Shift in student loans increases even more risk to lenders

Article Abstract:

The enactment of the Omnibus Budget Reconciliation Act of 1993 has resulted in student loan providers competing with the federal government, which launched its Federal Ford Direct Student Loan Program. Under this scheme, the federal government would directly give students the loans they need in an attempt to reduce the involvement of the private sector in student lending. In addition, the government would also handle the administration of the originations, collections servicing of these loans via multiple contractors. Given the imploding margins, stiffer competition and a small pool from which loans could be generated, lenders are rethinking their strategies. The appropriate approach may be to use models and processes usually used in other consumer fields. Routine champion/challenger processing strategies are examples of these recommendable tools.

Colleges, Universities, and Professional Schools, Colleges and universities, Student Loans & Scholarships, Student financial aid, Student aid

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The continuing indebtedness of our students ... how deep can they get in debt?

Article Abstract:

College students are becoming more dependent on student loans to finance their education, resulting in an increasing number of students who are deeply in debt. In FY 1990, the cumulative value of outstanding federal student loans was $7.8 billion, and default costs were $2 billion. The student loan industry is taking steps to reduce student indebtedness. The restrictions for the Stafford Loan Program and Supplemental Loan for Students Program implemented in 1990 included delaying the first cash disbursement loans until 30 days after the first day of classes so that students would not drop out after receiving their disbursement, eliminating schools with high default rates from the student loan program, and allowing schools to decide which students would receive loans.

Finance, Cover Story, Students, Debt, Credit management

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Student loans - what do they mean?

Article Abstract:

Credit grantors of student loan funds must recognize that not all students find good jobs and can easily repay loans, and it may be necessary to take steps to see that borrowers do not become over-indebted. College tuition has increased at twice the rate of inflation. Many students cannot refuse student loans, but are unable to afford payments following graduation. The steps credit grantors should take include reassessing their easy extension of credit to college students; implementing a more detailed check of loan applicants' credit history; and acknowledging that graduates do not always find high-paying jobs.

College costs, Higher education costs

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