New rules for student loans
US Secretary of Education Margaret Spellings announced final regulations for student loans in response to universities receiving kickbacks from lender institutions.
The new rules, which Spellings announced last Thursday, aim to increase transparency between loan companies and universities. They will go into effect in July 2008.
The new stipulations prohibit universities from receiving gifts from lender institutions and require universities to include no fewer than three lenders on preferred lender lists. Additionally, universities must disclose what criteria they used to select those three companies.
At the Student Government Town Hall meeting last night, University of Miami President Donna E. Shalala said that UM had already ended its single loan recommendation practice.
“We didn’t break the law before, but everyone looking at [our policy] decided there should be more choices for students,” Shalala said. She also added that the university decided to change its single lender recommendation policy “months before” the new rules were announced.
Earlier this year the Department of Education sent letters to hundreds of schools asking them to describe their relationship with its lender institution. The letters were addressed to schools that used a single loan company for over 80 percent of student loans. Sallie Mae issued at least 96 percent of loans at the University of Miami in 2006 according to Student Marketmeasure, a company that compiles federal aid data.
Margot Winick, executive director of Media Relations, said the university declines to confirm whether they received a letter.
Spellings also announced new rules for Academic Competitiveness (AC) grants, which clarify how universities should account for Advanced Placement, International Baccalaureate and dual enrollment credits.
Colleges cut loans as tuition source
By Alissa M D’Gama
Harvard Crimson (Harvard)
(U-WIRE) CAMBRIDGE, Mass. – As the stream of colleges that have cut or eliminated loans as a source of funding continues, the question follows: will Harvard follow suit?
Williams College announced last Thursday that it will drop all loans from financial aid packages and meet need solely with grants, joining a group that includes Princeton University, Davidson College, and Amherst College, according to insidehighered.com.
One day later, Wesleyan College announced that it will curb its issuance of loans, moving all students of families with incomes below $40,000 to grant-only packages and reducing the size of loans in aid packages to families with incomes higher than that number.
Currently, Harvard College is not amongst the group that has done away with loans. The College meets demonstrated financial need through a combination of loans, work-study, and grants. According to the Financial Aid Web site, about half of Harvard undergraduates graduate with some loan debt, typically between $5,000 and $10,000.
Sally C. Donahue, director of financial aid at the College, wrote in an e-mail that “The median graduating debt for the Class of 2007 was $6,750, with roughly 750 students having borrowed at some point during their Harvard career.” In contrast, said Donahue, 935 members of the Class of 1997 borrowed, graduating with a median debt of $16,500.
She also said that since students can meet the expected personal contribution portions of their aid packages through work, outside scholarships or loans, many are able to graduate debt-free.
“Some recent research suggests that even modest loans affect career choice. It will be nice not to worry about that anymore,” said Morton O. Schapiro, president of Williams College.