University Business - July 2008 - (Page 29)

FINANCIAL AID Student Loan Borrower Beware How to help students avoid borrowing pitfalls By Haley Chitty I N THE WAKE OF LAST YEAR’S investigations into loan provider and financial aid office relationships, some campuses hesitate to recommend any lender for fear that they’ll be perceived as steering business to certain lenders. Unfortunately, a lack of unbiased counseling from the financial aid office leaves students and parents alone to decipher complex student loan terms and makes them vulnerable to sometimes misleading direct-to-consumer marketing. The height of the student lending season has arrived, and fierce competition for student loan volume drives a few lenders to use misleading marketing practices, sometimes even encouraging students to avoid the financial aid office. These techniques can be detrimental to a student’s financial future and are unnecessary, according to the Consumer Bankers Association (CBA). “There can be no worse advice to students and their families than to rely exclusively on the internet or direct mail solicitations to learn about and apply for a student loan,” explains CBA President Joe Belew. “Recent advertisements by one student loan lender implying that borrowers should not consult with the financial aid office at the institution they are attending are inappropriate and a complete disservice to students.” While marketing practices recommending an end-run around the aid office are certainly the exception, administrators at higher ed institutions should be aware that they exist and protect students and parents by ensuring that they are counseled by the financial aid office before they take out student loans. These solicitations often resemble actual loan documents or look like government-issued letters. A FEW BAD APPLES Several IHEs have sent the National Association of Student Financial Aid Administrators examples of direct-to-consumer (DTC) mailings. Envelopes marked “Confidential,” “Open Immediately,” “Final Notice,” and “Urgent” are used. Many of the mailings not only attempt to lead students and parents away from the financial aid office, but also to steer them from federal student loans and other forms of financial aid. One solicitation promises students up to $40,000 a year, underscoring that the money will go directly to the borrower without having “to fill out any federal forms.” Another boasts, “Funds are now available to parents without all the complexity and restrictions associated with traditional student loan sources.” A recent ad campaign placed in major media outlets features individuals with their heads sawed off, with the quote, “I didn’t use my brain; I went right to the financial aid office.” Some lenders mislead students and parents with inaccurate information. One student was sent a solicitation to consolidate immediately because of the “student loan tax” recently proposed in the president’s budget and in legislation that “would cause lenders to discontinue their rate reductions” the borrower could be receiving on current loans. Another borrower received a letter from an unidentifiable lender with the words “Rebate eligibility notification” printed in all caps on the outside. The notice reads, “Contact us immediately regarding your Federal Student Loans. Our records indicate that you may be eligible for a rebate up to $2,000.” These solicitations are often sent in disguise to resemble actual loan documents or, worse, to look like government-issued letters. Lenders may use phrases like “from the Student Loan Department” or “Department of Student Finance” to try and confuse students. Others use a slightly altered Department of Education insignia to draw attention. According to U.S. News & World Report, the federal student aid ombudsman has received about 100 complaints about inappropriate DTC marketing materials suggesting that the lenders are affiliated with the federal government. Complaints are forwarded to the Federal Trade Commission, which reports having received almost 600 complaints about deceptive DTC marketing practices by student lenders since 2000. Administrators face an uphill Haley Chitty is assistant director of communications at NASFAA, July 2008 | 29

Table of Contents for the Digital Edition of University Business - July 2008

University Business - July 2008
College Index
Company Index
Advisory Board
Editor's Note
Behind the News
Money Matters
Financial Aid
Human Resources
Students in Need, Schools at the Ready
Security Officers Speak Out
Advancement Goes Digital
A New Day for NASFAA
Sustainable Admissions
What's New
End Note

University Business - July 2008