By now, all of us in the financial aid profession are well aware of the many recent changes which have occurred in the past year in the student loan industry. These changes will have an inevitable affect across a broad range of areas for campuses for the upcoming 2008-09 processing season.

Some of the more indirect results of these changes may, superficially, appear to be minor and difficult to trace directly back to issues in the student loan industry. For example, professional entrance and exit loan counseling sessions were previously provided to students, at no cost to the college, by those within the loan system. These may read on paper like a small, value-added perk but loosing such informative extras may in fact, hurt the school’s perceived service levels in the eyes of its students, not to mention affect the student’s ability to repay their loans and the long term default rate at the school.

More directly though, students and institutions, will feel the pain of the real and present issues stemming from loan processing bottlenecks. Lender selection and Master Promissory Note signing will have a wide reaching affect on the campuses at many schools.

Here are some potential issues that your campus may experience and will need to plan for:

Recent changes in student lending that will affect your institution

• Higher Education Reauthorization Act
  • Resulted in many top-volume lenders exiting and or dramatically reducing participation in the Federal Family Education Loan Program, (FFELP).
  • Reduced or eliminated up-front borrower benefits on loans
  • Reduced number of available processing options in FFELP and in the private student loan sector.
    
    
• The Student Loan Sunshine Act
  • Limits loan processing and disbursement facilitation for institutions
    • Increased delay in loan processing and disbursements
      • Delayed deposits
        
  • Elimination of value-added student services previously received from lender partners, such as exit, entrance and debt management counseling
    • Affect on perceived service levels
    • Retention
    • Potential affect on alumni giving
      
      
• The overall crisis in the private credit markets have also forced many of the nation’s top student loan lenders out of both the federal and private loan programs.
  • Returning students who borrowed from these lenders in previous years will now be required to sign new promissory notes with lenders that are left in the programs to ensure loan funds for the 2008-09 academic years.
  • Students and families previously approved at certain credit scores may no longer qualify, even with similar credit scores.
  • Even the credit-qualified will see higher interest rates than those offered to them last year.
  • A declining credit score could further increase a student’s interest rate on private loans.
  • Students stuck to fill the gap in their financing will require more one on one counseling

What this means for your institution

• Possible delays in student registration
  • If students are required to sign new promissory notes with new lenders, your financial aid office may not be set up to process these loans in an efficient and timely, electronic way. Financial aid officers will be required to manually certify these loans which could mean delays of disbursement of funds.
  • Students will seek additional guidance from the financial aid office on what lender to choose but, legally, the aid administrator is limited in the amount of assistance it can provide to students in this area.
  • The additional responsibilities that these new requirements place on financial aid officers and staff may mean less time for counseling students on important decisions about borrowing.
    
    
• Dramatic cuts to borrower benefits:
  • Borrower loan incentives had been long been offered to students in the form of up-front fee reductions and provided students with hundreds of extra dollars for books and other expenses.
    • Without access to these up front benefits, some students will fall short and may need additional loan funds.
      
      
• Delayed deposit of funds
  • If even a small percentage of your fiscal budget is based on funds received from federal and private student loans delays caused by manual processing could have a significant affect on that budget.
    
    
• Perceived service levels
  • Although the financial aid office exists to facilitate the awarding of scholarships, loans, grants as well as the processing and certification of student loans, many students perceive any customer service issues related to financial aid and student loans as one with that exists within the school.
  • Since financial aid professionals are prohibited from providing even the most basic recommendations for lenders, many students will be left confused, bewildered and frustrated with the process and thus have a skewed perception of the service levels provided by your institution’s financial aid office.
    
    
• Retention issues
  • If students are unable to pay their deposit in time for classes, this may affect their ability to return to school. The largest percentage of students who drop out site lack of financing as the reason.

Being prepared to deal with these issues will be the best way to ensure that your students get the funding they need and that your service levels remain high.

What can you do now to prepare for these issues?

• Talk to your financial aid director about how they plan to deal with each of the issues listed above.
  
  
• Ask Questions to your financial aid director o How many of our returning students are going to be required to sign new promissory notes and are we prepared to handle them?
  • How have we notified students this is something they will need to do?
  • How will we handle the processing of loans that do not fit into our automated process?
  • Have we adjusted our deposit dates to correspond with these anticipated delays?
  • Will the financial aid office require additional, temporary help to assist students and families and or conduct entrance interviews and assist with loan processing?

If your financial aid director answers even one of these questions with “I don’t know”, you may want to schedule a meeting of all of the potentially affected offices and spend an afternoon brainstorming on how you can work together to assist students.

I believe one of the most effective and satisfying ways to get through adversity is to shine in spite of it. What better response could the financial aid community have than to handle all that has been thrown our way than to handle it with care, organization and, as always, keep in mind the best interest of the students.