By CHRIS ONSTOTT
The House Education and Workforce Committee voted 43-0 Wednesday to approve a bill that would allow college students to consolidate their direct student loans into the guaranteed student loan program.
The committee approved the bill in an effort to relieve the backlog of upwards of 84,000 applications to consolidate guaranteed loans into direct loans. All new applications for consolidation of direct student loans were placed on hold in August and will continue to pile up until the Department of Education corrects the situation, a staff member for the committee said.
“Throughout this year, students have submitted applications to consolidate loans under the presumption that the process would take weeks. Instead, students are learning that the process takes eight to 12 months.,” U.S. Rep. Bill Goodling, R-Penn, said.
According to Armando Azarloza, spokesman to U.S. Rep. Buck McKeon, R-Calif., who introduced the bill, the direct loan program has been heading for problems since its inception in 1992. “We have always said the Department of Education can’t handle the direct loan program,” said Azarloza “This is a program that is run ineffectively and it hasn’t been able to handle the vast amount of financial aid applications it receives.”
The emergency bill would involve both agencies in the consolidation process by also allowing students to consolidate loans into either the guaranteed loan program or the direct loan program, speeding processing time.
Students seeking to consolidate several loans into one agree to pay higher interest rates in exchange for a lower monthly payment and an extension in the time allowed to repay the loan.
Most BYU students would not be affected by the bill if it is passed by Congress because BYU does not participate in the Federal Direct Loan Program, said Stephen Olsen, Federal Compliance Officer for BYU Financial Aid.
However, some transfer students who were involved in the program at their previous school may be affected by the bill, Olsen said.
The direct loan program was designed to allow students to borrow money directly from colleges with the funds being matched by the government. However the program has experienced several problems.
“The hope was to eventually replace Stafford Loan program with the Direct loan program,” Olsen said. “Now they are discovering that the Stafford Loan Program can do it as well or better than the direct loan program.”
According to staff members of the House Education and Workforce Committee, the program has become bogged down in red tape due to the complexity of consolidating student loans from several different banks and colleges. A higher than expected amount of consolidation applications added to the problems that the Department of Education was experiencing processing the applications, creating the backlog. Problems such as these may spur another review of the direct loan program and possibly its termination, Azarloza said.
“The Emergency Student Loan Consolidation Act of 1997” is expected to be voted on by the House during the week of Oct. 20.
