Creating Consistency in Educational Finance: A Training Curriculum
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Module 3: Campus Administrators
Role of schools, lenders, servicers, and guarantors in loan management
- Role of the lender
- Role of the servicer
- Role of the guaranty agency
- Role of the campus financial aid office
This section presents an overview of the roles and responsibilities of each of the players in the student loan process. It is important that campus administrators understand when and how the institution and other players interact with students during each of the phases of the loan process. This knowledge will allow campus administrators to maximize their communications with students by reinforcing the messages about proper management of educational debts that students receive from the multiple players.
Role of the lender
The lender (bank, credit union, etc.) provides the capital for the student loan. Generally, students come into frequent contact with lenders. During the initial phase of the loan, students receive contact information from the lender and lenders collect information about the student, which is important to ensure successful communication between the lender and student throughout the remaining phases of the loan process. Also, before the student enters repayment, and if the lender sells the student's loan, lenders will inform students about the new holder and servicer of the loan. This information will help avoid confusion for students once the loan enters repayment.
When applying for a student loan through the Federal Family Education Loan Program (FFEL), students have a choice in lenders. To gain exposure to students, lenders generally employ different strategies to market their services on campus. The campus financial aid offices typically keep a list of "preferred" lenders that have a working relationship with the campus. Campus administrators should become familiar with the preferred lenders to ensure that students receive consistent information and guidance on selecting a lender.
Lenders and financial aid administrators are generally in close contact to address issues that may arise during the processing of student loans. Campus administrators outside the financial aid office are encouraged to coordinate with the financial aid office any contact with lenders to maximize the relationship between lenders and the institution.
Role of the servicer
A servicer is the entity that bills the student for payment and posts payments to the student's account, on behalf of the lender or loan holder. Some lenders service their own loan portfolio, so the servicer is not necessarily a different entity from the lender. In addition, servicers perform collection due diligence on delinquent accounts and other activities as required by federal regulations.
Throughout the life of the loan, the loan holder maintains contact with the student. Typically, lenders first notify students about who will service their loan at the time that the loan is originated, and then in some cases, periodically thereafter. Because college students move frequently during their college years, students sometimes do not get all correspondence and may lose touch with their loan servicer. In the event that students need to contact their servicer and are not sure where to call, they can either contact the financial aid office to verify this information, or they can go online at www.nslds.ed.gov to receive their own login ID to locate this information themselves.
Additionally, most servicers offer online account access to students and financial aid offices. This feature allows schools to view and check student account information, and it allows students to receive information at any time of the day or night. Students can also go online to find information about alternate student loan repayment options such as forbearances and deferments.
Role of the guaranty agency
The primary role of the guaranty agency is to administer the Federal Family Education Loan Program. The guaranty agency essentially guarantees student loans, enabling students to receive a loan under their name without a credit check. Without the existence of a guaranty agency, the student would have to rely on high-interest, private loans which require a credit history or a cosigner.
Guaranty agencies also provide financial aid and college awareness information to students and families. For lenders, schools and servicers, the guaranty agency provides loan management products, services and training. Most importantly, the guaranty agency plays a critical role in preventing student loan defaults by providing default aversion assistance to lenders. In fulfilling this role, guaranty agencies reinforce the counseling and guidance that campus administrators, lenders, and servicers provide to students.
Role of the campus financial aid office
In most cases, the financial aid office is the student's first contact when applying for student loans. While in college, students learn to rely on the advice of financial aid administrators to assist them and guide them in the student loan application process. Even after graduating from college, students generally contact the financial aid office before they contact the lender, servicer, or guaranty agency with questions regarding their student loans. Even students who do not graduate or who otherwise withdraw from school tend to contact the school when inquiring about their student loan.
Campus administrators in and outside the financial aid office are encouraged to educate students about the roles that each entity (lender, servicer, guaranty agency) plays in the student loan management process. Informing students about each entity's roles maximizes the student's ability to be in contact with the organization that can provide the most appropriate guidance and assistance in properly managing their student loan debt.
In addition, although the financial aid office is responsible for processing financial aid for students, other offices on campus should stay abreast of changes in policies and legislation affecting student financial aid. For instance, adjustments to loan limits at the federal level can have a direct impact on whether students can keep up with increasing college costs and thus continue their studies. To help students succeed in managing their educational debt while in school and once they leave campus, campus administrators should counsel students about proper debt management.