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Getting the latter provision passed is a long shot, which helps explain why many higher-education advocates are encouraging the next generation of students to borrow less money in the first place. To help prospective applicants compare the costs of attending different schools, all colleges as of Oct. 29 must include a net-price calculator on their websites. The calculator asks families for detailed financial information and then provides customized estimates of what they will likely pay out of pocket. Industry experts are also focusing on improving the information applicants receive once they are accepted. Kantrowitz testified before a congressional advisory committee that in an online survey last year of some 580,000 students and parents, 61% of respondents said the financial-aid-award letters they received did not include basic information about loan terms like interest rates or monthly payments. Some didn't even use the word loan, referring instead to a "subsidized Stafford," which families might confuse with a grant. (It's actually a loan whose interest is paid by the federal government while the student is in school.) Hence the Department of Education's current push to standardize financial-aid-award letters so people won't get lulled into overborrowing.
At the same time, more financial-aid offices are trying to help families maximize their use of federal loans, which have fixed interest rates, unlike private loans, which can have uncapped, variable rates that often go up after the first year. Lenders reel in families by advertising low rates, but usually only people with stellar credit qualify. Private loans--which make up 20% of outstanding education loans--also lack certain consumer protections, like the ability to write off the balance if the borrower dies. In 2006, Alison Rabil, then director of financial aid at Barnard College, started a policy of contacting families whenever she received requests from lenders to certify private loans. After one year of explaining why federal loans were the better option, Barnard saw the school's private-student-loan volume drop from $1.6 million in 2005--06 to $400,000 in 2006--07. Many other schools both big and small have since adopted similar procedures. Last year San Diego State started requiring students to go through an online counseling process before it would certify private loans.
Nina Marks, president of Collegiate Directions, a nonprofit that provides college counseling for low-income students, recommends that families drill deeper and ask financial-aid officers such questions as, If a college's cost of attendance increases each year, will financial aid go up too? What percentage of students graduate in four years? A fifth or sixth year could significantly increase debt load.
Some high school guidance counselors encourage students to start at a more affordable state school or community college and then transfer to a more impressive (read: higher priced) institution to get their diploma. Other counselors suggest smaller ways to skimp. "You can lower the price of the second year by adjusting the meal plan," says John Boshoven, a counselor at Community High School in Ann Arbor, Mich. "A lot of kids don't eat breakfast or can save money by eating cereal in their rooms."