National Forum on Educational
Loans
College Board Forum
2006
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Idea and Purpose
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Need for a better option for students
and families to finance college
Growing concern about borrowing from
multiple sources
Current system has served us well for
many years but may not serve the
needs of students in the future
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Idea and Purpose
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How did the NFEL come about?
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Event organizers believe that the current
system of educational loans is:
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Confusing
Inefficient
Many believe the current system is broken;
others believe that it should be improved
Presented NASFAA Board with a proposal
for a national forum on educational loans
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Idea and Purpose
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Confusing loan system
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Some require a FAFSA and some do not
Federal loan limits are insufficient
PLUS/Private loans not available to all
School certifies some but not all loans
Repayment start dates vary widely
Often few qualify for advertised benefits
Consolidation can change the rules
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Idea and Purpose
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Confusing loan system
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Private loans have answered a real call for
help, but at a cost
Schools increasingly need time and
expertise to evaluate private loans
Helping students and parents understand
advantages and disadvantages of private
loans or specific private loans is time
consuming
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Idea and Purpose
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Inefficient loan system
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Multiple loans required from multiple
lenders to get required funds at lowest cost
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Federal Stafford
Federal Perkins
Private loan
Students/parents must sort out best option
from among unknown loan sources
Processing and fund delivery methods vary
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Idea and Purpose
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Organizers wondered if aid
administrators could create a better
system
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A more integrated system
A less time consuming system
A more flexible system
An easier to understand system
A Better Option for Families
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The Plan
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Invite participants from a cross-section of
school aid administrators from all sectors to
engage in a dialogue about educational
financing.
Identify speakers to facilitate discussions
Develop a position paper following the forum
that articulates a new plan for educational
loans
Present plan to constituent associations
Work toward implementation
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Speaker Panel – Day 1
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Ken Redd, Director of Research and Policy Analysis,
National Association of Student Financial Aid
Administrators
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Sandy Baum, Economics Professor, Skidmore College
and Senior Policy Analyst, The College Board
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Who is Going to College and Who is Not, Including
Socioeconomic and other Demographic Profiles
What Does College Really Cost and What are Reasonable
Debt Levels
Jackie King, Director, Center for Policy Analysis,
American Council on Education
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Who is Borrowing and How Much, It’s affect on Life Styles
and Pursuit of Advanced Degrees
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Financial Aid Administrators Panel
Tom Babel, Vice President of Student Finance, DeVry
University
Dan Davenport, Director of Admissions and Financial
Aid, University of Idaho
Pat Hurley, Associate Dean of Student Financial Aid,
Glendale Community College
Cathy Thomas, Associate Dean of Admissions and
Financial Aid, University of Southern California
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Facilitated Groups – Day 2
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With the help of a professional
facilitator:
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Participants working in small groups
Group charge
Steps in creating plan
Showcase plans
Identify best ideas from each plan
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Brainstorming and Thinking
Outside the Box
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10 Groups of 8 participants
Valuing members – some analytical
thinkers and some creative thinkers
Awareness of barriers to creative
thinking
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Conformity
Evaluating too quickly
Fear of looking foolish
Unwilling to challenge the obvious
Etc.
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Group Charge
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Describe the ideal long-term financing
program to serve students and parents
seeking higher education
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Framework with 3-4 concepts, philosophies
Addresses all types of schools
Addresses all types of need
Can be implemented and is scalable
Realistic
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Steps in Creating the Plan
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Keep in mind: key points of current
environment of student loans and key points
about future trends
Share ideas and post/record all ideas from
the group
Discuss and evaluate ideas presented
Array ideas according to affinity
Select 3 to 5 of best ideas that are central to
the solution
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The Creative Process
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Each group showcased their plan using a
science fair model.
Plans were summarized in creative
presentation formats depicting the core
elements of the model loan program.
Each group presented their plan and
answered questions.
Participants identified ‘best’ features from
each plan.
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Group #1: EASY
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The EASY plan is designed to create
incentives for students and families to save
for college (and thus limit the need for
borrowing). It also is designed to increase the
amount of loans students who do borrow are
eligible to receive.
The EASY plan has two parts:
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An Education Savings Account
A line of credit
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Group #2: HELP
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HELP is designed to provide students with educational
and planning skills BEFORE they enter higher education,
and to increase and expand access to federal student
loans at rates and terms more favorable to borrowers
and easier to understand for families.
HELP has two major parts:
 First, before entering college, all prospective students
would have to take a high-school level financial
literacy program.
 Second, a new loan program would be created that
allowed students to borrow up to the total cost of
education. The loan subsidy would come in the form
of lower interest rates for higher need students.
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Group #3: It Takes A Nation
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The key elements of the “It Takes a
Nation” plan are:
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Everyone qualifies
Means tested & assignable repayment
Cost of attendance minus other aid.
Tax benefits for employers for workforce
investment
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Group #4: Outcomes – Educational
Loan Trust
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A new funding mechanism.
All loans unsubsidized
Income contingent repayment thru IRS
Principal and interest payments go back
to the Trust
25 year repayment for all, regardless of
actual loan repayment period
Funds collected after loans repaid go to
fund to provide Pell grants.
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Group #5: Ideal Outcomes, a
Public-Private Partnership
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Establish a public-private partnership that shares
some features from both the FEEL and DL programs.
The private funding for loans would come from banks
and other lenders; public funding would be in the
form of interest subsidies to low income (needy)
students. Key elements of the program are:
Funding – private capital into a risk-sharing pool.
A family line of credit.
Interest subsidies for needy students
Simple delivery of funds to students
Income contingent repayment
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Group #6: The FLASH Loan
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The key element of this program is a flash
drive containing all pertinent information
about the student and his/her financial aid
issued before entering higher education for
the first time.
Other elements of the program:
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Combine all existing loan programs into one
Fund loans with public and private sources
Students can borrow up to the cost of attendance
Portability of the flash drive
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Group #7: Lifetime Family
Savings Account (LFSA)
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The LFSA is an account that could be used for
multiple purposes, not just college expenses.
Multiple funding sources. Under this plan,
families and employers could make taxadvantaged contributions into a recipients’
account.
A Variety of Uses. After they reach college
age, children could use the LSFA funds for a
variety of purposes—such as paying
postsecondary costs, buying a home, getting
married, long-term health insurance, etc.
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Group #8: KISS
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Create a portable line of credit that students could
use at any accredited postsecondary institution. The
key elements of the program are:
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The loans would be financed by the government but loan
consolidation would be financed by a secondary market.
The student could borrow up to cost of attendance minus
other aid.
To encourage students to stay in school and complete their
degree programs, interest rates and loan repayment terms
would improve for borrowers for each year of attendance,
such that completers would get the best rates and terms.
Also, to reduce post-college loan repayment burdens, tax
credits would be available to offset the cost of some portion
of repayment. Otherwise, loan consolidation and incomecontingent plans would be made available.
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Group #9: Education Line of
Credit
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This plan includes a financial literacy component and
increased access to college loans.
All students would be required to take some form of
financial literacy training before entering school.
Government database that includes the schools costs’
of attendance and the students’ expected income
after graduation on which repayment is determined.
To help further with loan repayments, the borrowers’
interest rate would be based on their field of study,
recognizing the different incomes and financial
situations of students in certain low-wage
occupations; benefits for making accelerated or ontime loan repayments
Employers would have some tax or other incentives
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for adding a loan repayment benefit plan.
Group #10: CHEF
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The CHEF program would be a flexible,
reliable source of funding that encourages
early preparedness, identifies a role for
private industry to play due to their vested
interest in a well-educated workforce,
promotes important service-based
contributions to society, and maintains a
Federal presence and priority for funding
higher education.
Multiple Funding Sources: family, employer
Collaborative, flexible and easily manageable
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means of repayment.
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Most Supported Ideas
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Comprehensive single loan program
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This concept provides simplicity in
processing and eliminates confusion for
students in repayment
A student account
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Savings program
Line of Credit
Add to account by community service
Tax incentives for contributors
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Most Supported Ideas
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Loan limits increased to total cost of
education minus other aid
Financial literacy programs
Loan repayment programs
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Incentives and loan benefits based on
needs test during repayment
Employer tax benefits for assisting
employees in loan repayment
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Most Supported Ideas
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Not intended to replace grant programs
which should be the major source of
funding for low income students
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Conceptual Model
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One source of funding for a single loan
program
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Could include part of the loan repayment
be directed at parents
Need analysis still used for students but
allows for only student data when
parents refuse to complete the
information
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Conceptual Model
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Funds delivered through the school to
the student
Loan amount up to cost of attendance
minus other aid
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Schools can determine lower borrowing
limits for their students
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Conceptual Model
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Repayment
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Based on financial circumstances during
repayment
Subsidies provided during repayment
rather than during attendance time-period
Payment can be part of income tax process
Tax benefits for others helping with
repayment of loans
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Conceptual Model
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Financial literacy provided by those
administering the program
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Provided prior to attending college
Conclusion
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Current programs fall short of family needs
Must keep higher education accessible and
affordable
Concepts intended to stimulate thinking of new
ideas and solutions
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Next Steps
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Feedback sessions from presentations to
groups
Draft white paper out this fall
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Feedback to refine basic concepts and ideas
Present second draft white paper of the
model program to other constituents:
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Aid Community and other professional postsecondary associations
Presidential Associations
Interested Loan Associations
Congressional Advisory Committee
National Student Associations
Other constituent groups
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Next Steps
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Convene meeting with key stakeholders
to further refine the model
Further develop the model to ensure all
perspectives have been adequately
addressed
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Next Steps
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Present final white paper with new loan
concepts for further action in the
political process
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House and Senate Committees
Committee on Education Funding (CEF)
Federal funding agencies (OMB, CBO, etc)
Encourage support from associations
involved in student financial aid
programs
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Comments, Questions, Other
Ideas
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Please use web site for comments
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https://finaid.msu.edu/forms/NFEL/main.asp
Welcome comments to any of us:
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Rick Shipman
Anna Griswold
Pam Fowler
Dan Davenport
[email protected]
[email protected]
[email protected]
[email protected]
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