One of the largest contributors to students' financial stresses comes right from the schools' financial aid offices, Vice President of Media Relations at My Rich Uncle, a student loan company, Karin Pellmann said.
According to Pellmann, the enemy is the preferred lender list. These lists, created by universities, consist of third party Stafford or PLUS loan lenders that financial aid offices emphasize, promote and desire their students to acquire, Pellman said in an e-mail.
Stafford loans are federal loans for students and PLUS loans are federal loans for parents, according to the Federal Student Aid Web site.
Pellmann said the problem with the lists is that a lender's placement often has little to do with student needs and more to do with services that preferred lenders provide to the school. Once loan companies make the list, they gain access to a significant loan market, as most students rely on financial aid offices' recommendations for federal loans, she said. The long-term effect of such a policy is a loss of competition, Pellmann said.
Pellmann also said in her organization's examination of Stafford loan distribution at 27 universities, preferred lenders received 83 percent of the Stafford loans while nonpreferred lenders received only 17 percent.
Presently, AU maintains a preferred lender list but only for PLUS loans. Selena Healey, the associate director of AU's Financial Aid Office, said AU's policy for its preferred lender lists only includes companies that help students.
"Our policy at this time is to only include lenders who benefit our students through a combination of good service and good rates, not only while the student is in school, but also while the student is in repayment," Healey said in an e-mail.
AU documents for PLUS loans make it clear that should students "choose a lender who is not on the ... list, [their] loan will need to be processed manually," and students "should expect delays" under those circumstances. Still, AU does not prohibit students from soliciting loans from lenders off the list.
Mike Evans, a senior in the Kogod School of Business, said he was not pleased to hear of Pellmann's findings.
"I would hate to think [AU Financial Aid] wasn't doing everything it could to help its students," Evans said. "I didn't think twice about these lists before. ... I didn't know there could be a relationship between lenders and the universities that didn't benefit students."
Nick Jonczak, a freshman in the School of International Service, said he hadn't heard of the practice either and said AU should inform students of other options.
"Students have a right to know," Jonczak said. "While I don't believe that AU's financial aid office has done anything malicious to its students, financial aid offices should be more open and more willing to help students cope with the rigors of college financing."
Evans said he believed there was an easy solution to the problem.
"If schools are going to develop preferred lists, they should reach out to students first," Evans said. "But I guess the real issue would be if financial aid offices didn't allow you to take out a loan outside of the preferred lender list."
Though Pellmann said she believed financial aid offices weren't out to harm students, she also said students should be more observant of their financial aid office's practices.
"[While] I don't believe [financial aid offices] are 'taking advantage' [of students], I don't think producing a preferred lender list shows that they 'know best' either," she said in an e-mail. "We have yet to see a financial aid office guarantee that the lenders and loan options it [prefers] provide the best deal."
Healey said in an e-mail that AU Financial Aid is working to make loans more accessible for students. She said Financial Aid has partnered with the Student Government to create materials making the financial aid process more transparent and has also worked with lenders to improve services to students.
Breaking the vault on preferred lenders
AU has several preferred lenders that students can work with to obtain various student loans, according to Selena Healey, AU's associate director of Financial Aid. Below is a list of AU's preferred lenders.
AMS Academic Management Services, Inc., is a member of the Sallie Mae companies and provides tuition payment plans for more than 700 schools nationwide, according to its Web site.
TutitionPay is also a Sallie Mae company and specializes in payment solutions for higher education and private school tuition, working with 2,500 different schools, according to its Web site.
Educaid/Wachovia is the student loan branch of Wachovia Bank that helps students apply for a variety of loan types, including federal PLUS loans, federal Stafford loans and Wachovia educational loans, according to its Web site.
Citibank helps students decide which loans to apply for and walks them through the process, providing information on different types of loans and how to get a co-signer, according to its Web site.
