Student loans provide a way for many Mississippians to attend colleges and universities, and it seems the volume of those loans is increasing.
“The number and dollar value of student loans have been increasing since at least 2000, and we expect that trend to continue because the cost of education is increasing,” said Ken Smith, executive director of Education Services Foundation, a non-profit resource for free college planning, scholarships and student loans.
The state’s education loan volume per fiscal year grew at 10% for 2006 and 2005 and grew at 7% in 2004. Smith said the rising cost of living and tuition are primary factors for those increases.
Trustmark Bank is one of the state’s leading lenders of student loans. Spokeswoman Melanie Morgan said the bank participates in the Federal Family Educational Loan Program (FFELP) as a lender for federal Stafford, Parent Plus and Grad Plus loans.
The financial aid offices at individual FFELP participating educational institutions award these loans according to information provided by students through the Free Application for Student Financial Aid. The interest rates for these loans are set by the U.S. Department of Education annually on the first day of July.
“Due to the government-regulated interest rates of federal student loans, the student loan market does not mirror that of consumer loans in competitiveness,” Morgan said. “A vast majority of the volume of student loans Trustmark generates is due to local banking relationships.”
She added there are currently a number of legislative bills pending that could potentially impact student loan lenders such as Trustmark. If the legislation is actually signed into law, the profitability for student loan lenders could decrease.
Smith points out that a bill doing just that is working its way through the U.S. Congress where differences are being worked out between the Senate and House versions.
The Senate proposal cuts approximately $19 billion from the Federal Family Education Loan Program over the next five years. The funds are generally redirected to pay for a new grant program to supplement Pell Grants and new policies for economic hardship deferments, forbearance, income-based repayment and loan cancellation for Direct Loan borrowers who are public service employees.
Public and private
Increases in the number of student loans are not just being experienced at state schools where tuition increases have been implemented several times in recent years. Karon McMillan, financial aid director at Mississippi College, also sees that trend. Tuition increases at the private liberal arts college have been only 1% or 2% in the last few years, less than the amount at state schools.
“We’re seeing more loan money coming in and more students getting them,” she said. “The costs of loans are going up, and students are taking out alternative loans through outside lenders that are not part of federally subsidized loans.”
McMillan sees that students are staying in school longer, taking longer to complete degrees, working while they go to school and in some cases parents are not able to help with college expenses. All are reasons for more loans.
“The school does not make any money on loans. Refunds are made to students if there’s any overage,” she said. “We caution students that they do have to pay back the loans, and they start paying off the loans six months after graduation.”
The Clinton college has added some degree programs and has an increase in international students that McMillan said are helping keep down tuition costs. “We’ve been blessed with that and the enrollment is going up,” she added.
Contact MBJ contributing writer Lynn Lofton at firstname.lastname@example.org.