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Chattanooga: Bryan College switches loan provider

By: Joan Garrett
(Contact)

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Rick Taphorn

As students struggle find and receive loans this year, colleges in the region are examining ways to safeguard against future funding troubles.

Bryan College in Dayton, Tenn., has become one of a few schools in the state to shift from enrollment in the Federal Family Education Loan Program to the Direct Loan Program, said Rick Taphorn, director of financial aid there.

“That is our backup next year if the credit crisis continues,” Mr. Taphorn said. “It is the school looking out for the best interest of the students.”

With FFELP, student receive loans from lending agencies. The Direct Loan Program offers funds directly from the government.

Mr. Taphorn said Bryan made the change in May when they began to see more and more lending agencies pulling out of the FFELP program because of the frozen credit markets. Sixty-seven percent of the 730 students at Bryan receive federal student loans, he said.

Students who entered Bryan with FFELP loans can continue to hold them, but they are given the option to shift to Direct Loan, he said. All entering students will receive federal loans through Direct Loan, he said.

Next year, if the credit markets worsen, all students will be moved into the Direct Loan Program, Mr. Taphorn said.

Traditionally, colleges preferred FFELP because it required less administration and offered more borrower benefits. For example, students who made their loan payments on time over a period of time could become eligible for lower interest rates.

Also, some lenders waives their fees to assign the loan, he said.

However, with the credit meltdown lenders are getting tighter and eliminating many of the perks FFELP provided, he said.

“(Switching) has been great,” Mr. Taphorn said. “It has been easier for us than working with lenders. It is cheaper in that sense for the student.”

Lindsay McKissick, a junior at Bryan, switched from FFELP to Direct Loan this year because the maintenance fee on her FFELP loan increased. Also, she said she and her parents were worried about the number of providers pulling out of FFELP.

“From what I have heard there are not that many people that can offer a lot of money, and that is sad because there are students who need that to get started in their college experience and in their careers,” she said.

Michael Stokes, vice president of student services at Cleveland State Community College, said Cleveland State, like many schools, has had frustrations with FFELP and considered changing to Direct Loan.

However, Direct Loan likely would require more staffing, which the school cannot afford, he said.

“Some things that are done by lenders, we would have to keep up with,” Dr. Stokes said.

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