The final admission letters have not been mailed out yet. But at least one thing about the Class of 1998 has already been determined: students receiving federal financial aid will have less paperwork and lower interest rates than their predecessors.

Harvard and Radcliffe were recently selected as two of 105 schools nation-wide to participate in the new Federal Direct Student Loan program. The program, which is expected to save billions of dollars, will eventually be the way most college students in the country obtain their loans.

The new program will enable students to get loans directly from their schools, rather than through outside lending institutions like banks, according to Elizabeth M. Hicks, assistant dean of admissions and financial aid for federal and special programs. The reform is designed in part to reduce the hassle for students seeking loans, Hicks says.

When the new program takes effect July 1, students on federal aid will receive a significant financial windfall. As of that date, the maximum interest charged on government loans will drop from eight per- cent to four, according to Hicks.

The 105 schools vary in size from Mr. Bernard'sSchool of Hair Fashion in Lewiston, Maine (withexpected annual loans of $45,000), toHarvard-Radcliffe, which has annual loans ofapproximately $45 million.

The Student Loan Reform Act, passed as part oflast April's budget reconciliation act and signedlast August, established this direct loansystem--which will phase out the 35-year-oldFederal Family Education Loan Program.

"For those in my field this is as big as healthcare reform," says Hicks, one of the designers ofthe new loan program.

Lower Rates, Less Paperwork

The current system of student loans involves anetwork of Banks, secondary markets, guaranteeagencies, servicers, collection agencies andauditors.

At the present time, approximately 8,000lenders and 40 guarantee agencies are involved inthe granting of student loans, Hicks says.

Confusion among students, many of whom areinexperienced with finance, is compounded by thefact that the loans, once they are granted, aregranted, are often sold to secondary markets suchas Sallie Mae or Nellie Mae within a day. shesays. These sales can leave students confused asto whom actually owns their loans.

For students whose institutions areparticipating, though, the new loan program meansthat students will no longer have to go through abank to get federal loans. Instead, the school'sfinancial aid office will handle the transactions,thus noticeably reducing the paperwork involved,she says.

Harvard was actually one of about 30 schools toact as a lender under the old loan system. Itcould loan out federal money to students, but ithad to deal with numerous intermediaries andlevels of bureaucracy at several differentcompanies.

But under the new program, the University willbe the lender to all its students and will onlyhave to deal with one other lendinginstitution--the federal government, according toHicks.

New Repayment Methods

The new systems also provides a great deal moreflexibility in terms of methods of repayment forstudents, according to Hicks, who served onPresident Clinton's education transition team.