June 27, 2010 - As of July 1, the United States Department of Education will mandate that all colleges and universities participating in the federal student loan programs offer all new loans through the Federal Direct Loan program.

That means commercial lenders will no longer be permitted to create or disburse new loans after that date. Students will not be working with outside companies to manage their loans, just with their institution. This is good news for higher education institutions and its students.

Why? Taxes would be reduced by more than $4 billion a year in lower entitlement subsidies. These are funds that can be invested in more grants to students seeking a higher education. Students will have 24-hour access to federal aid information just by visiting www.studentloans.gov. Loan entrance counseling and master promissory notices can be conveniently managed in one location and payment arrangements can be set up without the hassle of even picking up a phone.

Students and parents are eligible for greater rewards and benefits, such as students now have one central contact which is the direct loan servicing center. Representatives are available to talk to students about various topics related to borrowing or repayment.

Furthermore, the Federal Direct Loan program offers an array of repayment plans which have been designed to meet the economic needs of all of their borrowers. In addition, any loan disbursed as of July 1, Federal Direct Loans will offer their subsidized loan to students at a reduced rate of 4.5 percent fixed throughout the life of the loan.

The students will also never have to be subjected to the bouncing borrower syndrome. They never have to research lenders again. This opportunity aids them to deal with a one-stop resource that aids in managing their debt and increasing awareness about borrowing wisely.

Those who work in higher education will have the luxury of having immediate accessibility to reports necessary for reconciliation with the business office, which will assist financial aid counselors in their role as adviser to students and parents. All information regarding Stafford Loans will now be housed in one centralized location.

As a financial aid professional who has worked in higher education for more than 10 years, I look forward to working with our students and their parents through this process. It will prove to be a simple process to manage for both parties, which will result in greater satisfaction for all.

*Michelle Burwell is an associate director of financial aid at Centenary College, Hackettstown. www.centenarycollege.edu/financialaid