Approximately 2,000 Harvard undergraduates receiving Stafford loans will pay reduced interest rates starting next year, as they will begin borrowing money directly from the Federal government.
The University is one of 105 schools selected by the Department of Education this week to participate in the "direct lending" program.
The new system which allows the government to bypass banks and loan guarantor agencies, will be also implemented gradually University-wide--eventually affecting more than 7,000 students. The process is supposed to reduce costs by eliminating the fees charged by banks and other lending institutions.
University students currently receive a total of about $45 million through the Stafford Loan Program. Half of that is processed by the University, and the other half goes through other lending institutions, according to Elizabeth M. Hicks, assistant dean of admissions and financial aid for federal and special programs.
Hicks said Harvard will begin phasing in the program this summer.
About $13 million in student loans will be distributed directly next year. The remaining $32 million will continue to be distributed by Harvard and lending institutions, at least during the first year.
In addition to lower interest payments by students, the new program is designed to make it easier to apply Hicks emphasized that students in the newprogram would only have to make payments to thegovernment, even if they have taken loans frombanks in the past. Officials also said direct lending willsimplify the process for the Harvard. "I think in our case it will have more of aneffect on students and their families than on theUniversity," President Neil L. Rudenstine said. "From our point of view, we are already in thebusiness of extending loans and doing all of thepaperwork and all of the follow-up and everythingelse." A task force including Vice President forFinance Robert H. Scott and various financial aidofficials was created this summer to consider thenew program
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