U.S. student loan proposal raises concerns



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A U.S. Department of Education proposal that would match federal student loan borrowers with out-of-state lenders would a potential negative impact on New Hampshire students, according to the state's largest student loan provider.In July 2010, a measure was enacted that supplanted bank-based student loans with direct government lending, meaning that private loan companies – including nonprofits – could no longer participate in federal student loan programs. One component of the legislation, however, reserved a percentage of the loan servicing contracts for nonprofits, such as the New Hampshire Higher Education Assistance Foundation.That way, "the local nonprofits could continue the work they were doing to support the residents of individual states that had led to low default rates, that had led to excellence in college programs," said Tara Payne, vice president of college planning and community engagement at NHHEAF.NHHEAF is the largest source of college lending in the state and an applicant for a servicing contract. While the agency is cautiously optimistic about winning the contract, it’s the proposed allocation of the loans that raises concerns. Instead of matching students with lenders in their home states, the federal Department of Education has said that loans will be assigned randomly throughout the country, so servicers can be compared more easily based on similar loan portfolios. But for New Hampshire students, this could amount to unnecessary complications, with loans that, for example, could be serviced, in Texas one year and Pennsylvania the next, said Payne. NHHEAF has a 2.9 percent loan default rate, fifth best in the nation and well below the national average of 7 percent.Payne attributed the rate to he customized, New Hampshire-oriented services NHHEAF offers, from sending personalized notes to borrowers to counseling Granite State students from kindergarten to senior year."The numbers do speak for themselves," said Payne, who added that loan servicing by national lenders could lead to greater default rates. "Folks feel more responsible for a loan when they’re paying back someone in their backyard." -- KATHLEEN CALLAHAN Edit ModuleShow Tags