University Business - March 2008 - (Page 32) FINANCIAL AID cheaper federal loan options. Counseling helps ensure that students take full advantage of federal, state, local, and institutional financial aid and avoid taking out private loans with unreasonable terms. In addition, the financial aid office can provide students with general financial guidance so they do not take on excessive debt levels, given their future career plans. Another consequence of stricter lending practices is higher loan costs for students. In response to news that Sallie Mae would no longer lend to students at his school, Robert Herzog, Indiana Business College’s chief financial officer, told BusinessWeek, “I don’t have any doubt that there will be other avenues for us to look at, but it will come at a higher cost for the students and for the institutions.” In addition to higher costs caused by fewer loan options, many lenders have in- creased interest rates and fees and reduced benefits on student loans. Reports from financial aid offices around the country indicate that students will pay more for their loans. Low-income borrowers will be hit hard by the higher rates and fees and limited financing options. There have also been rumors that in the short term, borrowers could see an additional shortage of financing options because of the difficulty loan companies are having in raising capital to disburse new loans. Lenders are seeing their securitization and bond ratings drop, and investors are more reluctant to bail them out given the problems in other areas of the market. Unfortunately, the combination of higher rates and fees and limited financing options will hit low-income borrowers harder than other students because access to student loans can make or break their opportunity to go to college. This is just another reason it is critical to provide more financial aid to low-income students. Without a greater investment, these students may be forced to take out more expensive loans that they will be less likely to repay, or worse—they may have no options to pay for college. A greater investment in need-based financial aid combined with sufficient counseling through the financial aid office can help mitigate the negative impacts the recent changes in the student loan environment will have on the nation’s most vulnerable students. 32 | March 2008 universitybusiness.com http://www.wimba.com/learnmore http://www.wimba.com/learnmore http://universitybusiness.com
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