Northeastern University moved to omit third-party lenders from its financial aid process yesterday, announcing it will only provide government-funded student loans and saying the decision will protect students from instability in the private sector.
Beginning with the 2008-09 academic year, Northeastern will participate in the William D. Ford Federal Direct Loan Program so students can receive funding directly from the Department of Education. The decision came the same day Sen. Edward Kennedy hosted a Senate field hearing at the university to discuss college accessibility in a “troubled” economy.
The switch to the program will help students avoid the “potentially confusing and overwhelming process” of choosing the best of thousands of third-party lenders to fund their education, a university press release states.
In the last decade, private sector lending has jumped 989 percent, up to $17.1 billion in the 2006-07 academic year, according to preliminary data collected by the College Board. In the same time period, federal lending increased 107 percent, with $59.6 billion in federal loans given last year.
“It is our responsibility to ensure that every student and parent has a sure and clear path to obtain educational loans, particularly at this important time of year when students are making decisions on college options” said Philomena Mantella, Enrollment and Student Life Senior Vice President, said in a university press release.
The U.S. Department of Education provides all funding for the Federal Direct Loan Program, and other financial institutions cannot buy out the loans; ensuring student benefits.
Mantella said the program will give students further stability and security in the financial aid process.
Boston University spokesman Colin Riley said the university has been a long-time participant in the Federal Loan Program, though BU students are also allowed to borrow from third-party lenders.
Riley said the “bulk” of student loans are given through the direct loan program and said Northeastern’s move to the Federal Direct Loan Program “reinforced” the view that direct loans are the best options for BU students.