Just when it seemed like the dust had settled from the demolition activities waged by the past interim administration, another ceiling collapsed. Last year, former Interim President Castell Bryant and the FAMU Board of Trustees decided to cancel FAMU’s participation in the U.S Department of Education’s direct loan program, which permits students to borrow funds from the most stable money source in America: the U.S. Treasury.
Instead, Bryant and former Vice President for Student Affairs Vincent June opted to steer students toward two “preferred lenders”: Regions Bank and Edamerica. In explaining this decision to the St. Petersburg Times, the interim administration claimed that this made life easier for financial aid advisers, who have to process federal loans differently for each company.
In a recent Tallahassee Democrat interview, Marcia Boyd, who became financial aid director shortly after the change was made, added that her former bosses liked “the company's customer-friendly support” which included “a call center to take care of questions, reduction in rates and better customer service.”
The "reduction in rates" claim is shaky, at best. One financial aid office in the University of North Carolina system recently compared the federal direct program versus Edamerica. It found that the federal direct program offers comparable interest rates, lower fees, and more options for undergraduates. Additionally, the federal direct program offered much cheaper interest rates for Graduate Student/Parent Plus loans.
Castell's decision to drop the federal direct program should also raise eyebrows because it occurred in the wake of scandals involving conflicts-of-interest in college financial aid offices. Lenders have been investigated and penalized for offering meals, vacations, staff time, revenue sharing deals, scholarship funds, stock options, and other inducements to financial aid offices or their employees, apparently in hopes of being listed as a “preferred lender” and recommended to students.
Such problems, combined with Edamerica's current difficulties in disbursing student loans, show why FAMU should have stayed with Uncle Sam all along. Last year, U.S. Senator Edward M. Kennedy (D-Mass.), along with a group of co-sponsors that included U.S. Senator Barack Obama (D-Ill.), introduced the "Student Debt Relief Act of 2007." It proposed financial incentives for universities that switched to the federal direct program, such as additional grants for low-income students. Hopefully, the 2008 election will produce a White House that is more supportive of such legislation.
In the meanwhile, there's finally some good news to report concerning this situation: FAMU trustees wisely approved Boyd and President James Ammons' recommendation to shift the university back to the federal direct loans.
Credit crunch puts squeeze on FAMU students
FAMU cancels federal student loan program
FAMU steering loans to "preferred" banks