Members Surveyed: Feelings about Two Disbursements
& 30-Day Holds
My understanding is that the Fed UP bill was killed - (it contained the legislation to continue allowing schools to disburse prior to the 30 days for first time borrowers and certify a single disbursement for a one-term loan). At this point, alternative legislation has not been introduced and the 30-day/two disbursement requirement will go back into effect on September 30, 2002. I have been in roundabout contact with our lobbyist who says there is a 10% chance that someone may introduce alternative legislation, but he doesn't think it will have time to go through. It would have to be tagged onto another piece of legislation in order to have any hope of getting passed.
A 30-day delay does not ensure that the students will either continue in school, nor does it have much to do with default prevention. In some instances, it hinders students from being able to pay their bill and have the money to pay for books, room and board without looking for alternative sources. The alternative to receiving the loan funds upon arriving at school can be much more detrimental - credit cards with high interest rates, alternative loans, etc. That type of alternative can serve to undermine the student's ability to repay their educational debt. With the implementation of a sound Entrance interview process, the 30-day hold becomes an ineffectual and outdated tool.
As for the multiple disbursement rule for single-term loans, most single-term loans occur when a student is graduating mid academic year and is at the end of their educational borrowing. What is the point? They already know how much debt they have and what their repayment will look like, and the likelihood of them leaving school without completing the term is usually not an issue. In any case, two disbursements for a single term is an expense to the school (in processing time), an expense to the lender (which is really more of an annoyance), and a pain in the patooty (technical term) for the student.
If a student needs a student loan to help pay for educational expenses, it is still the lowest cost instrument (barring grants and scholarships) to help them meet their goals. Guarantors, lenders and schools are constantly reminding students of their loan debt and counseling them on how to manage it. Making students jump through additional bureaucratic hoops to obtain those funds in the name of default prevention may have had its purpose at one time. Thirty-day holds and multiple disbursements are no longer effective and may hinder more than help.
Institutions that choose to maintain the 30-day rule and multiple disbursement may still do so. Many community colleges prefer that method due to their more mobile populations, as do many vocational schools. Community Colleges also do not have the upfront costs that some 4-year institutions have and their population tends to come and go, and a single term may not be their graduation term, in which case two disbursements may be appropriate. However, they should have the flexibility and choice to make those decisions based on their own experience with their student population.
The restrictive legislation dictating the 30-day rule and multiple disbursement does not give educational institutions the credit they deserve for understanding the student population they serve. We all do the best we can for our students and understand their needs on a much more personal level than the legislators in DC. We need to make our voices heard.
I have been in financial aid for over 18 years and have not seen any miracle in default prevention from this type of measure. Economic stability and the ability to find jobs have far more effect on defaults than anything we can do at the micro-management level.
Judy Ransom, ASAP/Union Bank and Trust
I feel strongly that we should not have a 30-day hold on new students!! They, of all people, need their money up front, especially if all they are getting are loans. Also hate the two disbursements on the one-semester students - it is timely and costly to the school!!
Victoria Glass, Helena College of Technology
Since we are an experimental school (at least for one more year), we can still waive the 30-day rule. Traditional 4-year schools' populations aren't quite as transient as vocational and community colleges. It certainly benefits our students not to have to wait, especially when they owe rent, utilities, and groceries. We have so many non-traditional students in this category.
Kris E. Dramstad, MSU-Northern
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