DES MOINES (AP) — State officials say new radio ads aired by the nonprofit Iowa Student Loan Liquidity Corp. may mislead people about whether federal or private loans are their best option.
In general, federal loans offer the lowest interest rates and the most flexibility if someone encounters financial hardships, so students are urged to exhaust all federal options before looking at private loans.
The Des Moines Register reports the new ads aired by the nonprofit compare its private loans to federal ones and encourage borrowers to choose its loan.
The radio ads conflict with the general advice Iowa Student Loan offers on its website and the advice state and federal officials give. Five years ago, the nonprofit’s lending practices were questioned, and Iowa Student Loan was investigated by the Iowa attorney general’s office.
The Iowa Attorney General’s spokesman Geoff Greenwood said officials will work with Iowa Student Loan to make sure the benefits of private and federal student loans are made clear to consumers.
“The information on their website is accurate and thorough, but perhaps the disclosures could be a bit more prominent,” Greenwood said.
Iowa Student Loan officials said they’re willing to address the concerns, but they also defended the ads.
Iowa Student Loan’s own board has urged the nonprofit to encourage the use of federal loans, Chairwoman Christine Hensley said.
But Hensley said Iowa Student Loan believes that one of its loans offering a lower fixed rate than federal student loans is the better option even though students might be required to start making payments on the loan before they graduate.
“We want them to exhaust all the federal loans possible, but they need to look at it and make sure they understand exactly what it is they’re committing to and what the costs are,” she said.
Iowa Student Loan officials already meet with the attorney general’s office twice a year to address any concerns. A state report criticized the firm in 2008 for failing to adequately promote federal loans and failing to ensure that borrowers didn’t have any federal loan eligibility remaining.
Iowa Student Loan is a private entity, but it was created by a state proclamation in 1979 and the governor traditionally appoints its board members.
State Rep. Vicki Lensing, D-Iowa City, said the ads don’t make clear all the options borrowers have available.
“If (Iowa Student Loan) is really looking out for the best interests of the student, then the student needs to be aware of all of their options — private, state and federal,” she said.