SAFRA legislation also affects Perkins loans, and that affects this large school in a large way. Terry Kell explains those changes and their likely impact.    

What plans are being made at Wisconsin for Stafford and PLUS loans?
We've decided it's time to become a direct loan school.  Our long-time lenders are leaving the business.  Many lenders who remain are selling their loans to the Department of Education anyway.  We'll miss the competition among lenders.  And, to some extent, the competition between FFEL and direct.  That competition was good for our students.  We had to work a little harder, but students got a break on origination fees and interest during repayment. 

What concerns do you have about that move?
None. We're well underway, and we expect little or no impact on our student borrowers.

Meanwhile, what other student loan change has your attention? 
SAFRA includes monumental changes for Perkins loans.  SAFRA takes Perkins away from the school entirely and replaces it with Direct Perkins, which will somehow be originated by the school but administered by the Department of Education.  The selection of borrowers is as yet unknown.  In-school interest will accrue.  Direct Perkins involves a significant loss of other benefits for student borrowers as well. 

How much Perkins lending did the Madison campus do in 2008-09? 
From our revolving loan fund, with no new capital, we loaned $6.5 million last year, and our total the past five years has been $50 million. 

How will school custodians of Perkins assets fare under the proposed legislation?
Under SAFRA, we must stop lending on July 1.  Any cash we have on hand will be sent to the Department of Education, minus the portion that represents our institutional matching share.  If we choose to continue servicing existing loans, we must remit the federal share of repayments to ED quarterly.  If we choose to continue servicing existing loans, we can pay ourselves an allowance equal to one half of one percent of the balance in service.  If we choose not to service, we would be required to assign our loans to ED. 

How will new student borrowers with Perkins loans fare under the proposed legislation?
These are the people who will be affected the most.  We've always used Perkins as the first loan for the neediest students.  Even for the neediest of students, a Direct Perkins loan willnow act much like an unsubsidized Stafford loan.  They'll pay or accrue interest from day one.  That interest change will add twenty to thirty percent to a Perkins borrower's debt load. All occupational cancellation benefits are eliminated with the exception of military service and limited teaching.  Interest forgiveness during periods of unemployment is also no longer available.  There's even the possibility that the school will have to pay Uncle Sam a fee for each Perkins loan originated—amount to be determined.  Finally, it's also possible that no borrower will be Perkins-eligible until he or she has exhausted Stafford, both subsidized and unsubsidized.