Private-college groups launch web loan tool

September 6, 2010 at 12:00a.m.

Associated Press

COLUMBUS

Private, nonprofit colleges in Ohio and 11 other states have launched a new web tool to help students find private loans for school.

C. Todd Jones, an Ohio official who helped develop the website called The Marketplace, said students can find it daunting to shop for bank or credit union loans needed to fill the gap between government grants or scholarships and the cost of attending college.

“The big difference in this is that it will now allow a transparent marketplace where students can find out how much they are going to be charged for their loan before they make a loan application, and they won’t have their credit rating dinged five times,” said Jones, president of the Association of Independent Colleges & Universities of Ohio.

Jones said The Marketplace service saves lenders overhead costs so they’re able to eliminate fees and markups that can surprise student borrowers.

The online loan comparison and shopping service is operating in Ohio, California, Maryland, Oregon, Pennsylvania, New York, Indiana, Michigan, Kentucky, Mississippi, Tennessee and Alabama.

Jones said he and his counterparts in California and Maryland conceived the web tool about two years ago and hired Overture Technologies of Bethesda, Md., to build it.

It was at about that time that the surging private college loan market stalled, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

According to the College Board, a membership organization of colleges and universities, private loan volume hit $24 billion in constant dollars during the 2007-08 school year — making up about a quarter of all college borrowing — then declined by 50 percent the next year.

“In the last two years we’ve seen a precipitous drop in private borrowing to where it’s around 13 percent,” Draeger said. “That drop wasn’t because of a decrease in demand. It was because, like the rest of the financial market, the private student loan market was seizing up.”

For private colleges, whose students do the most borrowing, that’s particularly troubling.