This morning I posted a comment to an article from Inside HIgher Ed on the muted response from Financial Aid Advisors (FAA) on the proposal to eliminate private lenders from student loans and let the Federal Government be the only provider effectively making ALL Federal Family Education Loans (FFEL) DIrect Loans.
The article itself is interesting but it is in the comments that we see the REAL problem with student loans! It is a "them versus us" dialog that shows the gulf is between the colleges and the recipients! The premise of manyof the comments is the "evil" nature of FAAs and their representative body the National Association of Student Financial Aid Advisors (NASFAA). Following is my comment to the dialog:
We all know one (or more) rotten apples in any group. We also know many good people in that same group. The "good" or "rotten" actions of indivuduals is not evidence of the value or honesty of the group. It is the VALUE of the service that the group renders that counts. The service itself needs to be judged.
As a financial professional, am I tarnished by AIG? Yes. Do I or did I personally have anything to do with AIG? No. But I suffer under whatever consequences regulators choose to apply. And worse, I suffer because of client and prospect perception that all financial professionals are greedy and scammers. As a college funding expert for over 30 years, I have the same problem with FAAs perceiving me as somehow scamming their colleges when I have NEVER hidden assets to made a family "poor" to qualify for more aid. But every year the NASFAA put out their official "warning" about paying someone like me to do the FAFSA.
The comments about individual kick-backs is true for a small minority BUT it distracts from the real problem -- the universal use of loans is what is rotten. Arguing over Direct versus private lenders is CLASSIC misdirection. Argue over the paint color instead of arguing over the house being in the wrong place.
Crushing student loans - REGARDLESS of origin be it Direct or private lender - are destroying the dreams of students? Have there been kick-backs and sweetheart deals? Yes! Have all FAA participated? No. But ALL FAAs and their organizations are tarnished not because of that. The college funding sysem in which FAAs live is broken. So sorry, you ALL take the heat when you live in the kitchen - good guy or bad, lender or "pimp" for the lender.
It is a FACT that virtually ALL students who are not at the handful of Ivies without student loans WILL have the MAXIMUM allowed in FFEL loans - REGARDLESS OF LENDER. The debt load is even WORSE when that student is in a major like education that requires a graduate degree where the maximum loan jumps to nearly $20,000 per year.
Arguing about where the loan originates is misdirection. It is rearranging the deck chairs on the Titanic. No one is addressing the REAL problem - out of control lending is destroying the hopes and dreams of our students.
I think loans overall need to be rethought.Where do YOU stand on loans and changing to the Direct-only route?
As one of my collegues has said, “Be careful what you wish for!”
I am most concerned that the lenders who have decided to no longer participate, have also decided not to continue to work with students who have used them as lenders in the past. Some students have had several loans with the same lender. The decision to no longer work with these borrowers is sending a very upsetting message. Now the fear of not being able to finance their continued education and reach their degree goals is very real and they are looking to us for an explaination and answer. The scramble is on to find a new lender and what about consolidation down the road with it’s impact on default. A simpler solution would be to revisit or even eliminate the loan subsidy changes made in the ironically named College Cost Reduction and Access Act, which has neither reduced college costs nor improved access. Once a minimum level of profitability returned to student loans, their ability to attract investors - and therefore liquidity - would let market forces solve the problem, rather than legislative fiat, no matter how well intended. Recently a noted official in higher education circles indicated that the cuts in subsidies due to the College Cost Reduction Act, had they NOT been passed, would only have delayed a tiny bit the credit crunch in the student loan markets. I wish I thought the current situation would be solved by something as simple as what Christopher suggests. It won’t be. But expecting Congress to solve it quickly is unrealistic too.
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