Mostly overlooked in the tide of news reports about Sunday’s landmark health care legislation is language in the bill that fundamentally changes the student loan landscape in the U.S.
Starting with the next academic year this fall, federally backed student loans will no longer be made through private lenders, but instead will come directly from the Department of Education.
As a result, the Montana Higher Education Student Assistance Corp., which since 1983 has provided more than $2.4 billion in capital for student loans in Montana, will effectively be out of the business of making or acquiring new student loans. It will continue to hold the loans it made through the last academic year.
But Jim Stipcich, president and chief executive of the Helena-based Student Assistance Foundation, which provides service and support for some 175,000 accounts, including $1.5 billion in existing MHESAC loans, said the changing legislation offers SAF opportunities to grow.
“There’s an opportunity here to grow the servicing portfolio by 100,000 accounts. I don’t anticipate layoffs,” Stipcich said. SAF currently employs 182 people and services a total loan portfolio of around $4 billion, which includes the MHESAC total. “MHESAC will have a loan portfolio with an average life of 10 to 12 years and a final life of up to 30 years. It will manage its financing and manage its portfolio.”
But first, SAF will need to become a federal contractor in order to be able to service the new government loans, a process that Stipcich said has been ongoing for months.
“We have been aware of this legislation for a year and have worked very closely with our congressional delegation,” he said. “We have been positioning SAF to become a federal contractor and to provide these services in this space going forward.”
Supporters of the legislation claim that cutting out the middleman and making loans to students directly from the government will save $60 billion over 10 years. Much of that savings will go to students in the form of Pell grants and other forms of assistance.
Ty Matsdorf, a spokesman for Sen. Max Baucus, D-Mont., said Montanans will see an additional $96.8 million in Pell grants over 10 years, along with $85 million in additional money for Montana’s tribal colleges in the next decade and $7.5 million in additional funds for Montana in College Access grants over five years.
Janet Riis, director of financial aid at Carroll College, said the change to direct government lending is positive for Carroll and for Montana, insofar as the savings generated will go toward more help for students. She cautioned, though, that her outlook could change if SAF doesn’t earn the right to service new loans in the future.
“If it does not happen, we are very worried about the servicing our students will receive from huge national servicers that are the lowest bidder,” she said.
Stipcich also said SAF is creating a wholly owned, for-profit subsidiary to be called Tru Student Inc., to help grow its loan-servicing activities. That subsidiary should be up and running this summer, he said.
Reporter John Harrington: 447-4080 or email@example.com.