“Current Pell Grant-participating institutions that move from FFEL into Direct Loans may have to learn a somewhat different process, but it is not something that is enormously complicated,” he added. Nonetheless, the loan industry used the House hearing to call for continuation of the current system, in which colleges get a choice between bank-led and Direct Loans.
“Schools utilizing the Direct Loan program tend to be larger schools, which are more comfortable dealing directly with a federal department,” says Jack Remondi, chief financial officer at Sallie Mae. Remondi says about 30 percent of public four-year colleges and universities use Direct Loans, compared with only 10 percent of community colleges that have lower tuitions and smaller staffs.
“The fact that the direct lending origination platform works for some schools does not mean it will work for all of them,” he adds. But a representative from one flagship institution says colleges may not face major disruptions if the change takes effect.
Pennsylvania State University recently made a switch to Direct Loans and has talked with smaller schools making similar moves, says Anna Griswold, assistant vice president for undergraduate education. “With adequate lead time, even most of the smaller schools will likely find converting to Direct Loans a manageable process,” she says.
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