Our Smart Choices borrower education newsletter, launched last fall, is now available online on the T.H.E. Today main page. Focused on bringing you the latest borrower education tools and advice, the newsletter features:

Too many students are overwhelmed by their debt after graduation. Our new brochure, Bright Ideas: Gauge Your Debt, can help them avoid this challenging financial situation by:

Are you having difficulty finding useful debt management education that doesn’t also promote a lender’s loan program? That’s what we’ve heard from many schools, and to remedy the situation, T.H.E. has developed “Smart Choices,” a financial literacy series. With “Smart Choices,” you can provide your students with resources for better debt management that are lender-neutral, educational and interactive.

Lender-Neutral

All materials in the “Smart Choices” series have been reviewed to make sure the content is:

• Educational: Strictly for the purpose of giving students practical information about their financial choices so they can make the best decision for their own situation.
• Unbiased: We are not selling T.H.E. or its products, directly or indirectly, in any materials bearing the lender-neutral stamp.
• Safe from scrutiny: This stamp offers a sense of security for you and your staff, that you are not influencing student choices with lender “marketing.”

If you have something you can sell for $5 today, but in a couple of months you will only be able to sell it for $1, what do you do? Easy —- sell as many as you can by whatever means necessary during the next couple months.

Many of the student loan consolidation direct marketers are facing this dilemma. Under the proposals passed by Congress, consolidation loans that currently sell for a 5% premium will probably earn only about a 1% premium if the proposed changes go into effect on October 1, 2007.

Lenders will be rushing to fund as many consolidation loans as possible in the coming months, so your students’ mailboxes are about to be stuffed fuller than ever. But before your students jump at the “Sale Ending September 30th —- apply now” offer, make sure they evaluate if consolidation is right for them.

Hint —- our “Consolidation Mythbusters” brochure is a good place to start.

When the incentives loan lenders offer aren’t clear, many students may turn to lender broker companies for help in evaluating a lender. What most students don’t know is that these lender brokers are getting 5% to 7% premiums from loan lenders when they sell a student loan.

Today, more than ever, financial aid professionals need to be on the lookout for lender brokers that target students without having the actual reward to back up their promises. You need to ask lender brokers how they can reap such premiums and still deliver on the borrowing incentives. If a lender broker says the borrower incentive terms are built into the sales contact, contact the company buying the loan and confirm that the borrower benefits are real.

“Some of these programs just don’t add up,” says T.H.E. CFO Jamie Wolfe, “these companies need to show you the money.”

Smooth Sailing offers students practical ways to organize their money and manage their expenses.

Solid Ground breaks down basic credit concepts and highlights what students need to know about credit scores in easy-to-understand terms.

Blue Skies covers what questions students should ask a lender before they sign for a loan and explains what’s behind the different incentives lenders offer.

Most of you are concerned about direct-to-consumer lending that bypasses certification by the financial aid office. Besides adding to the growing student loan debt, there is a potential tax implication for students that should be addressed.

According to the IRS, interest expenses for student loans are deductible when used for educational expenses, which are defined as expenses that are certified under the cost-of-attendance formulas used by financial aid offices.

Let’s say a student applies for loans through the school channel and covers the cost of attendance but then also arranges for an additional, non-certified, private loan for more than the certified amount. If that student tax-deducts the interest paid on that loan, that student has just unknowingly committed tax fraud.

Of course, the direct-to-consumer lender is protected in these instances. They will send the student a 1098E IRS form, reporting the amount of student loan interest paid with the famous fine print at the bottom: “This amount may or may not be deductible, consult your tax advisor.”

While today’s students certainly see the value loans have when it comes to getting their degree, many students don’t realize just how valuable their loans are to other lenders in the market. But lenders can reap a huge profit on a student loan if they can get the student to consolidate their loans with them. It’s why shady marketing tactics exist; it’s why many lenders are so eager to shower students with a myriad of letters and sometimes even offer free lunches.

For example, if a student has $100,000 in T.H.E. Stafford loan debt that they will repay over a 25-year term, the $100,000 loan will generate about $44,000 of profit. At T.H.E., this amount is going to be given back to the student in the form of our T.H.E. Bonus. But if a telemarketer can convince a student to fill out a consolidation application for a loan with on-time benefits (despite the fact that consolidation loans are less valuable because of the additional fees levied on consolidation loans by the Department of Education), the telemarketing firm can sell that loan for $7,000 or more in the student loan secondary market. The student, unfortunately, probably won’t see any of that cash: as you may know, only 5% to 15% of other lenders’ borrowers ever receive any bonus (more than 95% of T.H.E. borrowers receive our T.H.E. Bonus).

Students need to be smart about their loans and schools need to help students realize the value their loans have. They also need to know that consolidation isn’t always the right solution. Don’t let your students make a $44,000 mistake, even if they get a free pizza lunch one day.

Graduation is just around the corner and many of your students are probably coming to you with questions about repayment options, consolidation and other loan issues. Remember, the Electronic Loan Counselor (ELC), T.H.E.’s new online tool, can help students figure out their repayment strategies, organize their loan information and save them money once they enter repayment.

Using the tool is easy:

Students can go to our website at www.theloanprogram.org and click on the ELC link. We already have their T.H.E. loan information pre-populated, so all they have to do is give us some of their non-T.H.E. loan information and the ELC shows them a variety of repayment options tailored to each student.

Students can even select and implement a strategy that’s right for them right on the site.

Please call our Debt Management team with any questions you or your students may have about ELC at 1-866-562-6672. We will be happy to provide you with more information and help students use this new online tool.

Last month we introduced you to T.H.E.’s Electronic Loan Counselor, or ELC for short, an online tool that guides borrowers to personalized repayment options. The ELC has since undergone a few updates to make it easier for your student-borrowers to get the practical guidance they need.

Here’s what’s new:

• Enhanced “take action” page allows users to save, print, e-mail and even implement the repayment strategy they choose from the ELC’s recommendations. As of April 20, all features will be clickable—-meaning users don’t have to print, fax or send any paper. They can do it all online.
• Personalized advice tailored to student’s goals makes the ELC’s guidance even more meaningful for each individual borrower. Your students can tell the ELC whether their goal is to lower payments or reduce interest expense—-and the system comes back with recommendations for each loan to meet these goals. If the borrower changes the goal, the messaging and options change along with it.
• Comprehensive contact page makes it easier for students to get help—-from a real loan counselor here at T.H.E. Along with our phone numbers, this page features an e-mail option, which captures the user’s recommendations from the ELC and sends it to a T.H.E. representative, along with their e-mail and contact info. That way, our counselors can see exactly what the borrower has seen, making the transition to live help as seamless as possible for the borrower.

We invite you to spend some time with the new and improved ELC, which is set to get one more set of enhancements in the next few weeks. We’ll update you with any new features as soon as they’re available. Find the ELC and other debt management resources online at theloanprogram.org.

It’s a busy time of year for FAOs and an important transition period for many students. We can give you a hand —- and give your students a little extra time and attention.

Erin Adams and Joe Pruden, our corporate presenters, are heading out to schools across the country to help students make sense of this season’s hot topics, consolidation and repayment, which are covered extensively in both our consolidation and exit presentations.

We welcome the chance to present to students on your behalf; contact us to schedule a visit. Or if you prefer to meet with students directly to complete an exit, you can still call on T.H.E. to deliver “Organizing Your Loans at Graduation”, a presentation that introduces T.H.E.’s Electronic Loan Counselor, an online guide to planning for repayment, set to debut in March.

And you’re more than welcome to use our ready-made education materials for exit sessions:

• Exit Handbook
• Consolidation Mythbusters
• Repayment Ability Chart
• Create Your Repayment Strategy
• Economic Hardship Deferment Forms
• Exit Interview Forms

Call or e-mail Joe, Erin or your key contact to schedule a visit for your campus.

Students may not be interested in the recent changes in student loans and consolidation, but some of these changes directly affect their wallet — and what they don’t know could cost them thousands of dollars.

Last month, we stressed the importance of educating your students about deceptive consolidation marketing. As a follow-up to that, our president, Taige Thornton, crafted a letter to our student borrowers, explaining the problems they might face, the tactics they should be wary of, and what they can do to avoid a potentially costly mistake.

We invite you to share the letter with your students, who may need to hear this message more than once to understand how this affects them, and what’s at stake.

T.H.E.’s educational blog for students, the Ramen Report, has been up and running since October, and student borrowers have been helping us add flavor from day one. Lucky for us, it seems that your students are more than willing to chime in with their ideas and experiences, on everything from interest capitalization to holiday gift-giving on a budget.

To thank them for their contributions, we’ve rewarded one lucky commenter every month with a $100 Visa gift card. Think your students might be interested? Please have them stop by and share their opinions. In addition to filling up on helpful loan and debt news, they just might walk away with some extra money in their pockets.

As the article above shows, your students are actively being targeted by lenders that may not have their best interests at heart. And some lenders are bold enough to simply show up on your campus in an effort to reach their audience.

What’s an FAO to do? Take the lead to keep these aggressive marketers at bay — and your students safe from predatory lenders.

Here’s how one of our advisory board members handled this growing problem. Michelle Byers of Eastern Virginia Medical School communicated to all stakeholders (the dean, the alumni, student associations, etc.) that the financial aid office has students’ best interests in mind and, as such, has a broader perspective with which to evaluate lender offerings. Byers’ office required approval for anyone coming in to speak to students.

The most recent “Dear Colleague” letter stated: “the consolidating lender is responsible for ensuring that they follow program guidelines in consolidating loans.” Unfortunately, that’s easier said than done. We’ve been hearing from students that some lenders are not following the rules: some are consolidating loans that are not to be included per the promissory note that the student signed, some are also consolidating a single consolidation loan. The worst offenders are those lenders consolidating loans for students who don’t realize that they signed a consolidation application promissory note with another lender.

What does this mean for students?