Press Release

Contact:
Barbara Laskin
651-696-6203

Macalester to Participate in Direct Loan Program

St. Paul, Minn. - June 11, 2008 - Macalester College will participate in the William D. Ford Federal Direct Loan Program, beginning in fall 2008. The move is aimed at ensuring the continued availability of Federal Stafford and PLUS Loans and simplifying the loan application process for Macalester students and families.

"The Direct Loan Program offers our students, two-thirds of whom receive some loans, access to federally guaranteed loans in as simplified a process as possible," said President Brian Rosenberg. "With the tight credit markets and changes in federal law that have reduced the number of private lenders offering Federal Stafford and PLUS Loans, the Direct Loan Program is the best way to ensure loan availability for our students and their parents."

For many years, Macalester offered students Federal Stafford and Federal PLUS Loans through the Federal Family Education Loan Program (FFELP). Students chose a bank or lender; the college then certified that students and parents were eligible for the loans and applied the loan proceeds to student accounts.  While this system offered students many choices and often good rates, it was also a confusing and multi-layered process.

The College Cost Reduction Act, signed by President Bush last fall, reduced incentives for lenders to participate in the FFELP Loan program.  As a result, many lenders opted out of the program.  Tight credit markets have also forced many lenders out of the student loan business.  Lenders remaining in the program have significantly curtailed or eliminated discounts that were offered to borrowers in the past, thus eliminating the cost advantages of FFELP.

Because so many lenders have left the student loan business, nearly 40 percent of borrowers returning to Macalester would have had to find a new lender for 2008-2009, according to Brian Lindeman, director of Financial Aid. "Given the number of students who would be changing lenders, we felt that now was the best time to transition to the Direct Loan Program for all students and families," Lindeman said.

Begun in the 1990s, the Direct Loan Program allows student and their families to obtain Stafford and PLUS loans, but instead of repaying a private lender, the loans are borrowed from and repaid directly to the federal government.

"Every borrower uses the same application process and is subject to the same loan fees," Lindeman explained. "The process is easier and faster and the funds can be delivered to the student's account much more quickly.

"The switch to Direct Lending allows us to avoid the uncertainties of privately funded FFELP lending that have resulted from the changes in the law and the tightening of the credit markets. It's a better situation for our students, their families and for the college."

Macalester College, founded in 1874, is a national liberal arts college with a full-time enrollment of 1,889 students. Macalester is nationally recognized for its long-standing commitment to academic excellence, internationalism, diversity and civic engagement. 

www.macalester.edu/financialaid/directlending/