Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, April 16, 1990 TAG: 9004160314
SECTION: VIRGINIA PAGE: B2 EDITION: EVENING
SOURCE: Associated Press
DATELINE: LENGTH: Medium
The CollegeCredit program will offer an array of services, including organizing loan packages for students, lending them money and counseling them on debt management.
But CollegeCredit would cut the banking industry out of its traditional role as lenders. Lending would be done from a $50 million trust supplied by the Teachers Insurance Annuity Association-College Retirement Equities Fund. The retirement fund for teachers and professors has $39 billion in assets.
"It's more than sour grapes because it really hurts the rest of the program," said Fritz Elmendorf, a spokesman for the 900-member Consumer Bankers Association in Arlington.
The association has begun an aggressive campaign to lobby Congress to block CollegeCredit.
"The worst case is that the banks will just be left with higher-default loans, and they'll just get out of the business. Ultimately, a lot of people would lose access to higher education, and it would be students with higher default risk," Elmendorf said.
Supporters say the program organized by the New York-based College Board will reduce confusion and the tangle of paperwork for students and college financial aid administrators.
About 50,000 students borrow $125 million to $150 million each year in Virginia, according to the State Education Assistance Authority. Most of that money comes from federally guaranteed Stafford Student Loans, named after former Vermont Sen. Robert Stafford, which now carry an interest rate of about 8 percent.
CollegeCredit also will focus primarily on the Stafford loan program and will charge roughly the same amount of interest, said W. Steve Stock, Virginia Wesleyan College's vice president for admission and financial aid.
Kathleen Brouder, a spokeswoman for the College Board, said CollegeCredit will be open to students or applicants at any two- or four-year accredited college.
The program will help arrange a package including Stafford and, possibly, private loans. The College Board will process the loan applications and offer students counseling on debt management.
"It's something that really is pretty revolutionary," Stock said. He predicted that CollegeCredit eventually will take over most of the country's $11 billion-a-year student loan market.
Instead of dealing with several entities, students will deal with just one, said Stock, the Virginia representative on a Southern advisory council of the College Board that reviewed the program.
Stock predicted that it will give students "a better understanding of their loan obligations. They think they can get a loan from this bank and one from another bank. They don't realize they can only get one [Stafford] loan."
Supporters say that better understanding could help reduce the high default rate nationally. The U.S. Department of Education reported Wednesday that 15.6 percent of borrowers defaulted on about $1 billion worth of loans in fiscal year 1988.
by CNB