The uncertain future of the Federal Family Education Loan Program (FFELP) has financial aid offices taking precautions to ensure their students will have seamless access to student loans after July 1, 2010. NASFAA has launched a new Direct Loan Conversion Web center to help institutions prepare for the possibility that students will not be able to borrow FFELP loans next year.

The Obama administration and Democrat leaders in Congress are committed to using savings from eliminating FFELP to increase funding for other financial aid programs. Even if they are unsuccessful, it is unknown how many FFELP lenders will be able raise capital for new loans when the Department of Education’s authority to purchase FFELP loans under the Ensuring Continued Access to Student Loans Act (ECASLA) expires in July 2010. Additional legislation is required to extend ECASLA, and Congressional leaders have said they will not extend ECASLA for another year.

NASFAA has urged lawmakers to provide a "safety net," including some form of an extension of FFELP for institutions that cannot transition to the Direct Loan program by July 1. Democrat education leaders are concerned about possible loan disruptions caused by eliminating FFELP, but are unwilling to extend FFELP because it would change budget estimates and limit their ability to increase student aid spending. NASFAA continues to work with the Department of Education and lawmakers to find ways to ensure there are no disruptions for students at schools that struggle with the transition, but institutions can take steps today to ensure their students can get loans next year -- no matter what happens.

The best way to ensure your students will have seamless access to loans next year is to prepare to make loans through the Direct Loan program. Although they may not be needed, schools should strongly consider drafting a Direct Loan transition plan and communications plan to think through the process.

NASFAA has created the Direct Loan Conversion Resource Center to help ease the administrative burden of preparing to make Direct Loans. The center provides some initial steps institutions can take today to prepare and links to several other resources, including the Department of Education, and the National Direct Student Loan Coalition.

Posted 10/22/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.