Online counseling pushing college students toward risky private loans

With its own online counseling tool, SDSU requires students to complete a counseling session and complete a Free Application for Federal Student Aid (FAFSA) “before the school will certify a private loan,” according to the TICAS report.

SDSU’s online counseling system “ensures that private loans the college is aware of will only be used to cover expenses that could not have been covered with federal student loans,” according to TICAS. The university’s requirements have paid off for many incoming students: Nearly half of those who applied for a private loan did not complete with application.

Colorado State University (CSU) takes one of the most proactive approaches to dissuading students from using private college loans. For 15 years, CSU counselors have called prospective students to tell them about the advantages of federal student aid. Half of students contacted by the university decide to exhaust their eligibility for federal student loans before turning to private loans, according CSU statistics.

Syracuse University and the University of California-Berkeley require counseling for current students who haven’t maximized their eligibility for federal student loans. The TICAS report highlighted Syracuse for replacing private loans with grants “for students in danger of accumulating excessive debt.” These students must attend financial literacy seminars as a condition of the loan assistance.

Mark Kantrowitz, publisher of and, popular student aid resource sites, said the U.S. Department of Education’s “Federal Aid First” initiative has helped raise student awareness of low-interest government loans.

Still, first-generation college students remain susceptible to private loan options presented during counseling sessions.

“I think families are becoming more aware of the risks after they are already in college, but there’s still a lot of room for improvement with first-time college students,” Kantrowitz said. “In some cases the dream is driving the debt, where a student has his or her heart set on a college they can’t afford, so they borrow to pay for it without paying much attention to how they’ll be able to repay the debt or how much it will cost to repay the debt.”

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