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STUDENT
LENDING
The Sunshine Act: Spotlight on Smart Borrowing
The Student Loan Sunshine Act, the House bill
introduced in February and overwhelmingly
approved in May, requires colleges and
universities to provide full disclosure and
choice in the private lending products they
offer to their customers. The communications
effort financial aid offices and lenders undertaking to comply with these requirements is a
daunting task. A new reader-friendly format must
be used to present the terms and fees in a
consistent manner; a side-by-side comparison of
terms and fees for a minimum of three lenders
must be delivered; full explanation of the
factors that led to the preferred lender status
is expected; institutions will need to expand
their communications online, in print, in person
and over the phone to help their customers
assemble the most advantageous financial package
possible.
How will the financial aid offices and lenders
meet this increased demand for consumer
information? How will they quickly ensure that
they are delivering this information consistent
with the Act’s requirements? How will they guide
students away from over-borrowing easy-to-get
private loans, which carry unreasonably high
interest rates?
One tuition management company (which is not
a lender in sheep’s clothing) is developing an
application that enables lenders and financial
aid offices to fully meet these new legislative
dictums. It is a software application that is
used online by the consumer via a college or
university website, or accessed by a school
administrator to provide inquiring students a
side-by-side comparison of any school lenders’
terms and fees. But the tool, BorrowSmart,
being introduced by Tuition Management Systems
at the Annual NASFAA Conference in July, goes
well beyond just providing required loan
disclosures. Instead, it is uniquely designed to
steer students away from borrowing, and
its success will be measured in how well it
accomplishes this goal. “In calendar year 2006,
we reduced customers’ borrowing by $6,306 on
average as a result of our payment counselors
guidance in how best to pay for education,”
reports Tuition Management Systems CEO Steven
Dodd.
Tuition Management Systems, a private company in
the payment plan, billing and counseling
business, has been advising students and parents
on the most responsible way to pay for education
for its entire 20-year history. “We are taking
our long-standing experience in helping people
get the bill paid - talking about loans in the
context of a healthier way to pay the
education bill - and creating a new application
so that schools and their customers can more
easily make a responsible and informed choice of
lending products,” remarks Mr. Dodd.
As
students and parents expect and demand more
information and choice from higher education
institutions, the application will satisfy this
need with regular updates of loan information,
quick online comparisons, a dynamic look at
different mixes of loans, and the ability to
select loans by key criteria. And yet it will
operate fully within the parameters set by the
school, ensuring financial aid officers with a
payment counseling tool that reflects their
institution’s unique guidance.
For those institutions that are looking for an
efficient and objective way to communicate under
these new guidelines, and provide payment choice
to their customers, this new application may
be just the answer.
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