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New federal legislation will increase Pell Grant funds and eliminate private loan servicing under the Family Federal Education Loan program.

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For Minnesota State Community and Technical College (M State) students, the changes won't mean much, but the increase in federal grant monies will help qualified students pay for college.

Bonnie Dahring, associate director of financial aid for M State campuses in Detroit Lakes and Wadena, said the colleges have already switched from the Family Federal Education Loan program to Direct Loan in 1999, and about 95 percent of the students here seek Direct Loans.

But colleges like Alexandria or North Dakota State University, she added, will have to make the switch before July 2010.

The process of switching isn't difficult, and the purpose of the switch is to eliminate the middlemen.

Under the Family Federal Education Loan program, students could borrow federal loans that are serviced through private lenders.

U.S. Secretary of Education Arne Duncan wrote in a recent Washington Post column that under the old law, taxpayers provided as much as $9 billion each year to subsidize guaranteed student loans issued by banks.

"The banks earn profits on the interest; if students default, taxpayers take the loss, not the banks," he added.

Although some banks opposed the legislation, Wells Fargo, a local bank that offers student loans, has expected the change for some time.

"Over the past several years, we've worked hard to re-engineer the business from a federal and private loan model to a private-only student lending origination model," Wells Fargo spokeswoman Kelly Sprecher said.

Students will still be able to borrow private loans, but no longer through the federal program.

"The money that was supporting administrative costs for the banks, that money will now be funneled back to the Pell Grant program," Dahring said.

Although M State participated in the Family Federal Education Loan program in the 1990s and it was successful, with many of the students in Detroit Lakes qualifying for federal aid, the boost in the Pell Grant will be beneficial, she added.

"I kind of hate to see them have to move away from this (Family Federal Education Loan)," Dahring said. "But I can see an overall gain for the student."

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