SOURCE: The First Marblehead Corporation

September 20, 2007 12:49 ET

Student Loan Literacy 101: First Marblehead Launches Initiative to Help Parents and Students Avoid Common Pitfalls in Higher Education Financing

Survey Finds Many Still Lack Basic Information; First Phase of Smart Borrowing Campaign Introduced With "Study Guide" for Student Loan Literacy

BOSTON, MA--(Marketwire - September 20, 2007) - Parents and students looking for help answering the sometimes thorny and confusing questions surrounding student loan financing now have an easy-to-use resource center to turn to for step-by-step guidance.

The First Marblehead Corporation (NYSE: FMD) -- a national leader in creating education finance solutions -- announced today the first-phase launch of its Smart Borrowing campaign, a multi-channel effort designed to provide objective, consumer-friendly information to potential borrowers. First Marblehead created the campaign in response to recent company survey findings indicating that many people may not be aware of the lowest-cost ways to finance a college education.

The campaign begins today with a new Web site,, that serves as a "Study Guide" for anyone seeking to undertake self-education in higher education financing. provides users a set of simple yet critical tools to help navigate the process of paying for college. The site is divided into five sections, identified through years of experience and confirmed through the survey findings as areas that many borrowers often overlook:

--  Start Early
--  Estimate Your Share
--  Federal Aid First
--  Filling the Gap
--  Borrowing Smart

"Postsecondary education is a large and highly impactful investment for students and families. With the cost of college continuing to rise, it is critical that students make sound financial decisions in determining how to pay for college," said Jack Kopnisky, Chief Executive Officer and President of The First Marblehead Corporation. "Part and parcel of making sound decisions is having reliable, easy-to-understand information about how much you need, where you're going to get it, and how you're going to pay it back. That's why we've launched this educational campaign."

Start Early

The First Marblehead survey revealed that procrastination is common in college funding preparation. Of those who did any planning at all, less than half (41 percent) of parents said they did not start until their child entered high school. Less than one in five families (18 percent) had saved more than $25,000 in total for college by the time students had entered their freshman year. Kopnisky said he found the latter statistic particularly startling considering the average cost of tuition and fees at a private, four-year college is over $22,000, excluding room and board (College Board, 2006). "Students and their parents need to begin family discussions about how to pay for college, along with their specific needs and options, much earlier," he said. tip:

--  Start family discussions about how to pay for college as soon as you
    begin to talk about your academic and career goals. Before high school is a
    good time to start.

Estimate Your Share

The survey found broad disparities between what students perceived they would be contributing to financing college and what their parents believed. More than one-quarter (26 percent) of students said they would be solely responsible for paying for college, while just over one in 10 parents (11 percent) said their children would be carrying the full load. Kopnisky said First Marblehead wants to help families close the communication gap around expected costs of college and the financial resources that are available. "To ensure that families are not borrowing too little, or too much, it's really important that students and parents talk about -- and agree upon -- how much they're going to need, and who is going to be responsible for what portion of the financing." tip:

--  When you think about college costs, what comes to mind? Tuition, room
    and board, right? There are other education-related expenses for you to
    consider -- like books, lab fees, course materials, a laptop. The time to
    think about these costs is before you start applying for financing.

Federal Aid First

Students and parents both felt that scholarships (95 percent), grants (81 percent) and savings (47 percent) were the top three ideal sources that should be used to finance college. Yet the ideal and the actual sharply diverge in practice. In reality, scholarships (65 percent), savings (63 percent) and federal loans (58 percent) are the top three sources. "Students and families should carefully consider the full range of financial aid options available to them," said Kopnisky. "Loan applicants should avail themselves of free and low-cost aid sources first, using private loans to supplement rather than supplant federal loans when the latter are not sufficient to cover the full cost of education, which is increasingly the case." tip:

--  Use the full range of financial aid options available to you. Apply
    for scholarships, grants and federal student loans first.

Filling the Gap

The survey found that 42 percent of respondents did not apply for federal loans, which typically offer more favorable rates than alternative loans, and one in five (20 percent) respondents did not take out the maximum federal loan amount before seeking alternative loans. "Even when it comes to people who have exhausted all their other options before seeking a private education loan, both the survey and our experience tells us that many people don't fully understand that there are factors -- credit scores, cosigners, the amount of the loan -- to evaluate in considering their specific needs and that ultimately impact the amount they'll pay." tip:

--  Once you have exhausted your scholarship, grants and federal aid
    options, consider filling the gap with a private education loan.
--  Ask a parent, other relative, or trustworthy friend to co-sign your
    private student loan to secure the best possible terms.

Borrowing Smart

Similarly, according to the survey, students and parents were not aware of many of the student loan benefits. Less than half of the respondents were aware that loan payments can be made electronically (21 percent) and that payment can begin before graduation (47 percent). Only 35 percent were aware that payments could be delayed on many private loans if borrowers experience financial difficulty. tip:

--  Make sure your lender provides you with loan documents that are
    written in clear, simple language.
--  Know that interest rates can and do change over time. Make sure that
    you can afford the monthly payments should your interest rate go up.
--  Make sure you are not penalized if you pay off your loan early.
--  If you make a loan payment electronically, you may be entitled to an
    interest rate reduction.
--  You may be able to defer payments until you graduate.

"More Americans are applying and going to college than ever before, yet the annual funding gap between the cost of education and traditional funding sources such as federal student loans, scholarships and grants continues to widen and is estimated to be $122 billion," Kopnisky said. "At the same time, the value of a college education cannot be overstated. As we point out on the site, a 2002 Census Bureau study showed a college graduate can earn almost twice as much as someone with a high school degree." He added, "Through our Smart Borrowing campaign, we want to help students and parents understand what financial resources are available as well as help them navigate through the process as effectively as possible to fill the financial gap."

About the survey findings -- First Marblehead commissioned a third-party market research firm to conduct this survey to gain insight into both students' and parents' viewpoints on borrowing, including the timing of school financing research, options researched, and their overall understanding of various education financing options. An online panel of more than 400 parents and students participated. All respondents are either college students or have children who are college students and have experience applying for federal aid. The survey was conducted in July 2007.

About The First Marblehead Corporation -- First Marblehead, a leader in creating solutions for education finance, provides outsourcing services for private, non-governmental education lending in the United States. The Company helps meet the growing demand for private education loans by providing national and regional financial institutions and educational institutions, as well as businesses and other enterprises, with an integrated suite of design, implementation and securitization services for student loan programs tailored to meet the needs of their respective customers, students, employees and members. For more information, visit

Contact Information

  • Contact:

    Janice D. Walker
    Vice President
    Corporate Communications