Idaho Colleges Like Clinton’s Student Loan Plan “To Me It Was The Best Thing That Has Happened In Many Years”

A Clinton administration plan to change the way college students borrow money for their education is beginning to draw fire from banks and others involved in the loan process.

But Idaho’s state colleges and universities are on their way to accepting the plan to eliminate private lenders from the process in favor of direct student loans from the federal government.

Direct Student Loan program supporters say it will simplify borrowing and eliminate many of the extra fees and interest payments by cutting banks, guarantee agencies and secondary markets out of the process.

The change has proven popular with financial aid officers at the University of Idaho, who tested the program last year. Other Idaho schools are set to adopt the change in the coming school year.

It also has been popular with students, who no longer must wait for checks to be processed because the money is transferred electronically to the schools, and because the amount of paperwork has been reduced.

“To me it was the best thing that has happened in many years. It has absolutely worked very well,” said Dan Davenport, University of Idaho director of student financial aid.

Until last year, Davenport’s office processed as many as 40 different types of applications for the same loans and dealt with several different guarantee agencies, each with their own requirements and rules.

Students lose as much as 8 percent of their loan money to pay for the complicated loan processing.

The revamped process involves only one application form. Processing costs have been cut by half, making loan checks bigger, Davenport said.

In addition, loans would no longer be sold to secondary market agencies, eliminating the confusion that some student borrowers face as they begin to repay their loans.

President Clinton has proposed expanding the program to bring all student loans under the new system, saving taxpayers an estimated $12 billion during the next five years.

Alternative Republican proposals would limit the expansion to 40 percent of the loans and give private lenders and guarantee agencies a chance to streamline their processes and compete.

Penny Shaeffer, assistant vice president and manager of the West One Bank student loan center in Boise, supports letting the two systems run side by side.

“You don’t do away with something that is good until you have a proven product,” Shaeffer said. “The Department of Education has made the loan process a bureaucratic nightmare with all their regulations. They should let us be just as streamlined.”

West One became Idaho’s biggest student lender last year, making more than $24 million in loans to the state’s college students.