Rules change student loans

Starting in May students at Texas Tech University who receive student loans will no longer be able to choose a lender.

The Department of Education has issued a new bill, the Student Aid and Financial Responsibility Act H.R. 3321, which has passed through the House and is stalled in the Senate. It is anticipated to pass by July 1, according to the Department of Education and the White House.

This new bill will no longer allow students to pick a student loan lender.  Instead the loans will come from the Department of Education.

The Texas Tech Federal Credit Union was one of the largest providers of student loans for Texas Tech, second only to Wells Fargo. In 2008 they funded more than 4,700 loans and almost $20 million to Texas Tech students.

Ellen Hein, CEO at Texas Tech Federal Credit Union, said the act will affect all financial institutions that are currently lenders.

“We have pulled out of the program as of spring this semester because the federal government will take over the direct program,” Hein said, “its anticipated on July 1.”

Hein said half of the loans in their portfolio are student loans and they are offering other services to offset profit loss.

“We have started a new mortgage program. We have started originating first mortgages,” the CEO said. “A brand new program, we’re going to start advertising and roll out information on it March 1.”

Hein said a negative aspect of the act is that it completely eliminates the student’s freedom of choice.

“Students will no longer have the choice of any financial institution,” Hein’s said. “They’re no longer going to have the choice of logistics, where they would like to go to talk about their student loans. That completely removes that choice for students, which I think is a horrific thing.”

Paul Blake, associate director at Texas Tech financial aid office, said besides not choosing a lender anymore the only major difference will be that students will have to file a promissory note every year.

“Under the old program,” Blake said, “promissory notes were good for 10 years as long as the student didn’t change lenders, complete a degree or change schools.”

Blake said starting in May students attending summer school will be receiving their student loans directly from the Department of Education.

“We’re going to use summer as our pilot program,” Blake said. “We have a lot less student borrowers during the summer.  If we come across any bumps in the road, we’ll be ready for our largest population in August for the fall.”

Blake admits that change is always difficult and anticipates students will have questions about the new process. But he also said he feels confident the financial aid department is prepared to make the transition easy for students.

“We have to be ready,” Blake said, “we can’t do that to our students. Right now we’re doing testing, making sure we got all the kinks worked out.”