- The Washington Times - Monday, July 22, 2002

Each year, graduate students across the country face the often grim task of figuring out how to pay for tuition.
There are several places an aspiring doctor or lawyer can go to help pay the bills. Private lenders, banks and the federal government offer student loans, usually at favorable rates.
But the University of Maryland at Baltimore hopes that next year its graduate students will look to another source for the $50 million in loans they take out each year.
Targeting students' school spirit, the university plans to start lending money next summer in a program that could help reduce student dependence on loans.
It will become the first Maryland public university to use the "School as Lender" program, and it may serve as a model for similar programs at other state schools.
"As long as students are taking out loans, why not have a benefit to the university and other students?" asked George Shoenberger, assistant vice president for business and procurement services.
Many graduate students, especially those studying law and medicine, pay for a large portion of their education with student loans. The average University of Maryland at Baltimore student borrows $14,000 a year.
Students use credit unions, banks and other financial institutions or loans from the federal government, known as Stafford Loans, to pay their bills. The loans usually carry low interest rates, and the government guarantees them against default.
A growing number of universities nationwide have realized they can cash in on the loans that move through their institutions. And they usually put the money they make from handling the loans into scholarship and grant programs.
The university lending plan has gained popularity in recent years, said Jeff Wendt, publisher of the Greentree Gazette, a Florida-based higher-education business magazine. If done right, he said, the loan plan can be a financial boost to a university.
"If they have the internal capabilities and their financial people can communicate well, this is getting to be a no-brainer," he said.
University of Maryland at Baltimore consists of six schools, including a law school, a medical school and a school of social work. It has 4,000 students, many of whom rely on loans to pay tuition and expenses that can reach $30,000 a year.
The University System of Maryland board of regents approved University of Maryland at Baltimore's loan plan at a recent meeting at Bowie State University. University of Maryland at Baltimore plans to ask the state Board of Public Works for permission to secure a credit line as high as $60 million from a private financial institution.
The university will use that money to give out loans that carry similar rates to other student loans. Once a student's entire loan is paid out, the university will sell it to a private lender for a profit.
University officials say they think at least 60 percent of students will sign up in the first year. They anticipate making about 3.5 percent of their total loan volume, which could be about $2.6 million, during the first four years. After that, the school anticipates making $1 million annually. That money will go to grant and scholarship programs.
"We want to eventually reduce the amount that a student has to borrow. There aren't a lot of grant programs right now for students," said Cissy VanSickle, director of financial aid.
The risk to the university is low, according to Mr. Shoenberger. Because the school sells the loans before students start making payments, it won't have to deal with defaults. Private loan companies like to buy graduate school loans because they tend to be larger than undergraduate loans and have a lower default rate the university's rate is 1 percent.
Depending on its success, the University of Maryland at Baltimore's plan could be a model for the rest of the state's 13-member public university system.
Joseph Vivona, interim chancellor of the University System of Maryland, said the program could be used at University of Maryland's flagship College Park campus within a year or two.
Other schools say the program pays off.
About 99 percent of the loans taken out by students at the University of Missouri at Kansas City are done through the university, according to the school's financial-aid director, Patrick McTee. After two years, the program has brought in $2 million.
The University of Denver has been able to cover students' "origination fees," or the 3 percent that the federal government takes out of a loan. For example, if a student takes out a $10,000 loan from the federal government, he or she normally receives $9,700 after paying the fee.
With its lending program, the University of Denver also has been able to steer funds that normally would go to private companies back to students, said Dave Gruen, the university's financial-aid director.
"We're not trying to make a profit for the school. Rather than have the bank down the street profit, we're turning the money around to use for the students," he said.
University of Maryland at Baltimore officials also think school pride will encourage students to sign up for the school loans.
"Just because of the association with the school, we think students will take part," Mr. Shoenberger said.

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