As Congress continues to deliberate on a bill that would eliminate banks as middlemen for students receiving federal financial aid, the Department of Education has raised concerns about the ability of institutions to meet the demands of the July 1 deadline.

The expiration of the Federal Family Education Loan program, or FFEL, in which private lenders of student financial aid receive a federal subsidiary and loan guarantees, and the switch to direct lending in which colleges and universities will need to integrate new software and training for their financial aid offices has lead to concern by the Department of Education.

The bill was introduced in July, passed by the House on Sept.17 and currently awaits consideration in the Senate. The bill’s progress through Congress has been slow due to ongoing health care reform debates, said Jerilyn Goodman, spokesperson for U.S. Rep. Tammy Baldwin, D-Wis. in an e-mail to The Badger Herald.

Goodman added the Senate generally takes longer to consider legislation than the House, and they hope to send a bill to President Barack Obama before the end of the year.

Baldwin, whose district includes six colleges including the University of Wisconsin, voted in support of the bill.

The Congressional Budget Office estimates the switch from FFEL to Direct Federal Lending will save the government a net $79.8 billion over the next 10 years.

Goodman said many colleges and universities are already beginning to switch to the Direct Loan Program because it is more efficient.

Regardless of legislation, these transitions will likely continue if the government can still provide adequate capital to schools, but without it, the transition will take much longer and more government subsidies will be paid to private lenders, Goodman said.

She added the savings created would also not be able to augment programs like Pell Grants and Perkins Loans.

According to UW System spokesperson David Giroux, only two UW campuses have switched to federal direct loans — UW-Superior and UW-Eau Claire.

Director of UW-Madison Financial Aid Susan Fischer said there are no direct loans for the 2009-10 school year, but since last August, UW-Madison has been in the process of migrating toward the federal program to be used next year.

“I’m very confident that we can do this in an organized fashion, I think our students will see no break in service,” Fischer said. “The tough thing — and what all our colleagues across the country say the hard thing to do — is to get students to read their e-mails.”

Students signed a Master Promissory Note when they first filled out FAFSA, but with the transition, every student who currently receives aid and wishes to continue will need to sign a new Promissory Note with the federal government before financial aid can be awarded, Fischer said.

Fischer emphasized the Office of Student Financial Aid has “tremendous gratitude” to their past privatized lenders, stating while they have been good partners, the economy last year made it extremely difficult for students.