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The misinformation game: educational loans and mortgages

Connecting the dots between educational loans and mortgages

Photo of Tatiana Pilon
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As a community trying to create alternatives for college affordability in the US, we need to ask ourselves why the educational loans are such a complicated subject?

In order to answer that question, I had a chance to speak with a finance wizard trying to disrupt the mortgage industry by educating consumers. The president of Finance Tactile unveiled the obscure process of  home loans and obstacles to solving this puzzle. Some of the insights are very much applicable to educational loans:

  1.     “The corporation profits from what the consumer doesn’t know”  

Most students applying for education loans have little or no experience on dealing with long term debt. Even fewer know what an amortization table means. In a similar way, home buyers are overwhelmed by financial jargon and a myriad of mortgage options.

     2.  “Loans are seen as commodities”

As educational loans are usually under the 6% rate, they are perceived as commodities.  Consequently, there is not that much thought put into taking an educational loan and there are not a variety of options available.

      3. “Many financial firms build walls of opacity between users and processors”

As the uninformed undergraduate, graduate, or student family member applies for educational loans, a few percent of users understand the terms of the loans, payments and fees. A wall between education loan originators and users is filled with misinformation. User’s don’t understand the commitment terms and loan processors/financial aid offices sometimes reproduce incorrect information. The same process applies to mortgages where the giant corporations profit on what the users don’t know.

What is a provocation or insight that might inspire others during this challenge?

With this in mind, how can we destroy the “walls of opacity” on educational aid and encourage better instruction for the users? In the end, conscious users make better choices and the whole community moves forward.


Join the conversation:

Photo of Adrian Casas

Great post Tatiana! I think that all these barriers coupled with a general lack of information by students is definitely deterring the amount of students applying to college.
I know at my high school, the explanation about financial aid services was mentioned here and there, but was not really explained in full. It was up to the student to go to the counselor and ask information. At this point, it would already seem like too much of a hassle for some students and ended up completely ignoring the option.
I wonder what we could do to improve this on the students' side?

Photo of Tatiana Pilon

Thank you for your insight, Adrian! As a student using financial aid for graduate school, I've experienced the same lack of information you are describing. I found it to be very helpful to talk to family and friends that used financial aid through undergraduate or graduate. Also, I've searched for scholarships online with very little success. My personal take out is federal financial aid is still cheaper than taking private loans. Also, you might find helpful tips at the official federal financial aid website FAFSA Another thing that I've learned, is that federal aid should cover at least the cost of attendance for your university. I hope this helps! Please feel free to message me if you need help on the subject.

Photo of Adrian Casas

Thanks Tatiana, I sure will.

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