The proposal, a version of which was incorporated into parallel legislation that the House of Representatives passed last fall, is designed to assure that borrowers turn to more-expensive (and riskier) private student loans only after they've exhausted federal, state, and institutional grants, or at least less costly federal student loans.
"Requiring school certification that confirms students’ attendance and loan eligibility -- as is currently required on all federal student loans -- discourages unnecessary borrowing which could lead to delinquency and default during repayment," the groups say in the letter. "It also gives financial aid administrators an additional opportunity to counsel students about less expensive forms of financial aid and ensures that students do not inadvertently disqualify themselves for less costly aid. Simply put, school certification will help ensure that private loan borrowers maximize their ability to borrow federal loans and only turn to private loans after exhausting federal loan eligibility."
The letter was signed by Consumer Bankers Association, the Education Finance Council, and the National Council of Higher Education Loan Programs; the National Association of Student Financial Aid Administrators; and the Institute for College Access & Success and the U.S. Public Interest Research Groups.
It is not unheard of for banks and other lenders to be on the same side of issues as financial aid officers or advocates for students; a roughly similar coalition developed around the federal government's 2007 creation of a repayment system based on borrowers' post-graduation income, for instance.
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