The Minnesota Higher Education Services Office proposed amendments to the rule governing its Student Educational Loan Fund program on Tuesday that would allow University students access to larger low-interest state loans with no fees.
“The changes are to the advantage of our students,” said Dianne Danov, assistant director of student loans in the Office of Scholarships and Financial Aid. “If students choose to borrow, they will be able to borrow.”
Under the proposed amendments, the eligibility structure for SELF loans would change.
But the new rules won’t come soon. The public has until August 19 to comment on the proposed changes, which will then be reviewed by the higher education office.
Currently, students’ eligibility for a SELF loan depends on their cumulative loan debt. For example, a University freshman can take out a maximum of $4,500 in SELF loans. The money from other loans the student has, or is eligible for, is subtracted from the SELF award.
If the student receives the maximum federal Stafford Loan award of $2,625, the maximum SELF loan amount the student could receive would be only $1,875 — withholding almost two-thirds of the potential SELF award.
The proposed amendments would no longer take the entire debt into consideration, meaning the student would be eligible for the entire $4,500 SELF loan, regardless of any other loan considerations.
Phil Lewenstein, director of communications and legislation for the Higher Education Services Office, said that the SELF loan is a better deal than federal or private loans for the majority of students. Federal Stafford Loans, as well as many private lenders, charge higher interest rates and carry additional fees that total 4 percent of the repayment obligation, he said.
“The bottom line is that it costs more to have one of the federal loans than it does (to get) a SELF loan,” said Lewenstein.
But there is a downside to SELF loans. They are not subsidized, meaning students have to pay interest on the loan while they are still in school, and payment on the interest cannot be deferred, as in federal Stafford Loans. Also, SELF loans cannot be consolidated with other loans like federal loans.
Still, several University students have financed their education with SELF loans. According to the Minnesota Higher Education Office, students at the University in 1996 received 776 SELF loans, totaling more than $2 million.
Lewenstein said the next step in passing the amendments is waiting.
It will be six or seven months before the University can implement the proposed amendments.
Danov said the financial aid office is in the process of sending its comments in support of the changes, and will make the changes, if they are passed, as soon as possible.