Bravo

I’m pleasantly surprised that alumni organizations are on the radar for consolidation deals.

I’m not an attorney and don’t know what current law is on these deals, but if there is no illegality associated with per-consolidation payments to alumni associations, there probably should be. In recent years, consolidators have exploited the remove at which alum orgs operate—they’re usually incorporated separately from the university, and operate quite autonomously. When lender-enablers dangle enough money, watch how fast consolidation referrals pour in—all in the name of serving the alums, of course.

Financial aid offices are usually not privy to these deals, and are usually livid when they learn of the deals’ terms. As aid professionals, they could have provided valuable perspective on a subject that alumni organizations are simply not wired to understand.

The aid community has been undergoing a learning curve about consolidation over the past few years. It used to be off the radar entirely once Johnny graduated, except for a couple of sentences during exit counseling. Now, there’s just too much money in play, and consolidators bombard graduates with appeals by mail, phone, spam, and pop-up.

The aid office must take more ownership of the consolidation process. If it does not, two things will happen: consolidators will continue finding ways to do end runs around FAOs to get at the graduates (ideally, corralling huge numbers together at venues like the alumni office), and, the legislative response to the circus will be ill-informed and insufficient.

finaidfollies, at 8:45 am EDT on May 4, 2007

Loan Inquiry

I have been waiting patiently for all of this to explode sine the My Rich Uncle advert last July and knew this would be bad when my first student asked me “who’s your preferred lender and why.” I had 3 more out of a class of 35 (enrollment of 300 and I’m a one woman office). It was a big clue and I knew that advert was going to resonate with the public. The funny part is that MRU wanted to feed in the trough of the federal loan business where the risk is little and the rewards vast. It was colleges who blocked them at the door, preferrng to keep their convenient arrangements with lenders. It’s all so ironic... The best my profession could come up with was their disdain at someone using the work “kickback” but sometimes you have to call a spade a spade.

I don’t think most of my colleagues in fin aid get it— we’re in for a huge mess and need to take a different approach to this all. As far as I am concerned, we have the perfect opportunity to change higher ed funding for the better of all— students, families and taxpayers (which we seem to have forgotten). I’m not sure who Dallas Martin is representing because it sure is not me. I’m tired of hearing my colleagues pretend this isn’t a huge issue and has been the dirty little secret in my industry for years. I’m also wondering why there is not much chatter about Cuomo taking payments for what???

Every podunk paper in the country has been running articles about this and we in FA need to start deciding which way to go. I spent essentially the last 6 years meeting with my students 1 on 1 to discuss consolidation and all of them ultimately decided they wanted 1 lender/1 payment over a lower rate. My colleagues need to look for the signs: how many of your students are asking you about consolidation and then looking disappointed when you point out they can’t do that loan? They are NOT looking to save a penny but to eliminate the multiple lenders they wound up with due to the secondary loan market they didn’t understand from the get go.

I am fortunate that my school pays me to advise students and I really mean sitting with them for hours going over the history of FFEL, the introduction of DL and the pros and cons of both and then they choose DL of FFEL 100% of the time and it’s not because I strong arm them. All of the students I inherit from FFEL schools 100% ask: why didn’t my school do that? When you ask a FFEL kid who their lender is they all say “the government.” Again, they don’t get it, whether they borrowed only at undergrad (40,000 in alternative loan??? What were you advising or were you?or grad school with most of them entering with well over $150,000 plus in most cases and leaving my school with another $175,000. And I truly pity the School as Lender schools because your kids feel like they were lied to and ripped off because of your shortsighted selfishness— it does not matter to them how you spent it. They don’t care and neither do I.

What we are setting in motion is kids searching on line to save a quarter year after year, lender hopping thinking they are really saving money. I’m scared as to what an exit loan session will be if we (and the DOE) encourage this attitude. I’ve already watching Simple Tuition and the Greentree Gazette salivating at what they can make as another pig at the trough.

In case you are wondering: I have kids from most every school in the country: big private, small private, public. It is I who is explaing to kids and parents that their “Big U” loan is actually a “Big Bank Alternative Loan” and they are pretty angry about it all.

In short: I don’t think we as FA folks can rationalize our way out of what was set in motion. We allowed it to happen to higher ed funding and a lot of folks stuck their snouts in the trough to eat as well and I don’t mean nice dinners— it the cost shifting of most everything in the FA office to a bank who was willing to pick up the cost and make my job easier and all the while pretend it was somehow magically free.

In closing, I find it even more humourous how we are all now the patsys for the banks and truthfully, from the parents I have heard from in the last months looking like a bunch of jackasses. Granted Direct is not the best run but how could it be? We never gave it a chance and complained the DOE wasn’t servicing us well enough—not the STUDENTS but us is what I hear from former DL schools. I’ve read many ridiculous comparisons about the pharmacutical industry and Dr’s but I have to point out: Merck is NOT funded by the taxpayers so I really don’t think it’s a good anaology. I prefer to think of it another way: folks on Medicare don’t get much choice... nor should student borrowers in a federally backed loan program being milked for millions by banks, guarantors, servicers, consolidators, search engine folks, marketing companies, schools, alumnae associations... the list goes on and it will keep growing.

My revolutionary take: students have a choice: either take a federally backed loan from the government or don ‘t. There’s your choice.

Ann Doherty, at 9:55 pm EDT on May 4, 2007

Reply to K

My students are told that nothing is for free. The loan fees they had covered by the lender etc... were basically just a penny of the profit the lender is gaining. They have a choice to go FFEL and it is explained to them one on one what their options are. I encourage my students to think a bit more macro and long term— the penny you saved came out of a banks profit—wasn’t that nice of them to share? Direct doesn’t offer perks (and nor should it) but more importantly it can’t: remember the 9.5 recycling of loans with borrowers only picking up 2.875— geez, I wonder where the money went? Maybe it’s helping to pay for those “free” loan fees I got from Oopsie Moo of Numnet. Hooray for me— I got my students less than 3% but now they have to pick up the difference anyway since their lender is guaranteed 9.5. What have you saved them really? Are we surprised that the interest rates couldn’t be cut in half by Congress. I know I wasn’t surprised based on the amount of money bled out of the treasury in the past 5 that paid for the double digit profits in student lending.

Reductions in fees, repayment incentives are for the most part smoke and mirrors. My main point is really: why is federal student lending a multi billion dollar business in the first place? I don’t think students (and parents) want to have a profit made off of them in this way and I as a taxpayer and FA am pretty tired of the rationalizing away of stuff and calling it “free.” As a fiscal conservative I frankly don’t think giving a social program to capitalists is the best idea— 2 competing motives that will never agree. I’ll never be convinced a bank is in it to send Poor Johnny to school... they are in it for the money and to maximize profits for their shareholders and I’m totally OK with that but not in a government paid for a social program.

Ann Doherty, at 9:00 am EDT on May 10, 2007