University Business - March 2007 - (Page 33)

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A number of factors, including rising tuition and stagnant federal grant and loan limits, have caused more students to turn to private loans to finance their higher education. The private loan industry should be commended for providing the capital that enables countless students to attain their higher education goals, but the rapid increase in private loans does not come without some drawbacks. SO MANY OPTIONS, SO LITTLE TIME One drawback to this increasingly popular form of higher education financing is that the terms on loans vary widely. The credit history of the borrower and/or the borrower’s co-signer significantly affects the interest rate on many private loans. Generally this benefits borrowers from higher-income families because they are more likely to have a better credit rating. In addition, the terms on private loans can be affected by the student’s chosen major or degree program. Private loans also offer a variety of borrower benefits, like deferred payment and rewards for on-time repayment. While these can benefit the borrower, families often find it difficult to navigate the oceans of private loan information to determine which loan is best for their individual situation. This makes the role of an expert inwww.universitybusiness.com T Families often find it difficult to navigate the oceans of private loan information. dependent advisor, like a financial aid administrator, valuable. Aid administrators can help students determine how much they need to borrow, assess whether they qualify for less expensive federal aid options, and evaluate whether the loan terms are reasonable and the student can reasonably expect to be able to make payments at repayment time. This counseling helps students avoid the hardship that comes with excessive borrowing or borrowing loans with unreasonable rates or terms. “The differences in rates due to credit history make private loans much more complex,” noted NASFAA’s Great Lakes President and Chief Executive Officer Richard D. George at a recent conference on private loans held by American Enterprise Institute AEI . “Students need guidance about front-end and back-end ben- efits. They are borrowing at a time when distilling loan terms is a challenge and they need help. This needs to be an independent assessment of loan terms provided by an expansion of financial aid officers’ role or by nonprofits like guaranty agencies.” One example of how a financial aid administrator can help students save money and avoid undue hardship involves a student who took out a private loan with unreasonably high interest rates. The student’s financial aid administrator noticed the high interest rate on the loan and advised the student to do this: Take out a loan with better rates to repay the loan with the higher rate. The student took the advice and as a result will save hundreds, possibly thousands, of dollars over the life of the loan. PROTECTORS OR BOTTLENECKS At the AEI conference, held to explore the fast-growing and under-researched private student loan market, the role of student aid administrators was the center of much debate. A byproduct of the increase in private loans is an increase in direct-toconsumer marketing as more companies market loans right to students and their families. Richard Lee Colvin, the director of the Hechinger Institute on education, noted that lenders are very comfortable verifying enrollment, enabling them to circumvent the traditional school channel. “As private loans grow very rapidly, the direct-to-consumer marketing also grows,” George explained, adding Haley Chitty is assistant director of communications at NASFAA, www.nasfaa.org. March 2007 | 33 MP 91:50:21 70/12/2 33 ddni.diAniF_703_BU Warning : Unknown : The session id contains invalid characters, valid characters are only a-z, A-Z and 0-9 in Unknown on line 0 Warning : Unknown : Failed to write session data files . Please verify that the current setting of session.save_path is correct /var/lib/php/session in Unknown on line 0 http://www.nasfaa.org http://www.universitybusiness.com

Table of Contents for the Digital Edition of University Business - March 2007

Contents
College Index
Company Index
Advisory Board
Editor's Note
Stats Watch
Sense of Place
Viewpoint
Marketing
Human Resources
Financial Aid
Money Matters
Community Colleges
Title IX Turns 35
It’s Electric
Lost in Space
Transportation Trends
Details of Retail
Business Technology
What's New
Calendar of Events
Direct Connect
End Note

University Business - March 2007