In 1855, the Michigan Legislature started a tradition. MSU was established as the nation's first land-grant university, and with that tradition comes a responsibility of keeping education affordable for all Michigan residents.
With a new loan system, the university aims to do just that. The system is a step in the right direction, and we hope it will save students money. But with any nearly free bank loan, this deal could be too good to be true.
This loan program is a collaboration between MSU, Comerica Bank, the Great Lakes Higher Education Corporation and the Michigan Higher Education Student Loan Authority. Rick Shipman, Office of Financial Aid director, says for every $1,000 a student borrows, that student will save $140. With the average college student graduating with $19,000 of debt, that translates into $2,600 of savings.
The 3 percent origination fee, which is charged when students or parents take out a loan from a bank, will be refunded under the new system. In addition, students who make three years of installment payments on time will not be charged an annual percentage rate for the remainder of the loan.
It's good to see the university taking strides to make an MSU education within everyone's financial reach, especially in these difficult economic times.
MSU stands to lose millions of dollars in aid from the state because of budget cuts, and we could see a large tuition increase.
In the 2001-02 academic year, MSU undergraduates borrowed about $80 million. Graduate students took out about $60 million in loans. With these kinds of figures, it's obvious an affordable loan program is a good idea for MSU, which boasts a high loan payback rate, to establish a system such as this one.
With the appeal this program will generate, more students are going to take out loans through the Office of Financial Aid. It seems like a win-win situation.
Another winner would be the university. MSU has not always been held in a positive light when it comes to the affordability of a college education. MSU created the Tuition Guarantee in 1994, pledging to keep tuition at or below the rate of inflation.
It was abandoned in 2001 when the MSU Board of Trustees approved an 8.9-percent increase in the fall of that year.
We hope the university did its homework when creating this new program. We also hope the Office of Financial Aid and administrators aren't being led into a trap. Or worse, leading students into one.
Most students currently at the university remember the abandonment of the Tuition Guarantee, and we don't want to see another broken promise. This is not to say there's a reason to distrust the university, but with this kind of a deal, it seems there's always a catch.
To MSU's credit, however, it receives less funding per student than the state's other research universities, the University of Michigan and Wayne State University.
This new loan system is good for the university, by showing its commitment to making higher education affordable. It's good for lenders who seek to loan out more money. And it's good for students who are seeking to find an easier way to pay for college.
