Barnard Makes Moves Against Private Loan Trend

Angela Januzzi

July 16, 2007

College Board data released last year shows that students’ borrowing of private loans has increased annually by twenty-seven percent every year since 2000. Private loans now comprise twenty percent of student loan volume, when only a decade ago they comprised only four percent.

Barnard College in New York has decided that number is far too high. This past academic year, before certifying to lenders that a student was enrolled, the school required all students and their parents to discuss their financial aid situation with an aid counselor. Most discussions were by phone, lasting twenty-thirty minutes. Shockingly, the measure resulted in a seventy-three percent drop in private loan borrowing.

Alison Rabil, director of financial aid at the school, said that the drop in private loan volume, following the discussions with counselors, conveys that both parents and students are largely ignorant to the consequences that can occur with large amounts of private loans. Parents seemed unaware of the flexibility of federal PLUS loan payback time and the option the college offered of dividing tuition monthly, rather than paying in a lump sum and then compensating with high amounts of private loans. 

Rabil emphasizes that the school was not quick to convince all families that private loans were not beneficial; for some students, no other options would support their education. However, Barnard continued to offer counseling even to students for whom private loans were necessary—steering them towards lenders with lower interest rates. 

“I was afraid people were going to bite our heads off,” Rabil said. “But people really seemed to be appreciative of the attention we were paying to their daughters.” Because Barnard implemented the required loan counseling months before the scandals broke about lenders molding rates for certain schools, the school believes the drop in private loan volume demonstrates how little borrowers actually know about their financial aid options.  

Jaschik, Scott. “Bucking the Tide on Private Loans.” www.insidehighered.com. Posted: July 16, 2007.