REPORT BACKS DIRECT STUDENT LOANS CALPIRG: GOVERNMENT TERMS CHEAPER THAN PRIVATE LENDERS.

Byline: Lisa M. Sodders Staff Writer

California students could get $246 million more in financial aid if its public colleges and universities got student loans directly from the government instead of through private lenders, a report released Thursday says.

The report by the California Public Interest Research Group says the California State University system could gain up to $47 million and the University of California system $39 million if loans were provided directly to students.

But private lenders and local college officials maintain that the estimates are inaccurate, and that competition among private lenders has led to a host of other services for student borrowers.

``In all honesty, this smacks of a bribery program,'' said Diane Ryan, interim director of financial aid for California State University, Northridge. ``It would disenfranchise students at campuses that have invested countless dollars in perfecting their banking programs'' with private lenders.

The federal government currently operates two major financial aid programs: the Federal Family Education Loan, in which the government pays private lenders to provide loans; and the Direct Loan program, in which the government offers the loans directly to students.

FFEL loans cost taxpayers nearly $11 more for every $100 loaned to students than direct loans, officials said.

Under the Student Aid Reward Act, co-sponsored by Rep. George Miller, D-Calif., colleges and universities using the Direct Loan program would receive half the savings they generate.

``The choice is, do you want to use education dollars for education, or to pad the profits and feed the commissions of the banks and the lending institutions?'' Miller said in a phone interview.

According to CALPIRG, the STAR Act could increase the amount of federal student aid funding available per year by up to $3 billion, enough to give every Pell Grant recipient $600 more.

According to the report, UCLA could gain $8.5 million; Cal State Northridge could gain more than $3.5 million; Pierce College could gain $64,425; Los Angeles Valley College, $28,375; and Mission College, $13,707.

Miller's legislation and a companion bill introduced in the Senate face heavy opposition from private lenders.

Shelly Repp, general counsel for the National Council of Higher Education Loan Programs, said federal budget scorekeepers are distorting comparisons of the two programs, making the Direct Loan program look less expensive than it is.

And Marco J. De La Garza, dean of student services overseeing financial aid at Pierce College, said he's also unconvinced.

``I'm interested in seeing more information and more specifics as to what kind of flexibility we're going to have with that additional funding or if it's going to be restricted,'' he said.

Lisa M. Sodders, [phone]

lisa.sodders(at)dailynews.com