In the first weeks of the 2012 campaign, Obama and Romney focused not on economic or foreign issues but on the student loan interest rate. Could student debt play a significant role in this year's elections?
High school dropouts used to be able to qualify for federal grants and loans based on a basic skills test. That ends in July, and community colleges are worried about what will happen to these students.
This is a huge undertaking and one that we take very seriously, as students use their disbursements to pay for books, supplies and other living expenses.
Many of our students -- 61,000 of whom receive Pell Grants -- rely on the speedy and safe delivery of their student aid to ensure they can pay their bills and continue their education. Without significant modification, the proposed regulation would create unnecessary challenges for us to provide students with their financial aid refunds in a timely, secure manner. While many provisions of the proposed regulation seek to limit fees and tighten security measures, several aspects unfortunately have the opposite effect.
A Move Back to Paper Check
Today, institutions can decide whether to offer paper checks as an option for disbursement among the other options for electronic disbursement. In the event that students do not choose any method for receiving their funds, they will be mailed a paper check. This method has allowed institutions to encourage and promote electronic delivery, which is a more secure and a timely method for students and institutions. Requiring institutions to provide the up-front option of a check goes against decades of encouraging electronic transfer of funds for many consumer purposes, including government benefits and employee earnings.
This will be operationally challenging for our system, and it also would provide a ready market for check cashing services and their exorbitant fees. Again, other provisions of this regulation seek to limit fee exposure to students. Unfortunately, the requirement to provide paper checks up front will expose many students to check cashing fees.
Increased Risk of Financial Aid Fraud
Under the new requirement, colleges would be limited in what information they could share with their third-party disbursement providers. No data, other than a student’s name, address and email, would be permitted -- information that is too vague and opens up exposure to financial aid fraud.
Without the ability to securely authenticate the identity of the student and share additional information, including the amount of a student's disbursement, third parties would have no way to process these transactions with the level of security and accuracy that they do today. We need to find middle ground on this issue, which could be accomplished by giving third-party providers access to refund amounts and unique, nonpersonal student identifiers.
Federalization of the Disbursement Process
Under the proposed regulations, the education secretary is reserving the authority of the department to operate the credit balance disbursement process -- essentially an invitation for unnecessary complication and delay.
Institutions and their students would be required to use the department’s system, whether or not it met the unique needs of a particular college and despite logistical burdens on both institutions and the department. Additionally, any system developed by the department is unlikely to deal with non-Title IV funds, requiring institutions to have redundant systems for the delivery of this aid, which could lead to more delays and errors.
The distribution of financial aid disbursements to our students is a process we take extremely seriously. Students must receive this aid quickly and securely to ensure they can benefit from the education they receive at Ivy Tech and other institutions across the country.
Like the department, we want to protect our students’ financial well-being and provide the least expensive, least burdensome and most financially secure systems. Unfortunately, despite good intentions, the proposed regulation in its current form would be a step in the wrong direction -- a step many students can’t afford to take.
Thomas J. Snyder is president of Ivy Tech Community College, Indiana’s statewide community college system.