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Last modified: Wednesday, April 30, 2008

Indiana University to use Direct Loan Program at all campuses

FOR IMMEDIATE RELEASE
April 30, 2008

BLOOMINGTON, Ind. -- Indiana University will use the federal Direct Loan Program as its source of federally backed Stafford loans at all of its campuses, starting in the fall of 2008, the university announced today.

Theobald image

Photo by: Chris Meyer

Neil Theobald

Print-Quality Photo

The university announced two weeks ago that IU Bloomington would return to using the Direct Loan Program. Neil Theobald, IU vice president and chief financial officer, said officials at the other campuses -- Indiana University-Purdue University Indianapolis, IU Northwest, IU South Bend, IU Kokomo, IU East and IU Southeast -- decided the change also made sense for them.

"We will review our options every year and ensure that students continue to receive the best services and pay the best prices," he said. "For 2008-09, we are convinced this is the right decision for all seven campuses."

Theobald said two factors drove the decision. One is that private lenders in the federally backed Federal Family Education Loan Program have indicated that demand may exceed the supply of private student loan funds in 2008-09. Funds for the Direct Loan Program come from the federal treasury and aren't expected to be affected by market turmoil.

The other factor is that private lenders are beginning to charge a 1 percent origination fee for FFELP loans, while the origination fee for the Direct Loan Program is 0.5 percent, resulting in significant savings on IU's federal loan portfolio of $393 million.

"A move to the Direct Loan Program will save IU students nearly $2 million," Theobald said.

Some 35,928 IU undergraduates, 48 percent of the total, received federally backed Stafford loans in the past academic year.

Several IU campuses, including IU Bloomington, used the Direct Loan Program until 2004-05, when all the campuses began using FFELP with Sallie Mae as the university's preferred servicer of student loans. Theobald said that history will help the university in making the switch back to the Direct Loan Program.

"We have a lot of experience in dealing with this, so I see a very smooth transition," Theobald said.