By Sharon McLaughlin, <a href=”http://www.unigo.com/explorer/profiles/profile.aspx?userid=67062″ target=”_blank”>McLaughlin Education Consulting</a> Have you ever wondered just what your Financial Aid Administrator was thinking? Especially once you received your financial aid award. I’ve worked for 20 years as a financial aid administrator and I’ll take you inside the mind of the FAA. FAAs are a dedicated lot that see their mission as assisting students to attain their academic goals through financial aid, while keeping student debt at a minimum. Financial aid philosophy is to award scholarships/grants first, followed by work study, then loans as a last resort. Students need to demonstrate need by completing the Free Application for Federal Student Aid (FAFSA). Once need is determined, the FAA can package using the above mentioned philosophy. How much of each type of aid is awarded is based on a number of factors: criteria for each separate scholarship, grant, work study or loan. For scholarships, grants and work study, the funding available at the time the package is being created is key. Aid is given on a first- come, first-served basis. So if you apply late or don’t get all your documents in to the aid office quickly you may end up with a less generous aid package. Counseling students against excessive borrowing is an integral function of any financial aid office. There have been countless times when I sat with student who had requested a loan that I felt was not necessary to: 1) determine why the student felt the need for the loan or loan increase, 2) explain his/her options and 3) discuss future education plans such as grad school (grad students rely almost exclusively on loans) and how this request will impact those plans. Loan entrance and exist counseling is required at all colleges. Although students roll their eyes at the mention of loan counseling and drag their feet to comply with the requirement, it should be viewed as an important planning tool and consumer loan education opportunity. It is also important to note that if a borrower is eligible for a loan through the Federal Family Education Loan Program (FFELP), a FAA is bound by federal law to certify the loan, unless there is knowledge of fraud or the borrower indicates unwillingness to repay the loan. A high default rate will cause the US Department of Education to rescind a school’s ability to participate in the FFELP programs and as a result none of the students who attend a college banned from FFELP can apply for those loans. So FAAs keep a watchful eye on student loan activity and default rates on campus. Unfortunately, there is never enough scholarship/grant or work study funds available to fully fund students’ need and loans are generally included in an award letter. This is the eternal frustration of any financial aid administrator. As far as educational loans are concerned, FAAs recommend that students first apply for Stafford and PLUS loans due to the lower interest rates as compared to personal loans or private education loans. Most students do not have a credit history and would not be eligible for a personal or private education loan without a co-signer and a high interest rate. These are credit based loans, meaning that the borrower would need a good credit score or a co-signer with a good credit score. The repayment is generally non-deferrable and the loans can not be consolidated with FFELP loans. As the financial industry seized in the last two years, lenders of private student loans have tightened the credit requirements and increased the interest rates. Fewer borrowers are eligible for these loans. Some may feel that FAA’s are unwilling to give a comparative analysis of federal loan rates. Are you aware that there are over 1,000 lenders that participate in the FFELP programs? It is more than a bit difficult for schools to do a comparison of all lenders with that maybe participating in FFELP. Many schools put together a list of 3-10 lenders that they assess annually through a process referred to as Request For Information (RFI). Even this has become more difficult as numerous lenders have exited the FFELP program or changed their borrower benefits to address the changing financial environment and federal legislation over the last two years. Schools may have a Preferred Lender List for FFELP loans and/or Private/Alternative Loans. Students and parents are not required to utilize a lender from the schools’ lists, but it is there if the families are looking for options or guidance. I hope this gives you a better insight in to the minds of and appreciation for financial aid administrators. For without them, many dreams would go unrealized.