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The state of Michigan's withdrawal from the Federal Family Education Loan Program (FFELP) on April 21, 2008, has been the subject of a number of recent news stories, including an article in the Detroit Free Press on April 24. If you are a University of Michigan student with a federal student loan, you might be relieved to know that the state's suspension of FFELP loans in no way affects U-M students' federal loans or their access to federal loans in the future.
The FFELP is a federal loan program through which private lenders and other institutions, including the state government of Michigan, offer federally backed loans to students to cover educational expenses. Many of these institutions, including the state government, recently have had to suspend their participation in the FFELP because their access to capital for loans has been limited by the credit crunch in the real estate market.
But the University of Michigan participates in a different federal loan program--the Federal Direct Loan Program--and not the FFELP, so U-M students are not affected by the state's suspension of FFELP loans. U-M students receive federal loans through the Federal Direct Loan Program, which makes loans from U.S. Department of Education. Funding for these loans comes from the U.S. Treasury and is not disturbed by instability in the financial markets.
U-M students who have private loans in addition to or instead of federal loans might see some changes in requirements for new private loans, again as a result of private lenders' difficulty in securing capital for new loans. However, because there are many private lenders offering private student loans, overall access to private loans is not expected to be inhibited by the current credit crunch.
Still have questions? Contact OFA at financial.aid@umich.edu.
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