A r c h i v e d I n f o r m a t i o n

   FOR IMMEDIATE RELEASE    Contact: Stephanie Babyak (202) 401-2311    June 15, 1994                        Jane Glickman (202) 401-1307

87 SCHOOLS ADDED TO DIRECT LOAN PARTICIPANT LIST

Securing a student loan for college or other career studies will be an easier task as the U.S. Education Department adds to a growing list of schools that will offer loans directly to students. Today another 87 schools were approved to participate in the new direct loan program, the second group announced for the 1995-96 academic year.

The total number of schools announced to date is 1174.

In November, the department announced the first 104 schools that will participate in the program in the 1994-95 academic year, which begins July 1. By academic year 1998-99, direct loans will represent at least 60 percent of loan volume.

"The schools' strong response shows they're convinced that direct loans benefit students, and it's a vote of confidence in the department's management ability," said U.S. Secretary of Education Richard W. Riley.

Today's announcement includes some of the nation's major schools, such as Southern Illinois University at Carbondale and University of Massachusetts at Amherst.

Under direct lending, the federal government will make loans directly to students through schools rather than through private lenders. Loan capital for the direct loan program is raised by the U.S. Treasury Department through the sale of government securities.

This announcement marks the last selection of schools that applied by March 30, 1994, to participate in the direct loan program. The next application closing date for participation in the direct lending system for 1995-96 is July 1, 1994. To be eligible, schools must:

be eligible to participate in the FFELP;
have a cohort default rate of less than 25 percent in one of the two most recent years for which rates have been issued;
have the technological capacity to participate electronically now or in the future; and
have demonstrated administrative and financial capability.

With the streamlined direct loan program, schools can offer students "one-stop shopping." Schools can process a student's entire aid package, including Pell Grants if the student is eligible, as well as direct student loans. In addition, several repayment options, including plans tailored to the borrower's income, will now be available to student borrowers. Direct loans will save taxpayers an estimated $4.3 billion through FY 1998 by eliminating excess profits in the current system and taking advantage of the federal government's ability to borrow at a lower interest rate.

President Clinton's direct lending initiative was passed by Congress as part of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).

Additional schools will be announced in coming months as the department continues to review applications.