The current economic crisis is creating a ripple effect with a far-reaching impact and higher education is not immune. While recent headlines point to the crisis having a long-term effect on the availability of student loans, there is more to the story. “The thing about student loans is they are still available, but the criteria have changed,” says Elynda Bedney, director of Student Financial Services at Andrews University.

FFELP vs. Direct
Before delving into the details the economic crisis is having on student loans, it is critical to understand the difference between a FFELP versus a Direct Loan institution. All colleges and universities participate in one of two programs to provide Federal Stafford and PLUS loans to their students. The main difference between the two programs is the source of the loan monies. Federal Family Education Loan Program (FFELP) receives loan funding from commercial banks, credit unions and savings banks. The other program is the William D. Ford Federal Direct Loan Program (Direct Loan), where the U.S. Department of Education lends the money to the student or parent through the college.
 
Andrews University is a Direct Loan school. “There is not a problem with any of those Direct Loans you [students] can get from the government,” says Bedney. “These include Stafford-subsidized, Stafford-unsubsidized, Graduate Plus loans and Parent Plus loans.” All Stafford Loans are either subsidized (the government pays the interest while you're in school) or unsubsidized (you pay all the interest, although you can have the payments deferred until after graduation).

Financial Bailout for FFELP Lenders
In May 2008, President Bush signed into law a student loan bailout plan, the Ensuring Continued Access to Student Loans Act of 2008. It was designed to provide new protections to ensure that families can continue to access the loans they need to pay for college. On Oct. 7, 2008, President Bush signed a one-year extension of the ECASLA. While loan monies for the current academic year are largely already in place, the U.S. Department of Education is taking immediate action under the extended ECASLA authority to ensure students and families have uninterrupted access to federal student loans for the 2009–2010 school year and beyond.
 
“We’re fortunate that we are a Direct-lending school. It is mainly the FFELP schools that are suffering,” says Vicki Thompson, associate director of Student Financial Services.
 
“We’re happy we do not have to change to become a Direct Loan school,” says Bedney. “Though economic times are not stable now from FFELP, if your loans are with the government, you’re pretty assured of being secure.”
 
According to The Chronicle of Higher Education (Monday, Nov. 10, 2008), “The Direct-lending system, which has traditionally been simpler and less costly for the government to operate, has seen a 50% gain in volume this fall semester as colleges abandon private loan companies. The Direct-lending program is now nearly half the size of the bank-based system, only a year after being about a fifth as large.”
 
Margaret Spellings, secretary for the U.S. Department of Education, said in a statement on Saturday, Nov. 8, 2008, “I want to reassure students and their families that federal student aid—both grants and loans—remains available to eligible students.”

The Criteria Has Changed
“There is a loan limit for freshman, sophomore, junior and senior students,” says Bedney. “Additionally, they are able to get an unsubsidized loan if their Parent Plus loan is denied. They can also get an unsubsidized loan if they are an independent student. But this year, the government—because of the alternative loan industry—decided, ‘We are going to make an additional $2,000 unsubsidized loan available to students and they can have it regardless of whether or not their parent is approved or denied a Parent Plus loan.”
 
“The government passed this law to get another $2,000 for students to help bridge the gap for them. Students simply have to fill out the FAFSA, you are eligible to take out this loan unless you are up to your aggregate (loan limit),” says Bedney.

Some Loans Are No Longer Available
“We used to have CanHelp [a loan available to Canadian students studying in the United States].” CanHelp loans were discontinued in April 2008. Instead of CanHelp, Canadian students can now apply for a Canadian Student Loan, backed by their government.

For international students studying at Andrews University who rely on a U.S. cosignor: “That particular group will probably be affected the most,” says Bedney, “however, there are not a tremendous amount of our students who fall into that group.”

Alternative Loans: A Less Desirable Option
Although Andrews University is a Direct Loan school, there is still a portion of students’ monies that come via alternative loans, income that now has an uncertain future. “While the additional $2,000 will help offset the monies we’ve lost because of alternative loans, we are hoping and praying the government will come up with other alternative solutions.”
 
The downside to alternative loans is the interest rates. “While students are in school, interest is already accruing with alternative loans. That’s the bad part about the alternative loans,” says Bedney. “We discourage students from taking out alternative loans. If you have never applied for a federal student loan before, now is the time. Applying for an alternative loan will most likely require a co-signor.”

Planning Ahead
The best advice is to plan ahead and save. “If a student can work during the summer, have their parents help them as much as they can and seek out any scholarship opportunities, they will be better off,” says Bedney. She suggests these tips:
• Start looking for a summer job early. Don’t wait until the semester ends. Begin exploring your summer work options as soon as possible.
• Try working for a summer camp, selling Magabooks, HHES or for church outreach programs. These summer jobs are eligible for the Andrews University Summer Ministries Scholarship Program (see pg. 68 of the bulletin).
• Save. Don’t spend.
• Find scholarships. Bedney says, “There’s millions of dollars of scholarships out there that aren’t used because students didn’t apply for them. I’m not talking about loans. I’m talking about scholarships and grants that are free money.”
• Apply for student loans.
• Do your financial-aid paperwork early to see what you are eligible for in federal financial aid. Knowing your overall financial picture early allows more time to plan alternative options.

-Written by Keri Suarez, media relations specialist, Office of Integrated Marketing & Communication