• Front page
• Receive this content on your RSS reader

This Speakout has not been edited.

By Lindsey Luebchow

If you are a parent struggling to put your child through college, or a student amassing large amounts of debt on your way to a college degree, you must have been shocked by recent scandals in the student loan industry. Some financial aid officials, whom students and families trusted as impartial advisors, weren't acting in the best interest of students. Instead, they were promoting student loan companies that provided them or their institutions with kickbacks and gifts, not those that offered the best loan deal.

But there are some financial aid administrators-notably those at Colorado State University-who have been proactively working to help students reduce the cost of their college loan debt. They have targeted a less scandalous, but more substantial source of high cost college debt explosion. Their efforts should be lauded and replicated at colleges and universities nationwide.

The worst type of skyrocketing college debt is in the form of non-federally guaranteed, private loans. Because tuition has risen so quickly in recent years, students have been forced to take out private loans on top of their federal loans. But these private loans, the fastest growing form of student debt, can carry upfront fees equal to as much as 10 percent of principal borrowed and interest rates that can reach in excess of 18 percent per year. In contrast, federal student loans have an annual fixed interest rate of 6.8 percent.

No student should take out a private loan before they exhaust their federal loan eligibility. And yet, one out of five students who holds private loans and is eligible for federal loans has not exhausted his or her eligibility. Why?

The private loan explosion could be the result of misinformation or a lack of information about how the student loan system operates and the different types of loans available (federal vs. private). It could be because companies use deceptive advertising to market private loan products in a way that steers students away from the low-cost federal alternative. Or it could also be because students and families are intimidated or confused by the five-page, 101 question long Free Application for Federal Student Aid (FAFSA).

Congress is working to fix some of the sources of unnecessary private loan borrowing. Soon, the FAFSA will be reduced to two pages and many of the complicated financial questions will be filled in by the Internal Revenue Service. And the Senate Banking Committee recently approved a bill that would require lenders to inform private loan applicants of the availability of lower cost federal student loans.

These are good steps, particularly FAFSA simplification. But bank-supplied disclosure warnings about private loans aren't going to impact many students. Disclosure statements need to be complemented by the front-line, one-on-one personal work of financial aid offices.

College financial aid administrators have an ethical responsibility to protect students from unnecessarily assuming unmanageable levels of high-cost debt. At the New America Foundation, we were pleased to find that Colorado State has been taking that responsibility very seriously for years now. It proactively counsels students to make sure that they are fully informed about their loan options. Every financial aid office in the country should do the same.

To be assumed and obligated, most private loans have to be "certified" by the borrower's college. At Colorado State, when private loan applications come in for certification, the financial aid office flags students who either have not filled out a FAFSA or already have federal loans, but who still are eligible to borrow more in low cost, federal student loans.. The office then calls these students and counsels them on the availability of federal loans.

Colorado State's Associate Director of Fiscal Operations, Carla William, estimates that approximately 50 percent of students who receive phone calls are persuaded to exhaust their federal loan eligibility before taking out private loans. As a result, the average Colorado State student contacted saves hundreds of dollars over the life of their college loan debt.

It's a simple idea: make sure students have filled out the FAFSA and are exhausting their federal loan eligibility before certifying any private loans. If Colorado State with almost 24,000 students can do it, so can other large public and private universities. And replicating the efforts of Colorado State's aid administrators would go a long way towards restoring the profession's good name.

Lindsey Luebchow is a program associate with the New America Foundation, a nonprofit public policy institute in Washington, D.C., and contributor to its policy blog HigherEdWatch.Org.