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

   FOR RELEASE                 Contact: Jane Glickman (202) 401-1307    April 25, 1995                    Stephanie Babyak (202) 401-2311

451 Additional Schools Will Go Direct Lending in 1996-97

"Direct lending is easier and faster," said U.S. Secretary of Education Richard W. Riley. "It offers a range of repayment plans, it makes education more affordable and gives young people wider career options that allow them to serve their communities and their country. And it saves taxpayers a considerable amount of money as well. I am delighted to extend the benefits of direct lending to 451 new schools and the thousands of students who will be attending these institutions."

With the addition of these schools -- the first group to be announced for the third year of the program -- the total number of schools taking part in the direct loan program climbs to 1,854. Approximately 3 million students are expected to participate.

Today's announcement includes all types of postsecondary schools, as required by law, and include such institutions as University of Chicago, University of Kansas, Wayne State University and the University of Arkansas.

The 451 schools announced today were either on the waiting list of schools that had applied to participate in years one and two, or submitted their application directly for year three. The law limited direct loans to five percent of loan volume in year one (1994-95) and 40 percent in year two (1995-96). The Education Department has not begun soliciting schools for year three, in which current law will permit loan volume of 50 percent plus demand. Additional direct loan schools for the 1996-97 school year will be announced later in the year.

Under direct lending, the federal government makes loans directly to students through schools, bypassing the maze of 7,500 private lenders, 41 guaranty agencies, and 90 secondary markets that now comprise the unwieldy guaranteed student loan program.

"There are some in Congress who would like to cap this program so that no more schools can sign up for direct lending," Riley said. "But we think it's hard to argue for a limit on a program that benefits students and schools and saves taxpayers billions of dollars. "Virtually all the schools already participating in direct lending are extremely pleased with the program's simplicity, cost and time savings, and cash flow improvements, to name just some of the advantages. Students are delighted that direct lending offers one-stop shopping. They only have to fill out one form for all their financial aid and go to one place -- the financial aid office at the school."

He also cited another benefit -- many students report that they now are comfortable borrowing less because the money arrives on time. There's no need to obtain a bridge loan and additional funds are readily available if needed.

Riley noted that independent surveys conducted by the Association of Community College Trustees and Education Daily also found overwhelmingly positive support for direct lending. In direct lending's first year, the department has disbursed $1.3 billion in loans and has collected over $5 million from students who took out unsubsidized loans, parents who took out PLUS loans, and students who have already begun repaying their loans.

The president made the announcement Monday [April 24] in Minneapolis in remarks to the American Association of Community Colleges.