The New York Times reported on August 23 that the College Board–the home of the SAT–has decided to leave the student loan business in the wake of crackdowns on shady practices in the industry. Here’s an excerpt:

In explaining its decision to abandon the business, the College Board cited new legislation and regulations cracking down on relationships between lenders and colleges that have been enacted in the wake of revelations that numerous lenders were paying colleges commissions or bonuses in exchange for business. College officials have also received free trips, meals and other perks to win spots on the so-called preferred lender lists that students rely on when selecting a loan company. …

The association also emphasized that its student lending operation had accounted for less than 1 percent of the $618 million in revenue in the year ending June 30, and that shutting it down would affect only 15 employees.

It’s a shame that access to higher education in this country has become so expensive that families have been duped by dodgy lending practices. Let’s hope that this scandal will help clean up the industry a bit. Let’s also hope that families will become better educated consumers, and that they will find the expertise they need to play the college admissions and financial aid game.
Mark Montgomery
Montgomery Educational Consulting
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The September 2007 Issue of Consumer Reports contains a call for greater clarity and consistency in the way colleges award financial aid and communicate those aid packages to families. Here’s an excerpt:

Students and parents should have access to understandable information at critical points in the financing process. The current system makes that nearly impossible. Colleges calculate the cost of attending in different ways, so comparisons are difficult. Financial aid award letters don’t always make clear the difference between grants, which don’t need to be repaid, and loans, which do. They also give little or no guidance on how to minimize loans, secure low-cost financing, or figure out the bottom-line costs of loans.

The article goes on:

Research by Consumers Union, the nonprofit publisher of Consumer Reports, has found that students and their parents turn most often to a college’s financial aid office for the ins and outs of paying for an education. But the information they get is often inconsistent and at times misleading. For example, some expensive colleges give enticingly large financial aid awards, but hide the amount families must pay.

The editorial then calls upon Congress to make legislative requirements for colleges to disclose financial aid information in a more consistent manner, and for lenders to disclose loan terms more clearly.
All this points to the fact that colleges are businesses, and they will continue to try to entice students to their campuses. I don’t believe most college in America are trying to be sneaky. But they are trying to award aid dollars in a way that will bring in the maximum number of students to the campus at the lowest possible subsidy.
This also points to the fact that many families need independent, expert advice to help them navigate the college admissions and financial aid process. Colleges and lenders have become more savvy over the years in how they market to families. Now it’s time for families to learn how to best play the same game to their own advantage.
Mark Montgomery
Montgomery Educational Consulting
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