The Fairness for Struggling Students Act of 2011, legislation introduced by Senators Dick Durban of Illinois, Sheldon Whitehouse of Rhode Island, and Al Franken of Minnesota on May 26th, aims to level the playing field in student lending by putting an end to bankruptcy protection for privatized student loans. The measure will potentially restore borrowing confidence among student loan seekers and thus increase the number of applications. Why is this troubling for private student loan marketers? The more student loan applications, the greater the likelihood of higher default rates. Student loan marketers must be proactive in light of this legislation by maximizing the effectiveness of their lead generation and management practices.
University lenders should look to another industry facing its own regulatory burdens. Affiliate networks responsible for placing and maintaining student loan offers would certainly help lenders target qualified applicants thereby minimizing default risks. An additional threat to private student loan marketers are financial institutions. For instance, U.S. Bank and Walls Fargo are offering fixed-rate loan products to attract prospective borrowers averse to risk. Though fixed loan rates are higher than their variable counterparts, this could shift if the Federal Reserve initiates a rate hike. Affiliates could empower student loan marketers to take action against banks by helping them get more aggressive in the space. There are a number of ways to go about this.
By utilizing performance-based targeting and tracking technology, affiliates can match lenders up with the right borrower. This will facilitate quality lead generation and further reduce the risk of default costs. Of course, finding the right affiliate is no less important. A vertical-specific network should be the first choice of any student loan marketer. Affiliates with experience in the industry will likely have a track record of building and managing lender micro-sites, effective lead filtering, qualification and validation strategies and a commitment to continually improve campaigns resulting in the lowest cost-per-lead. In actuality, this is good for lenders and borrowers. Lenders will get the most qualified lead possible and students will benefit from a more streamlined, targeted loan search process.
In the days ahead, it will be interesting to see the steps student loan marketers will take to filter and manage loan applications in order to leverage quality over quantity. They should understand that whether or not the Fairness for Struggling Students Act passes isn’t the issue. Similar pieces of legislation are sure to come down the pipeline. Private student loan marketers must be three steps ahead of these bills to continue to compete and grow. Affiliate networks with the right mix of experience and technology can get them where they need to go.