SEMO GETS NEW LOAN PLAN

Skip the bank and go straight to Uncle Sam. That, in a nutshell, is the new, federal direct student loan program.

Southeast Missouri State University has been selected to participate in the loan program, beginning in the 1995-96 academic year, U.S. Secretary of Education Richard Riley announced recently. Southeast is one of 983 schools selected to participate in the new loan program.

The schools are among the first to participate in a streamlined system to restructure the nation's student loan program, officials said.

The new loan program initially will be tried at 104 post-secondary schools in the coming academic year.

Riley said the schools that have been selected to participate over the next couple of years "have an opportunity to demonstrate that direct lending can indeed simplify the administrative tasks of educational institutions, lower costs to taxpayers and, most importantly, provide better services to students."

Robert Zellers, director of financial aid services at Southeast, said it's actually more of a revised, financial aid program than a totally new one.

"Basically, it is the same loan, with basically the same terms as the current Stafford loan," he explained Tuesday.

"The difference is that the capital isn't coming from a bank, the capital is coming from the federal government," said Zellers.

"We will still have to process that loan," he noted, "but we won't be so dependent on the external agencies like the banks and the guaranty agencies."

Under the new program, the federal government provides loans directly to students through the colleges, universities and trade schools.

By eliminating middlemen -- guaranty agencies, secondary markets, banks and other private lenders -- direct lending eliminates excess profits, while reducing administrative burdens and increasing efficiency to make borrowing easier for students, federal officials said.

It's argued that by taking advantage of the federal government's ability to borrow money at a lower interest rate, direct lending will save taxpayers billions of dollars.

The new program also will offer students a repayment option that tailors monthly payments to the borrowers' income.

Currently, about 3,500 to 4,000 Stafford loans -- totaling about $8 million -- are made annually to students at Southeast, Zellers said.

There are more than 6,500 public and private four-year, two-year and trade schools eligible to participate in the direct loan program.

Zellers said the federal government's phasing in the direct loan program over the next several years.

In the 1994-95 academic year, it's estimated that only about 5 percent of Stafford loans nationally will be made directly by the government, he said. In the 1995-96 year, that percentage is expected to climb to 40 percent.

If the program proves successful, the indirect loan program would likely be eliminated, Zellers said. If it doesn't work out, "then we could end up reverting back to the existing program."

Zellers believes the direct loan system could benefit students. "I think the program has real merit for helping students to get through what is really a rather difficult process right now to obtain a student loan."

He said the new program should save students a lot of time and paperwork.

"The student deals directly through us and then we deal directly with the federal government. We would draw down the funds from the federal government," said Zellers.

Despite his optimism, he's not ready today to jump right in.

"Everybody is hedging their bet," he said. "Some of us are watching (to see) how well it works."

Zellers said that he and other Southeast officials will be paying attention to how the system works at other schools in the coming academic year.

"We have been selected, but we could still say this doesn't appear like it is working for first-year schools.

"We were selected, but we are not locked in," said Zellers, "and I think we would want to evaluate it very carefully."