Student Loan Blog : Jonathan D. Glater

Proposed Legislation Would Prevent Student Loan Lenders from ‘Cherry-Picking’ Schools They Lend To

Student Loan Girl — Fri, 20 Jun 2008 01:14:00 GMT

To ensure all students have access to student loans regardless of what type of school they attend, two Democratic senators introduced legislation Tuesday that would prohibit banks and other lenders from “picking and choosing” which institutions of higher education they do business with, according to a New York Times article (“Bill Promotes Universal College Loans,” June 18, 2008).

Under the proposal, lenders that participate in the Federal Family Education Loan Program would have to extend credit to any eligible student, regardless of a student’s income or the type of institution they attend, as long as the student’s college is a member of the FFEL program, writes Times reporter Jonathan Glater.

Senators Patty Murray, D-Wash., and Christopher Dodd, D-Conn., introduced the legislation in response to the decision of Citibank, JPMorgan Chase, PNC, and SunTrust to stop offering student loans to community colleges and other two-year institutions.

“Lenders offering loans backed by taxpayer dollars shouldn’t be able to discriminate against certain schools or students,” Murray said in a statement. “Denying loans based on school, program length, or income level locks the door for far too many.”

Bill Faces an Uncertain Future

Banks who have ceased lending to certain two-year institutions contend that they lose money on the loans. Schools that have been cut off by the banks tend to have higher default rates and fewer borrowers with small loan amounts — financial factors that, lenders say, make business at these schools less profitable.

But financial aid administrators counter that lenders should not be allowed to “cherry-pick,” because selective lending could make it harder for low-income students to pay for college.

The proposal, which is under review by the U.S. Department of Education, has already been met with controversy. Some financial aid officials support the measure as way of ensuring access to student loans, while others believe it might have the unintended consequence of pushing lenders out of the federal student-loan business altogether at time when over 100 lenders have already left the FFEL program.

While the bill’s prospects are unclear, Sen. Edward Kennedy, D-Mass., chairman of the Senate Committee on Health, Education, Labor, and Pensions, is expected to co-sponsor the bill.

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Banks Become More Selective, Leaving Some Colleges Without Student Loans

Student Loan Girl — Tue, 03 Jun 2008 00:49:00 GMT

Students at community colleges, for-profit universities, and other less competitive institutions may have trouble finding a lender willing to offer them federal student loans as some of the nation’s biggest banks pare down the list of schools they serve, according to an article that appeared today in The New York Times (“Student Loans Start to Bypass 2-Year Colleges,” June 2, 2008).

Citibank, JPMorgan Chase, PNC, and SunTrust are no longer offering student loans to certain colleges — schools that the banks have determined tend toward higher default rates, fewer borrowers, and small loan amounts that make business less profitable.

More than 6.2 million — over 40 percent — of the nation’s undergraduates attend community colleges. These students, according to the College Board, borrow an average of $3,200 a year.

In late May, Citibank, one of the nation’s largest providers of student loans, announced its student lending division, the Student Loan Corporation, would temporarily suspend lending to schools whose borrowers tend to have college loans with “lower balances and shorter periods over which we earn interest.” Citibank also announced it would cease lending to schools it anticipated to have minimal loan volume.

“The logic is so flawed, that for us to have volume with them in the future, we have to have had volume with them in the past,” said Korey Compaan, financial aid director at William Jessup University in Rocklin, Calif. To deny federal student loans to students based simply on the college they attend, he said, is “totally and completely unethical.”

Sallie Mae and Nelnet have recently reaffirmed their commitment to offering federal college loans regardless of the institution a student attends. And Wells Fargo has contacted financial aid administrators at schools dropped by Citibank to express a willingness to lend to their students.

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Harvard’s Aid to Middle-Class Families a Signal for Change

Student Loan Girl — Thu, 03 Jan 2008 15:03:00 GMT

In December Harvard University announced it would begin offering increased financial aid to students of middle and upper-middle class families. Those families earning between $120,000 and $180,000 will only have to pay about 10 percent of their income, or no more than $18,000 of the $45,600 traditionally charged for tuition, Jonathan D. Glater of the New York Times reports (“Harvard’s Aid to Middle Class Pressures Rivals,” Dec. 29, 2007).

For a school like Harvard, with a $35 million endowment, the gesture is reasonable, and other schools have followed suit: the University of Pennsylvania, Pomona College, Swarthmore College and Haverford College. But smaller liberal arts schools are beginning to find similar cost-cutting discounts to be less than feasible.

Schools Fail to Financially Compete

Harvard’s competitors are finding that the Ivy League school’s change in financial aid policy is affecting their students as much as its own. Small, but competitive liberal arts schools have been receiving comments from concerned parents and students asking for equivalent financial aid offers.

“Harvard has started to redefine the financial aid landscape, and it’s redefined it in a way that is quite beneficial to the wealthiest institutions,” Dean of Admissions and Financial Aid at Bryn Mawr, Jenny Rickard, told the Times. “It’s just a handful of schools that can really respond this way, but it leaves others kind of pulling their hair.”

William D. Durden, president of Dickinson College in Pennsylvania, says his school is one of the many finding it difficult to compete.

“A lot of us are going to be under huge pressure to do these things that we just can’t do,” he tells the Times.

Durden, along with other college president’s like himself, say Harvard’s move could also end up taking away financial aid opportunities from low-income students, making tuition pricing seem even more arbitrary, and causing schools to raise already increasing tuition costs to account for the additional financial assistance.

College Costs at the Heart of the Issue

Harvard officials made their decision in part because they noticed students from middle-class families were simply not applying. Although Harvard allows almost any student from a household making less than $60,000 to attend the school almost for free, Harvard’s Dean of Admissions William R. Fitzsimmons noticed that his school was missing out on some “exciting” middle and upper-middle-class students, most likely because of the school’s high price tuition.

“People were voting with their feet,” Fitzsimmons said in the Times article.

But others see Harvard’s efforts as capable of reversing admissions trends. Donald E. Heller, director of the Center for the Study of Higher Education at Pennsylvania State University, says an increase in middle-class students to Harvard could bump out lower-class students from the school’s acceptance pool.

Some of the arguments surrounding Harvard’s recent tuition discounts are turning into the chicken and the egg type discussions. While some officials have used Harvard’s move as an example of why schools need additional federal funding, others fear that parents and students will point their fingers back at the institutions arguing that they’re clearly charging too much for an education.

“It will educate those parents into thinking, ‘Eighteen thousand dollars a year is what we ought to be paying; why should we have to pay any more than that?’” the president of Ursinus College, John Strassburger, asked in the Times article.

And perhaps that’s where the real problem lies: college affordability. There’s no saying when and if college costs will ever be overhauled, but in the meantime it looks like the only people winning in this situation are those Harvard students whose families make just the right amount of money.

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Online Ordering Causing Mailroom Mayhem on College Campuses

Student Loan Girl — Thu, 27 Dec 2007 23:46:00 GMT

The internet has completely changed the way college campuses operate, from class offerings and registration to college admissions and financial aid services. Now the technology is changing the way campuses deliver and receive mail. As more college students gravitate to online shopping, college and university mailrooms are overhauling their mail processing operations to accommodate the influx of packages.

Some pretty bizarre ones at that.

Car tires, barbecues, dishwashers, ant farms and air conditioners are just some of the orders college students are having mailed to their dorm rooms, according to a New York Times article by Jonathan D. Glater (“Majoring in Mailroom Management,” Nov. 21, 2007).

When students make their online purchases they often give little thought to the cost let alone the effect their shipping volume or types of packages they’re ordering will have on the mail processing centers at their schools. But for some schools, the adjustment has not been simple or cheap.

Revolutionizing the Mailroom At a Cost

The University of Southern California, for example, has experienced double the amount of their typical package volume in the last four years, expecting to process more than 67,000 packages by the end of this year. It has spent thousands of dollars adjusting their mail processing systems by building a new highly-complex mailroom almost as large as half a volleyball court for just one of their residence halls, Glater reports.

“Some folks don’t realize the logistical implications,” said Jeff Urdahl, the recently retired director of housing at USC, told the Times. “It’s a different world.”

Although online shopping statistics don’t exist for the college age demographic, according to shop.org, a division of the National Retail Foundation, internet buying increased nearly $220 billion last year and this year it is expected to top $259 billion.

And how are students paying for these purchases? Most interviewed for the Times article said their online shopping splurges are financed by college jobs, savings and parental allowances, but many students are also resorting to their good friends Visa, Master Card and American Express.

But students’ online ordering habits are not only affecting theirs and their parents’ bank accounts, they are also proving costly for the schools themselves. SUNY Binghamton spent $25,000 to implement a new bar code scanning system to track the increase of incoming packages, which rose from 33,000 in 2002 to 57,000 this year. Purchase College, also in New York, spent $37,000 on a similar system.

For Arizona State University, the second largest university in the country, the process became so cumbersome, the school chose to wash its hands clean of the mail distribution process and turned over all mail responsibilities to UPS.

Mindless Internet Shopping Hurts Students and Schools

The effect of students’ online spending is not isolated to schools; students’ bank accounts are taking huge hits as well. Credit and debit card use, necessary for online shopping, makes it much more difficult for students to keep track of their spending and their account balances.

Some students told the Times that they may buy something off the internet three times a week. This has led college students, according to Young Money, a student financial magazine, to have credit balances averaging $2,700, and as the popularity of internet shopping continues to rise, these numbers may only go up.

Students like Sarah Staton, a first year student at USC, don’t mask their online shopping activities; however they don’t quite seem to understand the effects it has on their finances.

“I do buy a lot of things, but it’s O.K. because I buy things that are cheap,” she told the Times. She admits to shopping on the internet more than two hours a day, especially for shoes. “How can I make a fashion statement if I don’t have the right shoes that match what I’m wearing?”

With this type of attitude, it looks like college mail centers and students will have to keep expanding their wallets.

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