Senator Kennedy has caused quite a stir in the financial aid world of late. After hearing testimony from "expert" witnesses, Kennedy and others have determined that most of the relationships between educational lenders and colleges/universities are suspect. Now they're pushing for more "transparency" in the financial aid process, especially as it relates to loans; and, are asking colleges/universities to re-evaluate and/or eliminate their relationships with educational lenders.

Kennedy, and now Gov. Cuomo in New York, have accused various lenders of conspiring with colleges to push students to take out loans the particular lender sponsors. Some of the articles on the internet accuse financial aid administrators of misconduct and unethical behavior; and accuse lenders of providing bribes and kickbacks to colleges/universities as enticements. While there may be some truth to these accusations in a very few instances, this certainly isn't true for the majority of colleges/universities.

Yes, most colleges/universiies do have a "preferred lender" list. But, generally just because a lender is on that list it doesn't mean that the college/university will only work with that lender. Typically, its just an indicator that the financial aid office and the students at the college/university have reported no problems with the lender. In fact, most colleges/universities won't recommend or discourage students from approaching any lender; though, financial aid staff will help the borrower understand terms and provisions and may point them towards resources to assist them in making comparisons between lenders. Most colleges/universities don't really care where a student's tuition payments come from and are more than willing to work with any lender the student desires to use.

Are the relationships between colleges and lenders questionable? For the most part, no. Many colleges/universities rely on the lenders they do business with to provide support services for students that the college/university, because of budgeting issues, otherwise wouldn't be able to provide (such as publications/information for students on general financial aid, debt management and credit management; workshops on debt/credit for students; personal entrance/exit counseling). Lenders also partner with financial aid offices at colleges/universitys to provide assistance (staff and materials) at high school and college fairs; and, many even provide free or low-cost website support or computer programs that assist financial aid offices in managing the many/varied grants, scholarships, work-study and loan programs they run on campus.

Given that the federal government and state governments across the U.S. have been decreasing financial support to colleges/universities while at the same time have made it very clear that they expect financially strapped colleges/universities to do more for students (i.e. greater provision of information, more workshops for students and families on debt and credit, more personal assistance, and more exposure to financing opportunities), I personally don't see how colleges/universities will be able to do what they have to do for students, per the law, without the assistance of the lenders they work with. If Kennedy and others are successful in banning lender relationships with colleges/universities, its very likely that students will have less access to the information they need to make informed decisions--not only about borrowing, but about financial aid in general, debt management overall, credit management, and post-college finances.

Wathdog and oversight committees are good ideas and governance has a definite place in the world of financial aid. But lets not let the alleged actions of a few purportedly misguided lenders and financial aid administrators speak for the entire industry. Most colleges/universities work very hard, with very few resources, to provide students with as much information and "transparency" as possible; and the changes Kennedy and others have suggested would definitely make life much harder for administrators and for students.

If you have questions or concerns regarding your school's financial aid processes, visit with the financial aid administrator on your campus. Let's all work together--students, administrators and service providers--to make financing higher education as painless a process as possible.

Until next time!

Lynn Byrne