Financial Aid & Default

Paying for higher education is just one of many worries facing Americans during these troubling economic times. People understand that, in order to be qualified for many jobs in today's society, some sort of higher education is necessary. But how will they find the finances to help them expand their professional skills? Earlier this year, the House of Representatives passed the Student Aid and Fiscal Responsibility Act which gives the government sole control over lending student loans. With the proposed new loan program, private lenders would no longer have the ability to directly grant loans to students. While the new legislation passed in the House, it still has yet to receive approval from the Senate.

This past week I was reminded of the time I spent in Saudi Arabia with the 1st Marine Division preparing for our mission to evict the Iraqi Army from Kuwait.

Anyone who has ever spent time in a Marine Corps uniform or perhaps is just a fan of Clint Eastwood movies, is familiar with one of my all-time favorites, Heartbreak Ridge. In it, Eastwood plays the tough-as-nails Gunnery Sergeant Thomas Highway who is charged with transforming his troops into highly disciplined, combat-ready Marines. One of Gunny Highway's mantras throughout the movie is that when unexpected circumstances or events run contrary to even the most carefully developed plans, we must always be prepared to "overcome by improvising and adapting."

In light of the current regulatory storm that is underway on Capitol Hill regarding higher education, a.k.a. the Student Loan Sunshine Act, I couldn't help but to recall the sage-like words of Gunny Highway. Improvise and adapt. Standard business practices that were legal and widely regarded as ethical yesterday have become not only unethical today, but could become downright illegal tomorrow. One thing is for sure. The proposed Student Loan Sunshine Act is going to become law in one form or another. So, what actions can be taken now in anticipation of the changes to come? One of the easiest is to diversify your lender lists. For instance, if you have a lender that accounts for more than, say, 75% of the loan volume at your school(s), it might be prudent to add another lender or two into the mix to avoid even the hint of a questionable school/lender relationship.

Even the fiercest of storms comes to an end. And this one is no exception. In the aftermath, however, it will require a change in how business is conducted between schools and lenders. Those that can improvise by adapting and overcoming will more than likely prosper. Those that cannot will need to report to Gunny Highway for remedial training.