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Financial Aid News, May 2007 Issue

A Publication of the Student Loan Network

This month, we present our take on what's happening in the financial aid industry, lots of scholarships from StudentScholarshipSearch.com, and more. We've also debuted our new Financial Aid News Sources web site, which lets you submit and read news and events in financial aid. Visit it at:

http://www.FinancialAidNews.com/fans/

If you have comments or questions about the newsletter, please email me at: FinancialAidPodcast@GMail.com and I'll do my best to respond as quickly as I can. Please call our toll-free number at (877) 328-1565 if you have a specific question about how we can help you pay for college.

Christopher Penn, Editor
http://www.FinancialAidNews.com
http://www.FinancialAidPodcast.com

Featured SLN Announcement

As financial aid award letters start to arrive, now is the time to apply for federal funding, including Stafford, Graduate PLUS and Parent PLUS Loans. With low, fixed interest rates, borrower benefits, and deferred payments until you graduate, federal aid is the best way to get a jump start on your education financing for the 2007-08 academic year. Visit the Student Loan Network for a comprehensive service offering:

http://www.StudentLoanNetwork.com/apply

Featured Article: State of the Financial Aid Industry

There's been a tremendous amount of news about the student loan and financial aid industry lately. Those who follow the industry know that New York State Attorney General Andrew Cuomo has been pressing settlements or lawsuits to both lenders and colleges, alleging unethical and illegal practices. The headlines have been filled with sensational claims of all kinds - some factual and some probably exaggerated to some extent. Let's take a balanced look at some of the practices being called into question.

- Revenue sharing. When a college sets up a revenue sharing agreement with a student loan company, the loan company may offer the college a payment based on the loans taken out by that college's students, usually a percentage of the loan. While some argue that revenue sharing gives colleges more money to work with for defraying administrative costs or funding additional scholarships, it has been deemed a conflict of interest when colleges have a financial incentive to push students to a preferred lender when it may not offer the best benefits or lowest rates.

- Opportunity pools. Not every student who applies for a student loan will receive it, especially with private student loans, which are credit-based. When a college sets up an opportunity pool agreement with a student loan company, the loan company agrees to approve some students who would otherwise not be approved for a loan. This allows more students the chance to afford college who might not otherwise be able to, but can also provide loans to students whose families may not have the financial resources to repay the loans.

- Call center contracting. Running a financial aid office can be an overwhelming task, particularly at large colleges and universities with tens of thousands of students. When a college sets up a call center agreement with a student loan company, the loan company dedicates a portion of its customer service center to act as customer service for the college. The student loan company's employees may identify themselves as employees of the college or employees of the loan company, depending on the contract terms. There are benefits to the college in that call center contracting reduces the burden and cost of a financial aid office for a college. However, call center employees may recommend their employer (the lender) over other lenders, even if other lenders have products with better benefits or lower rates.

- Advisory councils. To stay in touch with what's happening in the financial aid world, student loan companies often convene advisory councils and invite college financial aid officers to participate. In some cases, the student loan companies pay travel expenses for financial aid officers to attend advisory council meetings. In other cases, financial aid officers may be paid for their time. While advisory councils can help student loan companies stay in touch with what colleges and their students need, some may perceive the lender has an ulterior motive. By serving on an advisory council and accepting payments or reimbursements for expenses, financial aid officers may have an incentive to recommend a specific lender over others that may have better benefits or lower rates.

- Payments and gifts. In a few of the recently publicized cases, financial aid officers have accepted gifts of significant value from student loan lenders, ranging from consulting fees to company stock. There are no positives to this practice as offering gifts of significant value implies a quid pro quo, meaning that reciprocity is usually expected, such as placement on a lender list.

- Preferred lender lists. Typically, a college assembles a list of preferred lenders which it recommends to students. In most cases, financial aid officers solicit proposals from lenders for product benefits and rates. A list of lenders is then drawn up and given to students, typically along with their financial aid award package. For the most part, financial aid administrators place lenders who offer the best benefits and rates to students on the list, helping simplify the task of choosing lenders for students and families. However, the process by which lenders are chosen is not always disclosed by colleges. If there is a conflict of interest as described above, lenders who don't offer the best benefits or lowest rates may still be placed on the list.

Some of the practices outlined above are clearly a conflict of interest and need to come to an end, such as offering gifts of significant value in exchange for promotion or list placement. Others, such as opportunity pools and revenue sharing, are more of a gray area because there's a definite benefit to some students and families, but potentially at the cost of value to other students and families.

Despite the recent uproar in the press, it is important to keep in mind that financial aid officers are for the most part honest and ethical people trying to stretch every dollar they have to help you pay for the ever increasing cost of college. There are a few who have made very bad judgment calls and have behaved unprofessionally, but the majority of financial aid professionals do have your best interests in mind and can be trusted.

Incidentally, it's worth pointing out that the Student Loan Network has never and will not engage in these practices. We play by the rules very strictly, and hope that when you choose a student loan company you'll choose us as the best balance of competitive products and great customer service. If you have any questions about our loan services, or would like help and advice with the financial aid process, please give us a call toll-free at (877) 328-1565.

Last Words: Selections from Student Loan Network Experts

This month, to ensure that web addresses don't get messy in the email, we're using a free service called URLtea for subscribers to the text edition of the newsletter. Those subscribed to the HTML version should notice no difference.

Scholarships

Be sure you've registered for Scholarship Points, our free college scholarship awards site. Every 3 months, we draw 3 winners for $1,000, $500, and $250 scholarships. Visit:
http://www.ScholarshipPoints.com

Remember, you can get daily scholarship updates by listening to the Financial Aid Podcast and visiting the Student Scholarship Search web site!

http://www.StudentScholarshipSearch.com
http://www.FinancialAidPodcast.com

A Word from our Sponsors

Need lots of money for college fast? Try alternative student loans! With funding as fast as 5 business days, alternative student loans can help bridge any shortfall or unexpected expense you might have. Learn more and apply at:

http://www.AlternativeStudentLoan.com

The Financial Aid Podcast is financial aid radio whenever you want it - for free! On your PC, on a CD, on your iPod, at school, home, or work. Learn about student loans, scholarships, how to get a job, and more. Make sure you have the latest copy of iTunes from www.Apple.com and then visit:

http://www.FinancialAidPodcast.com/itunes/

Looking for a career change in 2007? Visit our new jobs site at:

http://jobs.edvisors.com

The Very Last Word

Missed an issue? Did you remember a scholarship but can't find the back issue? Want to tell a friend about the newsletter? You can always find back issues of the Financial Aid Newsletter at:

http://www.FinancialAidNews.com

The Student Financial Aid News is a publication of the Student Loan
Network. Copyright (c) 1998 - 2008, the Student Loan Network. 1250 Hancock St, Suite 703N, Quincy, MA 02169
and on the web at:
http://www.StudentLoanNetwork.com

iPod and iTunes are registered trademarks of Apple Computer, Inc.

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