Beware aggressive marketing of student loans

The Baltimore Sun

Recently, lawmakers and the media have focused on potentially improper relationships between student financial aid administrators and certain lenders, even going so far as to propose eliminating the position in college student aid offices. These proposed measures could have harmful, unintended consequences for students and parents attempting to finance higher learning. Without an objective third party, consumers would be more prone to manipulation by direct-to-consumer marketing by unscrupulous lenders.

At best, this type of marketing is aggressive; at worst it is misleading, predatory and harmful. For example, some companies send misleading marketing materials designed to steer students away from federal student loans and other financial aid available through student aid offices. Others try to frighten students by referring to a "student loan tax" that would raise rates on current loans. Still other companies masquerade as student aid offices or government agencies.

The Federal Trade Commission reports that it has received almost 600 complaints about deceptive direct-to-consumer marketing practices by student lenders since 2000.

Student lending is not the only industry dealing with this issue. Aggressive marketing and its effect on consumers have been much discussed in the pharmaceutical and mortgage industries. Such marketing tactics have resulted in measurable harm to consumers.

In the mortgage industry, state attorneys general and federal officials are investigating predatory lending tactics such as offering subprime loans to borrowers who cannot afford them.

According to the New England Journal of Medicine, direct-to-consumer expenditures by pharmaceutical companies rose more than 300 percent in less than 10 years. More and more patients are requesting unnecessary and expensive drugs after being exposed to slick, multibillion-dollar advertising campaigns, and patient care is being compromised as a result.

Advocates of such marketing techniques say consumers are responsible for their purchasing choices and any consequences resulting from those decisions. However, this approach leaves poorly informed consumers vulnerable. Students with limited experience engaging in complex financial transactions are at risk.

Any student or parent who has tried to navigate the finer points of a student loan can tell you it is a confusing and stressful process even in the best of cases.

To avoid confusion, headaches and compromising their financial futures, student borrowers and their families need unbiased assistance when choosing their loan products. As a group of ethical professionals dedicated to helping students make informed decisions about their loans, student financial aid administrators can and should continue to fill that role.

Justin Draeger is assistant director for communications of the National Association of Student Financial Aid Officers. His e-mail is

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