In an article about student loan debt, TIME magazine highlights a policy adopted by Barnard's Office of Financial Aid in 2006, concerning the certification of private loans. This effort to help families understand their options reduced Barnard's private-student-loan volume substantially, and has since been impletmented by other schools. An excerpt from the article:
"...more financial-aid offices are trying to help families maximize their use of federal loans, which have fixed interest rates, unlike private loans, which can have uncapped, variable rates that often go up after the first year. Lenders reel in families by advertising low rates, but usually only people with stellar credit qualify. Private loans--which make up 20% of outstanding education loans--also lack certain consumer protections, like the ability to write off the balance if the borrower dies. In 2006, Alison Rabil, then director of financial aid at Barnard College, started a policy of contacting families whenever she received requests from lenders to certify private loans. After one year of explaining why federal loans were the better option, Barnard saw the school's private-student-loan volume drop from $1.6 million in 2005--06 to $400,000 in 2006--07. Many other schools both big and small have since adopted similar procedures. ...
Nanette DiLauro, who succeeded Rabil as Barnard's director of financial aid, recalls one student who wanted to go to Barnard--where the sticker price, including fees and housing, is $55,566 per year--so much that she begged the school to certify her private loans. The student, whose parents weren't willing to contribute, would have had to borrow $140,000. "That was a crazy amount," says DiLauro, who gave counsel with a candor that is perhaps all too rare. "I advised the daughter not to do it." The student ultimately chose to go somewhere else."
The full article is available online with subscription access.