The Vermont Student Assistance Corporation (VSAC) was founded in 1965 as a public non-profit institution designed to supervise the issue of federal education loans to students of Vermont. But with the far-reaching reforms of the federal student loan program that were passed in 2009, bundled in with the reform of national health care bill, VSAC and agencies such as the were stripped of their ability to new federal education loans.
1 July 2010, all federal parent and College loans are now provided to borrowers directly by the u.s. Department of education, and VSAC is now faced with a reduction of the staff of nearly two-thirds as it tries to find ways to survive in the era of the Federal Direct Student loan program.
The Agency was a lender in the federal family education loan program (FFELP), which was discontinued as part of the Federal college loan reform. VSAC acted as part of its lending functions under the FFEL Program, both as a lender administrator of loans from the Federal University.
Under the new world order, with FFELP dissolved, VSAC can still manage (i.e., "service") all the college loans had been issued in the past, but the Agency is unable to issue new loans.
Revenue from the repayment of the issued loans were used for the financing of new student loans, as well as ongoing financial aid and student loan education programmes, so that the Agency faced a reduction of the income of approximately 90 percent of its existing loans are repaid.
VSAC issues still a small number of private student loans, non-federal loans funded by VSAC rather than by the Ministry of education, but the Agency is looking for a new role with the direct loan program.
VSAC recently presented a proposal to the Department of education with more than the current legal limit of 100,000 federal education loans service. The proposal of the Bureau is seeking permission to the student loans of all Vermont students and all non-resident students enrolled in Vermont colleges and universities. Under the new rules of direct loan program, only four organisations responsible so far by the Education Department with more than the allocated 100,000 federal student loans service.
Even if VSAC of this proposal is approved, however, it would be the income from the federal direct loans servicing bring in only a fraction of the revenue the agency once earned as a lender in the FFEL Program.
VSAC also asks the Vermont state legislature to help ensure its administrative costs by the Agency to distract of approximately 7 percent of the 21 million dollar state appropriations from need-based grants and scholarships for students to the Agency itself. VSAC also asks legislators to her private student loan borrowers to deduct up to $ 500 of the interest rate on the private student loans of their state taxes.
The future role of the Agency is unclear and is likely to stay that way until at least April, while it is waiting for a determination on the extended repayment of loans from the Federal University created through the direct loan program. The state legislature is probably faster to make a decision.
But even with her private student loan portfolio, a favourable decision on student loan maintenance from Washington and additional support from the legislature of Vermont, VSAC still reduce its budget by about 10 percent per year for the next three years to stay solvent.
The Agency, which is currently about 300 employees, has already cut about 60 positions through natural attrition. If the added maintenance work student loan not materialize and legislators do not agree to support the agency administrative costs and financial aid counseling and outreach work, the Agency will likely reduce the staff by an additional 200 positions before the start of the next fiscal year.
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