It’s normal to approach online student loans with trepidation. Getting financial aid for an online degree program is tricky, and recent college student loan scams and scandals have made many adult and online students even more nervous.
In March 2007, New York Attorney General Andrew Cuomo began investigating whether online education financial aid officers were benefiting by recommending certain student loan programs to learners in exchange for kickbacks, discounts and other preferential treatment. Cuomo’s investigations prompted the resignations of admissions officers at several prominent schools.
Much has changed since then—new codes of conduct have sprung up and new laws now regulate the college loan industry. Student loan scams and fraud are less prevalent than they used to be. These days, you can, for the most part, trust the advice provided by your online college financial aid officer. And what’s more, many experts urge you to trust your aid officer because she or he can help protect you from other, less scrupulous lenders.
Online College Financial Aid & Student Loan Officers on Your Side – Mostly
“The scandal—or ‘the disruption’—was really blown out of proportion,” says Patrick Kandianis of Simple Tuition, an online student loan comparison company. “Ninety-nine percent of the financial aid folks out there followed a general business path that was designed to do right by students.”
Haley Chitty, a spokesperson for the National Association of Student Financial Aid Administrators (NASFAA), agrees. He says that at least one of the practices that came under fire during Cuomo’s investigations—in which financial aid offices put lenders on “preferred lender” lists or promised them higher volumes of students in exchange for better terms for students—was done with the goal of getting better deals for students. “That got taken way out of context,” he says.
Still, the “disruption”—to use Kandianis’s term—did change how financial aid officers do business. “It cleared the air and set a base guideline on how to do business going forward which really didn’t exist previously; it was really the Wild Wild West,” says Kandianis.
Online School Financial Aid Ethics
Many schools and states—New York’s Cuomo kicked off the practice—now require online schools which offer financial aid to abide by codes of conduct. The newly authorized Higher Education Act contains its own federal code of conduct, provisions that schools must follow if they participate in federal loan programs.
NASFAA, too, requires its members to abide by a code of conduct. “Before, there was a bit of unclarity. Now, what’s permissible and what’s not is cut in stone,” says NASFAA’s Chitty. Financial aid officers can help protect students from unscrupulous lenders, says Chitty. However, one negative side effect of the investigations in 2007 is that some financial aid officers became unwilling to steer students to safe options. “College students, especially low income students who don’t have a lot of history with financing and lending, can be left in the lurch.”
On the plus side, financial aid advisors who are reticent to steer online students directly to lenders are picking up the slack by offering more financial education. “There’s more emphasis on educating students about lending so they can make a choice for themselves,” says Chitty. But choice, says Chitty, is not exactly the catchword of the moment. Sinking credit markets and new regulations are crushing student options. Chitty says that many students are feeling lucky this year to find lenders with sufficient funds.
The preferred lender lists that caused so much trouble last year are falling by the wayside, he says, because aid offices don’t want to shoulder the administrative burdens necessary to maintain such lists. Also, lender profits have been cut so deeply that lenders can no longer offer students interest-rate discounts and other benefits.
Steps to Protect Yourself – Online Student Loan Scams
Where choices are still on the table, you can protect yourself best—both from unscrupulous lenders and conflicts of interest—by taking the following steps:
- Pick the right online univeresity. A school that’s eager to enroll you is more likely to reach deep into its coffers to put together the financial aid you need. Remember, not all online schools will offer you the same financial aid package or terms. Dare to compare.
- Ask to see the code of conduct. If you’re worried about the financial aid officer at your online school, ask to see the school, state and/or federal code of conduct that governs his or her behavior.
- Compare online colleges carefully. In the end, you choose the loan. Carefully compare interest rates, terms and benefits. Not all student loans are equal. More importantly, no two colleges online charge the same amount for the same degree. In fact, one may charge up to three times more than another for the very same degree. You may not even need a student loan if you choose a less expensive online school up front.
- Consult trustworthy resources. Use reputable sources to confirm or supplement information given to you by your financial aid officer. When in doubt, ask for help from a state non-profit education agency, listed on the Department of Education’s List of State Higher Education Agencies.
- Never blindly trust any college official. Some online universities, especially those that are run for a profit, may pressure you to take out loans in an effort to hasten your enrollment. The recommended loan may be a solid student loan, but that still doesn’t mean you should borrow or rack up endless debt to attend college online. Another online university might offer you a better aid package or a more affordable college degree that comes with a much lower sticker price up front.
Online Student Loans Resources