Pro-active Financial Aid Counseling

This is another example of why colleges and universities must employ a practice of pro-active financial aid counseling whereby prospective students who have applied to their college are contacted within 24-72 hours to discuss their financial aid options. Sometimes these calls must be made during evening hours when the prospective student is available to be counseled and complete the FAFSA online with the counselor. Not only does this practice ensure the student is aware of their options, it also helps to increase enrollment for the school.

Sandra kemp, Global Financial Aid Services, at 10:50 am EDT on September 28, 2006

Do you think we’re fools?

I have met hundreds of people whose lives are been ruined by credit card like interest on their student loans. In many cases, these individuals believed they were receiving a publicly guaranteed loan, but were mislead by dishonest and shameless financial aid staff, eager to close another deal.

The American people are catching onto this game. Those responsible for railroading this vulnerable segment of our population into ruinous debt situations ought to be ashamed of themselves.

As University Administrations fatten their bank accounts, allthewhile hiding behind an increasingly thin veil of serving the public interest, America is Watching.

Go to www.studentloanjustice.org to see how these wreckless, unchecked bureaucracies are affecting decent American citizens.

Alan Collinge, Founder at Studentloanjustice.org, at 3:10 pm EDT on September 28, 2006

Attacks against Educap are unfounded

I read with interest your news item in regards to the allegations about Educap and their publication “Demystifying Financial Aid". The claims by the U.S. Student Association are very misleading and false and I wanted to comment that Educap has done nothing but provide excellent student support and customer service for the last 20 years.

First, USSA needs to make sure that their organization reads the entire publication first before making claims of falsehood and credibility. I have read the entire publication numerous times and found it to be very helpful to my students and to me as a financial aid administrator. Educap does a wonderful job in explaining the purposes of the FASFA and need-based programs, discusses comparisons of all loans both federal and private and explains the benefits of repayment and good credit decisions within their publication. USSA in their allegations has chosen to cut and post snippets of information in their complaint to the FTC and this is misleading and sheds very poorly on their organization for building a case against Educap or any other private lender within the educational community. Their complaint is filled with false information and they should be very ashamed of misrepresenting valued lender information.

Second, as a grassroots student organization, I would think that USSA and their President would have taken the time to explore all the facts and digested the entire publication before making very false claims. I saw nothing in their complaint from schools or students that had issues with the publication or the facts therein and in their letter of complaint there was misleading information as students may not borrow Plus loans as only their parents can as undergraduate students- the students cannot borrow Plus loans as students.

Third, the publication from Educap rightly suggests that the federal yearly loan limits are too low and many in and out of state students at my University have to explore outside options for lending since the federal freshmen year loan of $2625 is too little and does not cover the room and board, tuition and fees, books and supplies, personal and travel cost of attendance budgets for either in or out of state schools. I would think that the USSA should spend their time and resources lobbying Congress and the Department of Education to raise the federal grade level loan limits and not attack the various private lenders that do an excellent job of providing alternatives for students to realize their dreams of an education.

Lastly, I pride myself on my counseling and lender partner relationships with various lenders and organizations across the country. We work hard as school to get the best loans and rates and opportunities for all students with various types of needs. USSA may be looking to attack these types of lenders for their foresight and truths that they express daily to students and their parents and I can speak for my students at Virginia Tech that USSA does not represent them or their beliefs about choices within education. USSA needs to realize that this complaint and attack against Educap did not benefit to them as a student group but showed that they complain with limited information and also misperceptions and false statements. Next time you may want to make sure that they have all their facts and allegations correct before you publish an attack against lenders that pride themselves on excellent student services and help students realize their dreams of an education. Private lending has saved many students from leaving their pursuits of a higher education and I value lenders that take the time to listen to schools and to our students and parents. They should be commended and not attacked in a public forum.

Tony Sutphin, Coordinator of Scholarships, Loans and Federal Work study at Virginia Tech, at 10:45 am EDT on September 29, 2006

Use Private Loans As A Last Alternative

It’s unanimous. No one will argue that education is one of the most positive decisions a person can make for himself. However, the cost of college is intimidating. For many it becomes a great deterrent. Even today, many young ambitious adults are verbally scorned at expressing the idea of borrowing a federal student loan to further their education. But it is these same young financially inexperienced adults who are subconsciously encouraged to take out private loans.

Private loans have there place in the market but should never replace a federal student loan. Students should always be encouraged to seek the maximum loan limit in the federal loan program before borrowing from a private lender. Why? Because there are safeguards built into the federal loan programs implemented to protect the borrower. Similar to credit cards, private loans have absolutely no cap on the interest rate that can be charge. This places the borrower at an extreme high risk of random, incomprehensible variable interest rates increases. However, in the federal student loan program interest rates are capped at 8.25% for Stafford Loans and 9% for PLUS Loans. And if the borrower defaults on a federal student loan the interest rate is raised to 18.5%. Private lenders have the flexibility to charge a daily interest rate that quashes the default rate limit of the federal loan program.

Borrowers thinking of taking a private loan should know that many private lenders do not offer the option of a fixed rate consolidation. Most private loan lenders will only extended the term of the loan giving you more time to repay at a variable interest rate. Conversely, in the federal loan program the borrower is afforded both benefits – a fixed interest rate and an extended term.

Most importantly, borrowers with both federal and private loans should never consider consolidating their federal loans with their private loans. This would be a huge mistake. All of the benefits of a federal loan – deferment, forbearance, fixed rate consolidation, interest rate caps and loan forgiveness – are compromised. And if a federal loans is paid-in-full with a private loan that’s it, this can not be reversed.

I encourage young adults and students to further their education. To take advantage of the educational loan programs that will get them to the graduation line. But, in life you must act responsibly. Paying for college is no different. There are many, high risks involved with private loans. Although, the purpose for there use is great, borrowers have to ask questions and continue to ask until they understand. Once confusion sets in mistakes will be made. I am an advocate of the federal student loan program. It is a highly regulated program that should be completely exhausted prior to seeking a private loan.

Ms. Lane, President, at 2:05 pm EDT on September 29, 2006

Private Loans

A quick general comment on private student lending (and more to come). As has been said in previous comments, there very well may be a place for private student lending, particularly as has historically been true, for professional and graduate students. But the trend toward high use of private loans to finance undergraduate education is very troubling. As has also been noted, there are critical protections for borrowers built into the federal loan system. These protections developed from the understanding that borrowers with little or no credit history need heightened protection from the private marketplace—There are interest rate caps and limits and also extremely important flexible repayment options and limited cancellation rights. Federal loan protections are not perfect by any stretch and there are very real problems with borrowers’ rights to enforce these rights. But they are an imporant foundation. Without these protections, borrowers are left to the whim of private lenders, some of whom may do the right thing, but that is not enough. Lenders must be required by law to do so. (See Fridays Congressional action to impose usury limits on payday loans made to members of our military. Congress is saying that the private marketplace cannot be counted on to do what’s right...and that without regulation, many lenders will even exploit our nations servicemembers.). I am not saying that private loans are exactly equivalent to payday loans, just that the need for regulation is very real in both instances. And there is tremendous room for confusion as borrowers try to decipher which loans are private, which are federal, the universe of aid they are entitled to etc.. Clear disclosures alone are not enough, but they are an excellent first step toward helping students understand their options.

Deanne Loonin, National Consumer Law Center, at 2:15 pm EDT on October 1, 2006

Response to Alan

Alan, thank you for your post. I will now call Sallie Mae and tell them that I no longer owe them $60,000 in student loans and that even if I did, Alan says I don’t have to pay them back. Could you please call my mortgage company, day care, cable and credit card companies and tell them the same thing?

Let me be clear about one thing, and I thought I made this clear in my last post. I DO NOT make money off of student loans. Apparently you believe that financial aid administrators around the country are sitting around making commissions based on the number of loans they produce. I would be very interested to see what facts you have to support that. And please let me know where I can sign up because, as I said before, I have student loans to repay.

When I went to college I was told that a) I would be borrowing money and b) I had to pay it back at such and such interest rate. Therefore, I was not shocked and appalled when Sallie Mae called me and asked for their money. I do the same now for all of the students that I deal with, as do the people on my staff and all of the many, many honest and ethical financial aid administrators that I deal with. If any student tells me that he is unsure or does not want to borrow money, I tell him to go home and think about it.

By the way, I did see your little website and read all of the stories. My question remains: if I have to pay back my loans with interest, why don’t you?

Any time you want to have an open and honest discussion about the issue (i.e. not whining about how unfair life is) the financial aid community is available. In the meantime I plan to make all of my colleagues aware of your crusade. Time will tell what the truth is.

Wendy, at 1:15 pm EDT on October 2, 2006

That’s the problem Troy — Financial Aid counselors are NOT LOAN OFFICERS! They are nowhere near qualified to regulate loan information on a daily basis and are not certified financial planners. They simply distribute an office brochure with the “best assumed” product.

While I understand your dilemma, you can’t fault them Troy — they haven’t the cumulative knowledge for which to be faulted.

CD, student, at 8:20 pm EST on November 1, 2006

RESPONSE TO WENDY AND ALLEN

First of all, Wendy, I think your boss should see your previous posts on this discussion and decide if you should be aloud to keep your job after telling a borrower who has thus far made tremendous impact on borrower rights (thank you allen)to “grow up". And in addition to that, you DO NOT speak for all of your colleagues when you say you are all there to HELP. In 2004 I was twice given false information by a Financial Aid Advisor that would’ve led me to have 14% interest rates on an 11K loan when I was fully eligible for a subsidized loan with a 6% rate.

So please, spare your colleagues reputation by thinking before you speak.

MARIA, MS, at 3:20 pm EST on December 18, 2006