06/28/95 Schools Give High Marks to New Direct Loan Program

US Education Department Press Releases

According to an independent evaluation, nine out of ten colleges and universities reported they were satisfied with the U.S. Education Department's new direct student loan program in its first year (the 1994-95 school year). More than 60 percent of the schools said they were very satisfied with the program.

Schools cited their ability to serve students better and the institutional control they now have over the loan process as assets. They were especially satisfied with ED's responsiveness and support in implementing the new program, and gave the department high ratings for timeliness and usefulness of both services and materials.

"The schools that work with us on a daily basis confirm that direct lending is well-run, is off to a good start, and the students are the ones who benefit," said Madeleine Kunin, deputy education secretary. "We will continue to improve tools in an effort to deliver an even higher standard of service to schools offering students the benefit of direct loans."

Under the William D. Ford Federal Direct Loan Program, students borrow money for college and other postsecondary education directly from the federal government through their schools instead of through banks and other third-party lenders.

On July 1, the direct loan program will increase from 104 schools at 5 percent of total loan volume to more than 1,400 schools at approximately 40 percent of loan volume.

The report released today, Evaluation of the Federal Direct Loan Program -- Survey of First-Year Direct Loan Institutions, is a survey of administrators at 112 campuses including those in the financial aid and business offices as well as technical support staff. The survey assessed schools' experiences as they made the transition from the Federal Family Education Loan (FFEL) program to direct loans, and included questions about overall satisfaction, ease of administration, and satisfaction with loan origination, servicing, communications and support from the department.

Most institutions described the direct loan program as easier to administer and far less labor-intensive than the FFEL program. The vast majority of schools were very satisfied with on-time receipt of loan funds and institutional cash flow, amount of effort needed to counsel borrowers, assistance provided by the private direct loan servicing contractor, and their ability to help students during peak workload periods.

Schools applauded department-sponsored training sessions, use of the Internet bulletin board to communicate, and the direct loan servicer's customer support staff. Many schools had specific suggestions for improving software and making loan processing even more efficient. The most frequently cited advice to other schools was to begin planning for implementation as early as possible and to contact other institutions for help.

The evaluation was conducted for the department by Macro International, Inc., an independent research company located in Calverton, Md.

Single copies of the report are available without cost by writing U.S. Department of Education, Planning and Evaluation Service, 600 Independence Ave. SW, Room 4168, Washington, DC 20202-8170.