government to Cease Subsidizing Private Student Lenders June 10, 2010
By Bridget Nash Staff Writer Enid News and Eagle

ENID — For more than 40 years, college students have been able to take part in a public-private student loan program, choosing private lenders for their federal student loans.

Now, though, students do not have the choice of a private lender for their federal loans due to a provision in the recently passed federal health care legislation.

The Health Care and Education Affordability Reconciliation Act of 2010, signed into law March 30 by President Barack Obama, included a provision eliminating the Federal Family Education Loan Program, effective July 1. FFELP allowed students to choose private lenders for their federal student loans. Now, students may only borrow through the Direct Loan program and receive their loans directly from the U.S. Department of Education.

“Now you don’t have the option of selecting your lender,” said Calleb Mosburg, financial aid director for Northwestern Oklahoma State University. “The loans just go directly through the federal government now.”

According to information released by the White House on whitehouse.gov, the legislation will generate nearly $6.8 billion in savings over the next 11 years by ceasing to subsidize private student lenders.

Those who oppose the elimination of FFELP say not only will students and colleges lose the right to choose their lenders, but this legislation will be expensive and create job loss.

U.S. Sen. Tom Coburn, R-Okla., is one of the legislators who expressed opposition to this measure.

“The health care law’s provision mandating that all federal student loans be made by the U.S. Department of Education is another example of how government overreach is eroding our liberties,” he said. “Not only does this provision deny the rights of colleges to choose their lending program, it also threatens jobs in Oklahoma.”

Losing jobs?

The Oklahoma Association of Student Financial Aid Administration recently estimated the elimination of FFELP could cause the loss of more than 200 private lender jobs in Oklahoma alone.

“Nationwide a number of jobs may be (lost),” said Kay Brezny, Oklahoma Student Loan Authority vice president.

She said job loss due to the elimination of FFELP is inevitable because without the use of private lenders for student loans, many positions will not be needed.

The true number of jobs lost will not be known until the transition away from FFELP is complete.

U. S. Department of Education also will have to fund implementation of the new law as well as manage a 400 percent increase in national loan volume, according to OASFAA.

“Borrowing $1.4 trillion over the next 10 years to fund this program will add to our already crushing debt and rob future generations of opportunity,” Coburn said.

Oklahoma State University and Tulsa Community College already operate exclusively on the Direct Loan program but all other colleges in Oklahoma are FFELP participants.

“Now every other school in the state is switching because they don’t have a choice,” Brezny said.

Paperwork for the switch

Nancy Moats, OASFAA president and University of Science and Arts in Oklahoma financial aid director, said the switching process is a lot of work.

“It’s a government agency so we have to make sure, first of all, that we are eligible to participate,” she said. “We have to indicate to them that we are interested (in participating). We have to set up a software exchange with the Department of Education, we also have to set up the bank accounts (for the receipt of funds). We have to change all of our paperwork. We have to notify all of our students who are currently (using) the FFEL Program.”

The students who have received student loans through private lenders through FFELP with have to start the financial aid request process over.

“They will have to sign a new promissory note,” Moats said. “In the long run, they are going to have to pay back more than one lender.”

She said there is talk of a student loan consolidation program that will be temporarily available to students who had to switch from a FFELP loan to a Direct Loan student loan.

The transition process has been ongoing at Oklahoma’s college for several months.

“It’s costing us in work hours, it’s costing us in creating documents and mailing letters,” Moats said. “It’s an additional work load.”

Once the transition process is complete it may be easier for colleges to deal with one lender, but there were benefits to using FFELP.

“One of the big things that is going to happen with us is we’re going to lose a lot of the customer service we had through our lenders,” Mosburg said. “Those private lenders added that extra bit of customer service for our students.”

“We had such a good level or quality and stability and choice,” Moats said.

She said Oklahoma’s colleges have worked hard to give their students a choice in how they want to fund their education and now that freedom of choice is gone.

“We were working hard to give the students as many choices as we could,” she said.

However, Oklahoma State University and Tulsa Community College have survived well on the Direct Loan program.

“For those who have made the transition, they are sold on it,” Moats said. “I think once it’s implemented it will run smoothly.”

Oklahoma Guaranteed Student Loan Program will serve is a support system for colleges throughout the transition and as they continue to work with the U.S. Department of Education.

“OGSLP is working hard to become a support system for us,” Moats said. “Oklahoma is very lucky to have that organization.”

She said she does not foresee any issues for students seeking student loans through the Direct Loan program.

“There should not be any problem getting a loan, and we are doing our very best to make sure the process is a seamless as possible,” she said.