[T]he Vermont Student Assistance Corp. says it will lay off about 55 people because it has decided to stop servicing loans the federal government makes directly to students.
VSAC said it wasn’t making enough money on the program.
“Despite our best efforts, and becoming one of the top federal loan servicers in the country, VSAC has not been allocated sufficient loans to be able to break even on the servicing costs and generate revenue to support mission-related activities,” said Scott Giles, president and CEO.
Under the direct loan program, the federal government lends money to students and pays contractors like VSAC to administer the loans.
VSAC was one of 11 nonprofit and for-profit servicers, selected through competitive bidding. It was allocated 190,000 loans to service, but only 294 of those were for Vermonters.
“From a mission perspective it was not a match,” said Sabina Haskell, director of public affairs for VSAC.
The organization wants to refocus and get back to its roots, she said, adding: “That’s helping Vermonters and their families go on and get the education and training they need to be successful in their lives.”
The nearly 300 Vermonters with direct federal loans will be notified of their new servicers, much the way a mortgage company lets homeowners know their loan has been transferred, Haskell said.
VSAC will continue to work with its clients who have loans under a previous federal program, the Federal Family Education Loan Program, according to Haskell. Under it, private banks made loans that were guaranteed by the federal government and subsidized to keep interest rates at a set level. The program was administered by public and private partnerships at the state level.
The current direct loan system replaced the earlier program in 2010 as a way to save money.
In an effort to get back to Vermont-centric work, VSAC says it is offering the Vermont Advantage loan for parents. The loans start with interest rates of 4.8 percent, which is lower than the federal government’s PLUS loan program.
“These are for Vermonters or students who study at Vermont institutions,” said Haskell. “We will also offer free, personalized loan counseling to our borrowers, which is a big deal because it’s one of our big problems with the (direct loan) program and why we aren’t participating as a servicer. We believe Vermonters value the expertise that we can offer when it comes to decisions about financial aid, loans and repayment.”
VSAC says it will also be taking a leading role in an initiative to boost the number of Vermonters who get a college degree or credentials beyond high school by 2020. It also plans to continue working with the first lady’s Reach Higher Initiative providing financial aid eligibility training and advice.
In addition, VSAC administers more than 160 scholarships for in-state organizations and nonprofits and administers the state grant program. VSAC says it plans to continue to concentrate on career and education counseling as well.
“We are always helping families pull the pieces of the puzzle together to pay for college. That will not change,” said Haskell.
