Texas schools prep for expected loan changes

AUSTIN, TX Congress is considering making federally guaranteed student loans offered exclusively by the government, ending a role for banks and other for-profit lenders who charge fees.

Some Texas universities are joining thousands across the country in abandoning the bank-based system, the Austin American-Statesman reported Friday.

The University of Texas announced this week it is cutting the program under which students borrow from private lenders. UT is opting for the U.S. Department of Education's William D. Ford Federal Direct Loan Program. Starting this summer, students will borrow directly from the government.

Texas A&M also is making the switch. Texas State University has offered the direct loan program since 1994.

"Most schools in Texas have stayed with the (Federal Family Education Loan Program) by choice," said George Torres with the Texas Guaranteed Student Loan Corp.

The public nonprofit was created by the 1979 Legislature to administer the bank-based Federal Family Education Loan Program in Texas.

"They were pleased with the support services they were getting and choice of lenders up until two years ago, when the lenders could no longer originate the loans as a result of problems in the private credit market," Torres said.

During the 2008 banking crisis, the government passed the Ensuring Continued Access to Student Loans Act. The law temporarily allowed the U.S. Education Department to act as a secondary market for student loans, backing private loans in case of default.

That federal aid expires on June 30.

The University of North Texas and the University of Texas at San Antonio also are moving toward direct loans. Direct loan applications will be available this month for the summer and fall semesters at A&M in College Station.

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