The vast majority (90 percent) of student financial aid administrators said they are concerned about the student loan crunch and more than half (52 percent) believe that the recently enacted Ensuring Continued Access to Student Loans Act (ECASLA) does not do enough to ensure future loan access for students, according to a recent survey, Financial Aid Administrators' Perspectives on the Student Loan Crunch and Preferred Lender Lists, conducted by the National Association of Student Financial Aid Administrators (NASFAA).
New discriminatory lending practices by student loan providers was a chief concern for the 1,078 aid administrators who completed the survey in June. Recently, some of the largest Federal Family Education Loan Program (FFELP) lenders have indicated that they will no longer be lending to some community colleges, career schools, or other private schools that have higher default rates or students with lower than average loan amounts.
More than half (56 percent) of the student aid administrator respondents said that an FFELP lender had notified them that the company would no longer offer loans to students at their institution even though the company would continue to lend to students at other institutions. Additionally, more than 60 percent of respondents said Congress should enact rules or incentives to ensure that lenders provide federal loans to all students no matter what institution they attend.
Unfortunately, these discriminatory lending practices have the greatest negative impact on colleges that serve the largest amount of low- and moderate-income students.
"Too many students rely on loans to pay for their education. I do not accept the premise that student loans are here to stay, especially for needy students," said NASFAA President and CEO Dr. Philip Day. "If the student loan crunch has shown us anything, it is that our neediest students have no place in the student loan marketplace. We should help them find as many alternatives to borrowing as possible by providing them with grants and scholarships to meet their educational costs."
Key findings in the report include:
- Aid administrators believe that ECASLA will help ease the student loan crunch problem, but also feel that longer-term solutions are needed.
- Aid administrators are concerned about the loan crunch as well as provisions in ECASLA that would result in students have multiple servicers and multiple repayment obligations.
- The financial aid community is concerned about lenders that discriminate against borrowers attending certain institutions and most believe that rules or incentives should be in place to ensure that FFELP lenders lend to all students at any institution.
- Aid administrators are using a variety of methods to help students affected by the student loan crunch. However, only a quarter of aid administrators have a backup plan in place to handle any disruptions in federal or private loans. An additional 20 percent plan to have a backup plan in place before the beginning of the academic year, fall 2008.
- The majority of schools still offer some form of a preferred lender list (PLL), but 75 percent of schools that stopped offering a PLL have done so within the last.
- The leading reason that schools have stopped offering PLLs is new federal or state laws or regulations that make the lists too difficult to maintain or open the school up to too much legal risk.
- Nearly half of all schools that offer PLLs also link to an outside Web site that offers student loan comparison tools or a list of lenders.
The survey was performed over a 16-day period from Monday, June 9, 2008, to Wednesday, June 25, 2008. Surveys were sent to 2,626 member institutions; 1,078 surveys were completed and returned, with a well-balanced representation from each of region of the country. Respondents represent all types of institutions, including: 4-year public and private schools, 2-year public and private schools, vocational schools, and graduate and professional schools.
This survey is intended to give insight to policymakers, advocacy groups, and others with an interest in higher education on the perceptions of the aid administrators, who work most closely with our nation's students and parents to help them meet their educational expenses.
"I have every confidence in the commitment of student aid administrators to our nation's students and parents, and urge policymakers, advocacy groups, and others with a vested interest in our nation's students to carefully examine what aid administrators are seeing on their campuses," Day said. "NASFAA members have practical knowledge of student aid programs and experience administering college aid. Their insights can help policy makers at the regional, state and federal levels develop student aid programs that are efficient and effective in accomplishing the nation's higher education goals."
Financial Aid Administrators' Perspectives on the Student Loan Crunch and Preferred Lender Lists is available on the NASFAA Web site in PDF format.
By Haley Chitty
NASFAA Associate Director of Communications
Posted 07/21/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
