A tsunami (from the Japanese word harbor wave) is a series of huge waves caused by an undersea disturbance, such as an earthquake or volcanic eruption. The waves travel in all directions from the area of disturbance, much like the concentric ripples caused by throwing a rock in a pond - except the magnitude of the disturbance and ripples are much, much greater.  Tsunami waves can travel in the open sea as fast as 450 miles per hour, but can be almost imperceptible until the waves hit shallow waters where they can rise to 100 feet and smash into the shore causing mass destruction. These are sometimes mistakenly called "tidal waves," but tsunamis have nothing to do with the tides. They are not cyclical or common and are more random.

With this in mind, it seems that we are in for a tsunami of sorts in our offices.  Think of the failure of the mortgage industry as the earthquake that has sent concentric ripples throughout the economy. These waves first affected the credit market and are now spreading to affect almost every aspect of the economy from banking to small businesses to families and their ability to pay for college. At my office, we are starting to see the beginning swells of potential tsunami waves reaching our shores.

There is growing anxiety - fueled by the national media - about the availability of financial aid funds. This is especially acute for alternative loans as more lenders seem unable to provide these funds. Fortunately, Congress has been quick to pass legislation to aid the lack of liquidity in FFELP and a $6 billion shortfall in the Pell Grant program, but anxiety about financial aid remains as the demand increases.

More students and parents are inquiring about financial aid and some parents are receiving pink slips.  As a result, we’re beginning to see increases in the number in professional judgment appeals. I am especially concerned that appeals for the 2009-10 school year will go through the roof compared to the slight increase we are seeing now.  I’m also concerned that funding for financial aid funding will be strained as institutions, states and the federal government struggle with dwindling resources at the same time that the demand for aid increases.

So put on your life jackets and leave a comment about what you are experiencing in your offices. Are you doing anything to prepare for the possible tsunami? NASFAA needs your input to represent the financial aid needs of students and develop solutions to ensure families get the financial aid they need.

Well, I am writing this on 8-8-08 (the start of the Olympics) and the craziness of this summer’s Dog Days continues. Consider the following:

• Brett Favre is now a Jet after a protracted soap opera with the Packers
• Manny Ramirez, formerly of the Red Sox, is now a Dodger;
• Paris Hilton puts out the best political ad of the season that sounds, in some degree, intelligent and reasonable
• The Governor of Massachusetts, Deval L. Patrick, brings Mr. Cuomo’s investigations full circle, as shown in a Chronicle of Higher Education article.

The Chronicle article indicates that the Governor has asked Massachusetts colleges to invest in the state-owned Massachusetts Educational Financing Authority (MEFA) so thousands of the state’s students can continue to receive student loans. MEFA recently suspended its federal and private student loan operations. The Governor’s request appears to be a clear violation of Mr. Cuomo’s conflict of interest guidelines established last year. Nevertheless, the Governor’s actions are considered commendable by many.

So what do you think? Should colleges and universities invest in what some would say is a noble action for Massachusetts’ students, or do conflict of interest concerns outweigh those sentiments? Is the pendulum swinging back to some uncomfortable arrangements between schools and lenders? Or, has public policy moved well beyond?

(And speaking of Mr. Cuomo, just what is he planning to do with the funds he collected last year? My suggestion? Work with NASFAA to target those funds to enhance access and financial literacy initiatives!)

Now I’m trying to figure out whom the next celebrity may be that will make the news. Enjoy what’s left of your summer!

Last weekend, I couldn’t help but notice the full page My Rich Uncle ad in the New York Times. To use their words, My Rich Uncle is “a different kind of loan company.”

Boy ain’t that the truth!

Their ad has a middle-aged man standing with dazed look on what I assumed to be a golf course landscape with the caption reading, “I Didn’t Use My Brain, I Went Right to the Financial Aid Office.”

In other words, “If you go to the financial aid office, you must be stupid.”

(Because the top of the gentleman’s head was sawed off, I found myself thinking “Where did his brain go?” but I’ll solve that mystery another time.)

The remainder of the MRU ad reads:

“Most families aren’t prepared for what college costs today. So why do they check their brains at the door when it’s time to get a student loan? Smart families know that the financial aid office isn’t their only option. It takes fifteen minutes to save thousands of dollars on a student loan with My Rich Uncle. That’s probably why more and more people are learning that thinking saves thousands at MyRichUncle.com”

As one who has worked as a financial aid administrator for over 25 years, let me first say that I believe that families are “using their brains” when they seek help from the office that is responsible for helping them find financial resources to attend college.

I have absolutely nothing against the loan products that MRU offers. Any lender that can offer a stable benefit to students is welcome to do so. Financial aid offices do not discriminate against any loan provider that can offer low-cost loans to students.

The real issue at hand is the advertising used by MRU and other direct-to-consumer loan marketers that attempt to create mistrust between financial aid offices and families. It’s destructive, abhorrent, and downright dirty, and ultimately it harms the customers they’re supposed to be serving.

The financial aid process can be challenging. MRU and other DTC marketers make it even more complicated by boiling down all financial aid to student loans. Contrary to popular belief, the College Board reports that by far the largest form of financial aid in the country comes from institutional grants and tuition discounts, not loans. The very first step in a student’s quest for financial aid must be the financial aid office – plain and simple. Students who are discouraged from reaching out to the financial aid office could potentially lose out on all sorts of financial aid.

It’s simply an inappropriate business model to exploit a family’s apprehension about college costs in an attempt to increase loan volume. Creating distrust between a family and the financial aid office is counterproductive to students and certainly a loan company must realize that a healthy loan market requires a healthy and fully funded need-based aid program first, so that low-income students and families can avoid loans altogether if possible.

If I had the money, I’d run a companion ad. The ad would consist of me giving the “brainless” man his brain back to help him make informed decisions using all of the financial aid information that we provide. It has always been my firm belief—and this has been confirmed in my travels the past year–that the 14,000 financial aid professionals across this nation are, and will continue to be, the most trustworthy source in helping students and families.

Also, as a parent, when I read an ad of this nature, my first thought is, “If this is true, why aren’t other lenders marketing in this inflammatory manner?

I agree wholeheartedly with Dr. Day’s letter that encourages each of us “to oppose on every level the ultimate harm done to students and families by advertisements that intentionally cause families to distrust the financial aid office.”

What are your thoughts? What, if anything, should be done about direct-to-consumer student loan marketing?