Breaking the Small Business Code

Who Speaks for College Families?

ORIGINAL DATE: 07/07/2008 09:21:43 AM

Interesting article in today's July 7th 2008 Inside Higher Education about a panel on student loans held at the convention of the National Association of Student Financial Aid Administrators - you know - the guys and gals who make the decision on how much money and what kind of money you get for your college dreams.  The article noted that NO ONE on the panel and only 1 person spoke on behalf of YOU - the college family who is going into deeper and deeper debt to pay for college!

Everyone on the panel (with the exception of a Dept of Education spokesperson) was a lender!  So as you suspect, it was all focused on loans and "woe is us, there is not enough profit in student lending" so you NASFAA members will have fewer options for lenders.  They also "threatened" the NASFAA that the "poor" students will not be getting loans because the lenders will need tougher "credit" standards to provide loans.

The article pointed out that many lenders had left the business and fewer lenders were in the Exhibit Hall because of how Congress changed the structure of the reimbursement to lenders.  Of those that left, the members we gleeful that one of them was MyRichUncle - the lender that pulled back the curtain on the cozy relationship between some lenders and the colleges.

The call for action from the panel and the response of the audience was predictable.  Please NASFAA members, lobby Congress to get our lenders back their margins.  Let's make loans easy again. NO ONE talked about how else they could help make college affordable.  No one talked about the massive debt families are being asked to take on for college. It was all about how to get our lenders back and keep making easy loans.

When loans are easy, it is also easy for NASFAA members to make those loans part of financial aid.  And before they provide one drop of free money, loans are ALWAYS maxed out to the legal limit.  Then, and only then, do you see them add Federal Grants (not their money), add state grants (not their money), absorb outside private scholarships (not their money), and then and ONLY then do they consider offering their own money.    So be aware that when they are screaming about loans, they are screaming about putting you and your student into more debt!

So what do you do?  HAVE A PLAN!  Learn the rules of college funding.  You can't win a game you don't know how to play.  Once you learn the rules, then get a strategy.  You can't win big if you don't know the best techniques for your family.

PLEASE comment on this article.  I want to know what you think about loans and how the aid administrators are being talked to about loans and lenders!

Sallie Mae Dings Credit Score of 10% of Borrowers

ORIGINAL DATE: 05/15/2008 05:44:48 PM

Thousands of student borrowers have had their credit scores severely damaged because Sallie Mae erroneously reported that they were delinquent on their student loans. Sallie Mae has said they fixed the error, but in the meantime some borrowers have seen their FICO scores tumble by as much as 150 points. This has repercussions beyond just FICO scores. Most people know FICO scores are important when you are looking for loans. But this error may impact job searches and credit card rates! I know from personal experience that employers sometimes use credit history to determine suitability for sensitive positions. An incorrect late payment on just one of the three credit agencies was enough to delay my being approved as a financial advisor at Mass Mutual in the early 1990's.  It took 6 weeks to clear up the mistake and I lost income because of it!

Sallie Mae has stated that less than 10 percent of Sallie Mae's borrowers were affected.  However, Sallie Mae is the largest provider of student loans so this "less than ten percent" equates to over 1 million borrowers.  And we don't know if there are other mistakes so there are potentially millions of student loan holders that were impacted. According to Sallie Mae, the error occurred in a routine transfer of account information to the credit bureaus last week.  The error was discovered on Friday, but by the time Sallie Mae notified the various credit agencies, Equifax had already posted the delinquency information. As a result, the accounts of some student loan borrowers were shown to be behind on their payments, causing the borrower's credit score to plunge immediately. Supposedly the credit ratings have now been restored, according to a spokesperson for Sallie Mae. They said that borrowers would see no negative repercussions but those who think they may have been affected are encouraged to call 1-888-2-SALLIE.  For those in the process of trying to get other loans, Sallie Mae has offered to supply credit references on request. This just points out the risks of borrowing for college. I want to remind my readers that the use of loans can be minimized by simply knowing the insider secrets to college funding.  But if you do use loans, it becomes critical that borrowers stay on top of their payments AND their credit reports. I strongly recommend that students with Sallie Mae loans contact the three major credit bureaus to make sure they were not impacted by this or any other mistakes.  Per federal law, everyone is entitled to a free report each year so take advantage of that right now.