Scholarship News

NASFAA Questions Student Lender Auctions


October 26, 2007
by Scholarships.com Staff
A recent evaluation released by NASFAA, an organization representing the interests of financial aid professionals, brings into question the effectiveness of a new student lender auction system. The recently-passed College Cost Reduction and Access Act created, among other things, a new auction system wherein student lenders would bid on exclusive market rights in each state. While the law concentrated on cuts in student lender subsidies and increases in free student grants, the auction system aimed at lowering taxpayer burdens was also enacted.

A recent evaluation released by NASFAA, an organization representing the interests of financial aid professionals, brings into question the effectiveness of a new student lender auction system. The recently-passed College Cost Reduction and Access Act created, among other things, a new auction system wherein student lenders would bid on exclusive market rights in each state. While the law concentrated on cuts in student lender subsidies and increases in free student grants, the auction system aimed at lowering taxpayer burdens was also enacted.

ADVERTISEMENT

When the system goes into effect in 2009, lenders interested in participating in the government's subsidized FFEL Plan would have to compete for the lowest subsidies. Those who won the bid would get exclusive state lender rights. Only lenders who would choose to take part in the government’s FFEL program would be effected, and only rights to PLUS loans would be auctioned.

However, the NASFAA report questions whether an auction would really be as effective as it initially seems.The statement suggested that the auction program was based on the rash assumption that lenders who bid for loan rights would be willing to greatly lower subsidy expectations, and that taxpayers would really benefit from lower subsidies. This assumption, based on the report, may prove to be faulty. State competition could be lower than expected, and some states could problematically benefit more than others. After a few years, the competition is likely to decrease altogether, and lenders may simply choose to opt out of the program.

Doubt was also cast upon the assumption that student borrowers would not be affected by the auction system. Based on the report, it is more likely that lenders will get rid of certain student benefits once they have exclusive rights to a state. Borrower services that could be affected include default prevention, financial literacy and electronic processing. The report disputes the claim that very few students are eligible for benefits. Instead, it suggests that most students qualify for at least some helpful services or benefits.

How an auction would in effect change the financial aid system and affect taxpayers remains to be seen. However, a "Bill Gates is about to take over the world" scenario is unlikely. First of all, a total overhaul is not going to occur; PLUS loans will be used to test out the system. Based on the results, a general idea of what could happen in such situations should be obtained. Secondly, the auction would repeat after two years, and it’s unlikely that lenders will get comfy enough to cause a ruckus. Because two lenders will be chosen per state, some competition is likely to keep them in line. Let us also remember that PLUS loans are not the only loans on the planet. If FFEL PLUS loans become too pricy, students could look to competing loans and lenders. FFEL program winners will still have a reputation to upkeep.

Ultimately, the government has the last word on this one. We'll see if that’s a good thing.

College is expensive. Scholarships.com has done the work for you. Pay for your college education with free college scholarship money. Get matched to college scholarships instantly and start applying today by conducting a free college scholarship search at Scholarships.com.

ADVERTISEMENT

Discuss

Share your thoughts and perhaps thousands of students will benefit from your unique insight on the subject!



If you can read this, don't touch the following fields


 
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
We want to wish all of our Jewish students a Happy Hanukkah! May you enjoy lots of family time and laughter this holiday season. During your final nights of Hanukkah, we hope you get your fill of delicious latkes, dreidel games, gift opening and great memories.

Jewish Student Scholarship Spotlight

December 3, 2021 2:36 PM
by Liz Montenegro
We want to wish all of our Jewish students a Happy Hanukkah! May you enjoy lots of family time and laughter this holiday season. During your final nights of Hanukkah, we hope you get your fill of
Adam Sandler undoubtedly paved the way in bringing the celebration of Hanukkah to the forefront of pop culture with his wildly famous “Hanukkah” song debut in 1994 on Saturday Night Live (did you know there is now a “Hanukkah” Part 4?). In the song, Sandler draws attention to famous Jews in mainstream culture. You may be wondering which celebrities are observing Hanukkah this year. Before we dive into Hollywood, let’s answer the question of why these “eight CRAZY nights” are celebrated by millions of Jewish people across the globe.

Hanukkah 2021: Celebrities You Didn’t Know Were Jewish

December 2, 2021 3:20 PM
by Liz Montenegro
Adam Sandler undoubtedly paved the way in bringing the celebration of Hanukkah to the forefront of pop culture with his wildly famous “Hanukkah” song debut in 1994 on Saturday Night Live (did you
Starting college is a very exciting time. Dorm life is full of new experiences, and many scholarships are available that can help cover the cost of your room and board. Like everything else, there are pros and cons to living in a college dorm.

College Dorms: Should You Give On-Campus Living a Try?

November 30, 2021 4:02 PM
by Liz Montenegro
Starting college is a very exciting time. Dorm life is full of new experiences, and many scholarships are available that can help cover the cost of your room and board. Like everything else, there
When asked the question, “Who was your favorite teacher or coach growing up?” For most anyone, an image of that educator’s face immediately pops up in their mind. What was it about that person that made them stand out? Maybe it was the way they encouraged or inspired you as no others had previously done. Perhaps they saw something in you that helped you to gain the confidence to achieve a goal that had once seemed unattainable. The truth is, there are as many answers to this question as there are people in this world. One common denominator unites them: it all started with the foundation of mutual respect and trust this individual established with you.

This Week is American Education Week 2021

November 18, 2021 1:54 PM
by Liz Montenegro
When asked the question, “Who was your favorite teacher or coach growing up?” For most anyone, an image of that educator’s face immediately pops up in their mind. What was it about that person that
Since the beginning of our nation, Native Americans and Indigenous communities have been a powerful influence on modern U.S. society. Although art, beadwork, music and dancing may first come to mind when you think of Native American contributions to today’s culture, did you know that many of the foods we consider to be staples, such as potatoes, wild rice, beans, corn, and peanuts were first grown and harvested by Native Americans? Not only that, but Native American groups also taught European settlers some of their farming techniques to help them survive and live off of the land, many of those practices are still used today. American Indians were also the inventors of goods we rely on every day, like topical pain relievers, baby bottles, and even rubber products.

In November, We Celebrate Native American Heritage Month

November 12, 2021 4:07 PM
by Liz Montenegro
Since the beginning of our nation, Native Americans and Indigenous communities have been a powerful influence on modern U.S. society. Although art, beadwork, music and dancing may first come to mind
Are you a high school student looking for opportunities to help others around you and set yourself apart on college applications? With the holiday season in full swing, this is the perfect time to start your search for volunteering opportunities in your area. Along with strengthening ties to your community, serving as a volunteer demonstrates to colleges that you have given your time and energy to help those in need, and that you have applied the knowledge you’ve gained in your studies to real-world settings. Many college applications and scholarships have a minimum number of community service hours that their applicants must complete in order to be eligible. But just because it is a requirement, doesn’t mean it cannot also be a meaningful experience.

Community Service Benefits Everyone

November 8, 2021 3:12 PM
by Liz Montenegro
Are you a high school student looking for opportunities to help others around you and set yourself apart on college applications? With the holiday season in full swing, this is the perfect time to
 With Veteran’s Day quickly approaching, what better way to honor our U.S. military members and their families than to shine a spotlight on the scholarships and grants available to them? Military life often presents unique challenges that can be overwhelming for the entire family. Lengthy deployments and frequent changes of station are just a few obstacles military families face, but their strength and perseverance through these hardships is truly remarkable. As a way to honor their sacrifices, Scholarships.com offers a wide variety of grants and scholarships to help offset the cost of college as they pursue their educational goals.

Scholarships for Military Members and Dependents

October 29, 2021 3:24 PM
by Liz Montenegro
With Veteran’s Day quickly approaching, what better way to honor our U.S. military members and their families than to shine a spotlight on the scholarships and grants available to them? Military
FAFSA is an acronym. It stands for Free Application for Federal Student Aid. Please take note that the first word in the acronym is Free. You do not need to pay to fill out the FAFSA but there are certainly websites out there that will charge you for their assistance. If you are asked for a credit card at any point in the process, you are at one of these sites. If you do not want to pay to complete the FAFSA, be sure to apply at https://studentaid.gov/h/apply-for-aid/fafsa. The FAFSA must be completed by you and your family each year if you wish to be considered for need-based grants from the college or university you are or will be attending as well as subsidized student loans.

What is the FAFSA?

October 8, 2021 2:52 PM
by Scholarships.com Staff
FAFSA is an acronym. It stands for "Free Application for Federal Student Aid". Please take note that the first word in the acronym is "Free". You do not need to pay to fill out the FAFSA but there
A study abroad program can be the beginning of the most exciting chapter of your college experience. Often, the travel, housing, credits and even food are included in the price of the program you choose. However, this is no reason not to look for more financial opportunities!

Want to Study Abroad? Find Scholarships

August 31, 2021 12:30 PM
by Scholarships.com Staff
A study abroad program can be the beginning of the most exciting chapter of your college experience. Often, the travel, housing, credits and even food are included in the price of the program you
As you get ready for this next big step in your life, this last year at home can feel like the longest and the shortest you ever had! While you prepare to select a college and research scholarships and financial aid, don’t forget to spend some quality time with your friends and family. While movies, even when based on a true story, are always a little bit fantastic, they are also works of art that share experiences among their viewers.

Movie Night! College Classics

August 19, 2021 12:22 PM
by Scholarships.com Staff
As you get ready for this next big step in your life, this last year at home can feel like the longest and the shortest you ever had! While you prepare to select a college and research scholarships