Commentary - Paul Wrubel: When it comes to student loans, it’s buyer beware

Certain colleges have been outsourcing some of their financial aid telephone assistance to employees of such “preferred lenders.”

It turns out that students or parents may ask questions about financial aid in general without knowing they are talking to a person who actually works for the lender — a recipe for bad advice. There is no way for the caller to know that the person on the other end of the line is not an employee of the college. There’s a full lexicon of adjectives one can apply to this shady practice. Take your pick.

To many of us, this is yet another sad example of doubt being cast on a trusted segment of our society. It follows many levels of government, formerly respected corporate entities, and a host of others in a rapidly growing list. The problem is that whenever any segment of our national infrastructure doesn’t pass the “smell test,” the odor permeates the air for all associated with that sector.

In the case of our colleges and universities, long respected as bastions of ethical conduct, honest dealings and open debate, the bad odor is particularly unsettling.

For many, the next question isn’t how we deal with this issue, but what else colleges and universities are doing that we don’t know about. It’s the possibility of the latter that is most disturbing to those of us who, over the years, have been unconditional champions of our system of higher education.

The sad spin-off is that many heretofore allies of college education like me are now painted as adversaries while the issue plods through the legal system. What could be a costly and convoluted legal battle could probably be diffused through a ray of sunlight that fully discloses the practices of preferred lenders — and any payments that result from the arrangement. Then the public can decide for themselves which colleges — and which lenders — appear to be playing by the rules.

From my perspective, I admire the agencies involved in this unhappy confrontation, particularly National Association of Student Financial Aid Administrators (www.nasfaa.org), the professional umbrella organization that nurtures and mentors the college financial aid community nationwide. We also applaud New York Attorney General Andrew Cuomo, who is seeking to find out if any laws have been broken at the expense of the consumer.

These are good people doing their jobs as guardians of the public interest. But that laudable motivation can create conflict in many instances when the public interest is interpreted from differing vantage points.

The next phase of the “preferred lender” investigation involves families taking control of their financial aid packages and not leaving it all up to the schools. Right now, students are weighing their financial aid options and as their trust in the schools continues to waver, they need to know which unbiased and transparent resources they can use to compare student loans. The deeper the financial aid investigation goes, the more apparent it becomes that families need to understand their “rights” when it comes to Financial Aid.

Parents and students alike would do well to search out unbiased resources that aggregate private lenders and array them visually, side-by-side, so consumers can compare loans and choose the one that best addresses their needs. Student and parent loan shopping should happen in the broad daylight with completely transparent loan comparison tools.

The process is not unlike an “Orbitz” tool that arrays airline flights and fares so the consumer can pick the carrier that works best. We are drawn to any tool that simply puts the facts in front of people and lets them make decisions on their own.

Paul Wrubel, Ph.D., founder of the Internet-based TuitionCoach, has provided college funding advice to thousands of families in 20 years of private practice.