Ithaca College will no longer participate in the Federal Stafford Loan Program because of pending legislation in Congress that could eliminate the program entirely.

Instead, the college will adopt the Direct Lending Program, a financial aid program funded directly by the federal government as opposed to private lenders and banks.

“We will end our participation in the Federal Stafford Loan Program effective at the end of this academic year,” said Larry Chambers, director of student financial services.

The college did not want to convert to a new loan program within a very short amount of time before next year should the legislation pass this summer.

The Direct Lending Program offers subsidized and unsubsidized loans — the same as Stafford loans — as well as the direct loan version of PLUS and Graduate PLUS loans.  

Eric Maguire, vice president of enrollment management, said the college wanted to be proactive instead of having to react to the possible changes in legislation over the summer.

“We’re addressing this because we don’t want to be caught in a situation with a small window of opportunity,” he said. “We’ll be able to make the transition and get people fully up to speed.”

Chambers said students will apply for a Direct Loan the same way they would for a Stafford loan.

“Step one is to fill out the FAFSA,” he said. “Step two is you’ll get a financial aid package from Ithaca College and when they review that, the student will go out to HomerConnect and accept the offer of a direct loan. Once they have done that, then we will generate the information that they will need to go out and sign electronically. From that point forward, everything is just how it’s always been.”

Freshman speech-language pathology major Alicia Dabek said she relies on a subsidized Stafford loan to be able to afford tuition at the college.

“I couldn’t come up with that “I was just concerned if it was going to work the same way, if I was still going to be eligible,” said Dabek. “I was just confused.”

The Direct Loan Program also offers additional borrower benefits that lenders are no longer equipped to offer.

Students will pay the same amount to originate a loan through the Direct Lending Program. In addition, due to a 0.5 percent rebate to the college, more of the students’ money will go directly to their educational institutions.

Chambers also said that a benefit of the new program is the ease that will come with a single contact.

“All Ithaca College students will be working with the direct lending services,” Chambers said. “It’s easier for students, and it will be easier for Ithaca College. So, instead of us having to deal with 160 different lenders and what they need to do and their processes and such, we will have one point of contact.”

As for PLUS loans, the biggest change will be a lower interest rate – down to 7.9 percent from 8.5 percent — and the additional borrower benefit of a 1.5 percent rebate of the total amount borrowed, creating a similar situation to the 0.5 percent rebate on the regular direct loans.

Chambers also said the switch will be much more dependable for students.

“The feds will always have money. The lending industries, we’re not so sure,” he said. “The vast majority of schools in the nation have been participants in the Stafford loan program through banks, but with all this turmoil and economy, many schools are now converting to the Direct Lending Program.”

For more information on the new program, visit www.ithaca.edu/finaid/faqs.