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

	Direct Loan Evaluation Report
	Survey of Institutions Participating in the Federal Family Education Loan Program 1994-95 Report Issued 1996
U.S. Department of Education - Postsecondary Education Division

Highlights of Findings

Introduction

Comparisons Between First-Year Direct Loan Institutions and FFEL Institutions

Comparison of Satisfaction Levels and Program Experiences

Comparison of Changes in Financial Aid Resources

Satisfaction with the Federal Family Education Loan Program

Overall Level of Satisfaction with the Federal Family Education Loan Program

Satisfaction by Institutional Characteristics

Institutional Satisfaction with Various Aspects of the Federal Family Education Loan Program

Institutional Effort Associated with Program Administration

FFEL Administrative Support

Level of Satisfaction with Overall Effort and with Effort Required for the Specific Activities Involved in Administering FFELP

Institutional Opinions Regarding Satisfaction with the Federal Family Education Loan Program

Communications and Support from the Department of Education, Lenders and Guarantee Agencies

Services and Communications Received from the Department of Education

Services and Communications Received from Lenders

Services and Communications Received from Guarantee Agencies

Comparisons of Services and Communications Received from the Department of Education, Lenders, and Guarantee Agencies

Changes in the Federal Family Education Program Since Introduction of the Direct Loan Program

Overall Institutional Satisfaction with the Federal Family Education Loan Program Prior to July 1994 vs. Current Satisfaction

General Perceptions of Change in the Federal Family Education Loan Program

Variations in Perceptions of FFELP Improvements by Institutional Characteristics

General Changes in Financial Aid Resources for Administering the Federal Family Education Loan Program

Changes in Financial Aid Resources by Institutional Characteristics

Federal Family Education Loan and Direct Loan Programs: Decision Factors and Information Sources

Factors Affecting the Decision to Participate in the Federal Family Education Loan Program

Sources and Impact of Direct Loan Program Information

FFEL Institutions' Opinions Regarding the Direct Loan Program

Overall Comments Regarding the Federal Family Education Loan Program

Successful Methods for Resolving Difficulties

Suggested FFELP Changes

Comments Regarding Direct Loan Program Implementation

Institutional Preferences and Comments Regarding the Survey

Highlights of Findings

Introduction

This report presents the findings of a survey of institutions participating in the Federal Family Education Loan Program (FFELP) for academic year 1994-95. The purpose of the survey was to establish a baseline comparison group for analyses of differences in various aspects of loan program administration between the Direct Loan and Federal Family Education Loan Programs, including: overall quality and ease of loan program administration; satisfaction with communications and support from the Department of Education; and satisfaction with service providers. A similar survey of institutions participating in the Federal Direct Loan Program was conducted during February and March of this year, and selected results are presented for comparison.

A total of 104 institutions participated in the initial year of the Direct Loan Program. Because of the limited number of participants, care must be taken when making generalizations based on the Direct Loan/FFEL comparisons in this report. The characteristics and experiences of the initial Direct Loan participants may not represent subsequent cohorts of Direct Loan institutions. In addition, program start-up is likely to be quite different from full operation of a program. Both of these factors could influence the results of a comparison of first-year Direct Loan schools and FFEL schools. However, over 400,000 borrowers and all types of schools are represented among the first-year participants of the Direct Loan Program. Therefore, the Direct Loan/FFEL comparisons presented in this report do provide a reasonable early indication of relative satisfaction between the programs.

Follow-up surveys of Direct Loan and FFEL schools planned for spring of 1996 will provide a clearer comparison of institutional satisfaction between the loan programs. In addition, FFEL and Direct Loan borrower surveys, to be conducted in the fall of 1995, will provide baseline comparisons of borrower satisfaction and experiences for each of the loan programs. Follow-up institutional and borrower surveys are also planned for future years of the evaluation.

Findings

• First-year Direct Loan schools indicated greater satisfaction with the Direct Loan Program than did FFEL schools with the FFEL Program (Figure 1). The biggest difference between the two programs was in the percentage of schools that said they were very satisfied--61 percent of Direct Loan schools versus 27 percent of FFEL schools. Few schools indicated that they were very dissatisfied with either program.

Figure 1

Overall Satisfaction with Loan Program
Direct Loan Schools vs. FFEL Schools

Regarding the various activities involved in administering the loan programs (including keeping up with regulations, counseling borrowers, disbursing loan funds, financial reporting and recordkeeping), Direct Loan schools reported higher satisfaction ratings for all activities than did FFEL schools. The greatest rating differences in satisfaction occurred for keeping up with regulations (1.7 for Direct Loan vs. 2.4 for FFEL ) and refunding excess loan funds to students (1.5 for Direct Loan vs. 2.2 for FFEL ).⁽¹⁾

Satisfaction with the FFEL Program varied by whether the school was currently participating (or planning to participate) in the Direct Loan Program. Those that did not intend to apply for the Direct Loan Program reported the highest satisfaction rating--2.0 on a 5-point scale. This compared to ratings ranging from 2.4 to 2.6 for those who have either applied or intend to apply for the Direct Loan Program.

• First-year Direct Loan schools found the Direct Loan Program easier to administer than FFEL schools found their program (Figure 2). Almost 60 percent of Direct Loan schools said the program was relatively or very easy to administer, compared to roughly 30 percent of FFEL schools.

Figure 2

Ease of Program Administration:
Direct Loan Schools vs. FFEL Schools

In general, large loan volume FFEL schools found the program labor intensive to administer. With the exception of schools with loan volumes ranging from $10-20 million, the larger the loan volume, the less likely the school was to report satisfaction with administrative efforts and the more likely the school was to report an intensive amount of effort required for administration. This means that a substantial percentage of FFELP loans are disbursed at institutions that consider the FFEL Program labor intensive.

• FFEL schools were less satisfied with materials and services provided by the Department of Education than were Direct Loan schools. For example, as shown in the following table, only 27 percent of FFEL schools felt that telephone support received from the Department was very timely, compared to 64 percent of Direct Loan schools.

• FFEL schools were generally satisfied with the key aspects of the program, but there were concerns regarding specific Department of Education-related activities (Figure 3). Relative to other aspects of the FFEL Program, FFEL schools stated that they were most dissatisfied (more than 25 percent) with the Department's responsiveness to reported problems and handling of special cases or exceptions. In terms of program administration, FFEL institutions found keeping up with regulations to be the most burdensome aspect of the program.

Figure 3

Satisfaction with Key Aspects of the FFEL Program

• As indicated in the table below, there is evidence of improvement in several aspects of the FFEL Program since the introduction of the Direct Loan Program.

The most substantial improvement, noted by 36 percent of respondents, is in service from lenders and guarantee agencies (which many of the schools providing comments attributed to competition from the Direct Loan Program). Other FFEL Program aspects also appeared to have improved since July 1994. However, FFEL schools only indicated a slight improvement in their overall satisfaction with the program since the introduction of the Direct Loan Program--from an average rating of 2.3 out of 5.0 prior to July 1994, to a current rating of 2.2. Approximately two-thirds of the institutions are currently satisfied with the FFEL Program, compared to 60 percent that were satisfied prior to implementation of the Direct Loan Program.

Survey of Federal Family Education Loan Program Institutions

Introduction

The institutional surveys comprise one component of an overall evaluation of the Federal Direct Loan Program conducted by Macro International Inc. under contract to the U.S. Department of Education. In February/March 1995, Macro conducted a survey of first-year Direct Loan institutions to assess overall satisfaction with Direct Loan implementation and administration at the institutional level. The purpose of the survey of institutions participating in the Federal Family Education Loan Program (FFELP) was to analyze differences in various aspects of loan program administration between the Direct Loan and Federal Family Education Loan Programs.

Consistent with the objectives of the Direct Loan school survey, the specific research objectives of the survey of Federal Family Education Loan Program institutions were:

• to assess the overall quality and ease of loan program administration at the institutional level;
• to determine the level of institutional satisfaction with communications and support from the Department of Education;
• to determine the level of institutional satisfaction with service providers (i.e., lenders and guarantee agencies); and
• to identify variations in satisfaction level and perceived quality of loan program administration by key institutional characteristics.

Volume One of the report summarizes the findings of the survey. The questionnaire with item responses is found at the end of the volume. Volume Two, Technical Appendices, includes:

• a guide to interpreting survey responses;
• the weighted data tables;
• a description of the survey methodology and the sample disposition;
• item-by-item response rates;
• the letters eliciting institutional cooperation;
• the information and instructions provided to Internet respondents; and
• the survey questionnaire.

The overall survey response rate was 85 percent, based on 2,303 responses from 2,723 eligible institutions. The following table illustrates the number and percent of responses, and the response rate by institutional type and control:

Comparisons Between First-Year Direct Loan Institutions and FFEL Institutions

Comparison of Satisfaction Levels and Program Experiences

Compared to schools offering the Direct Loan Program, FFEL institutions were consistently less satisfied with their loan program (Figure 4; Table 1.1a, Volume Two; and the Direct Loan Survey Report). Overall, 90 percent of Direct Loan schools, compared to roughly two-thirds of FFEL schools, indicated satisfaction with their current loan program. The greatest difference, as shown in Figure 4, occurred among the institutions that reported the highest level of satisfaction. As expected, first-year Direct Loan schools were also less satisfied with the FFEL Program in the year

Figure 4
Overall Satisfaction with Loan Program
Direct Loan Schools vs. FFEL Schools

prior to implementation of the Direct Loan Program than were FFEL institutions. These findings are illustrated in average ratings given by each group of institutions in the table below.

These represent average ratings by the entire group of respondents currently participating in each program, on a scale of 1 to 5 five with 1 being the highest rating.

Respondents from both the Direct Loan and FFEL schools were asked to characterize the level of work or staff effort needed to administer the respective loan programs on a day-to-day basis. As shown in the table below, while more than half of the Direct Loan respondents (59 percent) perceived their program as easy to administer, approximately 30 percent of FFEL respondents indicated ease of loan program administration.

Respondents from both programs were also asked to rate their satisfaction with various activities involved in administering their program. Following is a comparison of the average ratings, using the same five-point scale, with one being the highest possible rating (Table 5b, Volume Two).

This table illustrates the higher satisfaction of Direct Loan institutions with their program than that of FFEL institutions with their program. The greatest differences in satisfaction levels are shown for keeping up with regulations and refunds to students.

Given the differences in the two loan programs, it was only possible to compare workload for a single activity common to both--workload for counseling borrowers. In this regard, Direct Loan institutions were more satisfied than FFEL institutions, with 62 percent of Direct Loan institutions reporting that they are very satisfied with this aspect of the program, compared to 16 percent of FFEL institutions (Table 5g, Volume Two).

The differences between the satisfaction levels of Direct Loan and FFEL schools are even more pronounced in the frequency with which the highest rating is assigned to the timeliness and usefulness of materials and services provided by the Department of Education. It must be noted, however, that the Department actually plays a larger role in service provision in the Direct Loan Program than in the FFEL Program. Lenders and guarantors provide more services to schools than the Department in FFELP. The following table highlights the percentages of schools that assigned the highest rating to various materials/services provided by the Department (Tables 5d and 5e, Volume Two).

On both timeliness and usefulness of information, materials and support, a substantially larger percentage of Direct Loan institutions reported the highest level of satisfaction than did FFEL institutions.

Comparison of Changes in Financial Aid Resources

Direct Loan institutions were much more likely to report significant changes in resources than were FFEL institutions (Table 5f, Volume Two). It should be noted that any time there is a change in program, changes in resources are likely to occur, particularly in the area of staff training. Less than 5 percent of respondents for either program reported significant decreases in any category of financial aid resources. Significant increases were reported by larger percentages of Direct Loan schools than FFEL schools, as indicated in the following table.

Direct Loan institutions have not tended to increase their staff during the transition to the new program. The extent to which increases in staff hours can be attributed to the new program, however, is questionable, given the similar increase in staff hours reported by FFEL institutions. The greatest differences in new resources committed by both programs are in the areas of staff training/travel and computer equipment and programming.

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