Letter to George R. Boggs, President and CEO, American Association of Community Colleges

Letter

Letter to George R. Boggs, President and CEO, American Association of Community Colleges

KENNEDY URGES COMMUNITY COLLEGES TO ENROLL IN DIRECT LOAN PROGRAM TO ENSURE ACCESS TO STUDENT LOANS

Today, Senator Edward M. Kennedy, Chairman of the Health, Education, Labor and Pensions Committee, sent the following letter to the President and CEO of the American Association of Community Colleges, urging his member colleges to register for the Direct Loan Program, in order to ensure students can access student loans even if private lenders refuse to offer federal loans to their students.

The text of the letter appears below.

June 16, 2008

George R. Boggs
President and CEO
American Association of Community Colleges
One Dupont Circle, NW
Washington, DC 20036

Dear George,

With the cost of college rising and a college degree more essential than ever in today's knowledge economy, it's especially important for students to be able to obtain the financial aid they need. The financial aid season now underway, however, has been unpredictable. As the turbulence continues in the economy and credit markets, I look forward to working together to make sure that the ability of students and families to obtain loans for college is not put at risk. I believe that the most reliable and cost-effective option for students, community colleges and taxpayers is the Direct Loan Program, so I ask that you ensure that your members are fully aware of this option.

Earlier this year, Congress passed the Ensuring Continued Access to Students Loans Act, which President Bush signed into law on May 7th. The new law gives additional support to students by providing a short-term solution to strengthen the Federal Family Educational Loan (FFEL) Program. However, since lenders continue to say they may have to limit new loans to certain colleges, it's possible that the neediest students, particularly those at community colleges, will need an alternative to the FFEL Program. The danger has been highlighted by articles such as Jonathan Glater's in The New York Times of June 2nd, "Student Loans Start to Bypass 2-Year Colleges." It is unclear how many students will be unable to obtain the loans they need, but the article emphasizes the importance of taking all steps possible. For colleges participating in the FFEL Program, one such step is to shift to the Direct Loan Program, which provides a realistic safety net for students and families seeking federally-subsidized student loans, since the program relies on funds from the U.S. Treasury that are insulated from the volatility in the credit markets. Colleges participating in the Direct Loan Program have not and will not face the possibility that their lender will pull out. Currently, over 1,150 schools participate in the Direct Loan Program, and the Department of Education has indicated it can handle a significant increase in program volume.

Shifting to the Direct Loan Program is an easy and quick transition for the majority of colleges. As a result of advances in electronic processing and electronic systems, administering the program need not impose significant new burdens on them. In light of the impact of this year's credit market troubles on student lenders, I've urged Secretary of Education Margaret Spellings to expedite assistance to colleges that enroll in the program, and she's assured me that the Department has streamlined the process significantly.

The process for a college to shift from FFEL to Direct Loans is relatively simple.

(1) The college must ensure that the Direct Loan Program is listed on its current Eligibility and Certification Approval Report (ECAR). If not, the college must submit to the Department a revised E-App at www.eligcert.ed.gov.

(2) Once approved, the college sends an e-mail to the COD School Relations Center asking to participate actively in the Direct Loan Program. The Department's Direct Loan team will then review the college's request and will send the college a final approval or denial letter via e-mail.

(3) The college will need to inform any third party servicers and/or software vendors of this change.

The Department of Education has established a website to walk colleges through the process of registering for the Direct Loan Program (http://www.ed.gov/offices/OSFAP/DirectLoan/participating.html).

Once the college is signed up, the process for implementing the Direct Loan Program is also simple. Contrary to a common misconception, the loan origination process should not be any more difficult or require any more financial aid staffing for a school under the Direct Loan Program than under FFEL. Colleges are not required to perform loan origination themselves. The Department processes the electronic master promissory notes - just as FFEL lenders do. And like most FFEL lenders, the Department also provides web-based entrance and exit counseling.

The Department uses the same system to process Direct Loans as it does for Pell Grants - the Common Origination and Disbursement System. Any college participating in the Pell Grant program will have little difficulty providing Direct Loan information to the Department instead of sending FFEL information to a lender or guaranty agency. The Department also provides a convenient computer-based training program to help financial aid administrators become familiar with the Direct Loan Program.

The National Direct Student Loan Coalition is another valuable source of information and support. Its website (www.directstudentloancoalition.org) provides information and links to additional support to help colleges through the conversion - even for colleges that do not currently administer Pell grants. The Coalition has established a "mentor" program specifically to assist colleges facing more challenging system changes, by pairing current Direct Loan colleges with new participants to help them find and adopt the solutions that other colleges are successfully using.

I commend you and the Association for all you do so well to assist students and families. I hope that you will call on my office if we can be of any assistance or if your students are having difficulty obtaining loans, and that you will urge college presidents and financial aid officers to do the same.

Please contact Emma Vadehra on my education staff if you have any questions or would like to have additional information at 202-224-5501. I'd also welcome thoughts you may have on other steps we can take to protect students and families. Access to college and the American dream are too important to be limited by the current credit crisis.

With respect and appreciation,

Sincerely,

Edward M. Kennedy

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