April 23, 2007
Lenders locked out of federal student database
Wow, I can’t believe it’s been a week since I posted last. Ironically, I haven’t posted because of the happenings in the student loan industry. Late last Tuesday night, and without warning, the Department of Education locked out all Lenders, Guarantors and Servicers out of NSLDS which is the nationals student loan database. For once, I’m going to write my own thoughts. Later I’ll post a more comprehensive view.
This database is where colleges report that you are a student, it’s where lenders report that you pay your loans on time or are in default. And it’s where lenders turn to verify that students are/are not in school or to collect loan balances for loan consolidation. It’s where Universities turn to get incorrect data on their students updated and corrected, so that loans can finally get disbursed.
So why did the Dept. of Ed. do this? Well, it’s a great PR move – they can be seen to be doing something. Right now student loan lenders are being vilified left and right – even the innocent ones – and so temporarily locking them all out probably seemed like the best PR move to try and keep their own reputation clean. (The Dept. of Ed is getting a lot of flack at the moment too).
However, this isn’t a solution. In fact, the only people who lose out are students!
Like all student loan companies, my company scrambled last week to work around the lock-out, and we’re back to functioning semi-normally. However, students are feeling the pinch now because loan companies are taking so much longer to process their requests. What about the students waiting for their loans to come out of default? Or students trying to put their loans in deferment or forbearance to avoid going into default?
In the end, it’s the students who will pay the price for this, not the lenders. And it’s not fair to the students.