ConSern can help with college fees - private-sector educational loans

Nation's Business, Feb, 1988 by Harry Bacas

ConSern Can Help With College Fees

For many young Americans, the prospect of financing a college education looks increasingly bleak. Tuition is rising faster than the cost of living; government assistance is dropping; banks are growing wary of making student loans.

At the same time, business leaders are stressing that more and better education is important to the nation's future competitiveness.

The federal government's Guaranteed Student Loan program, which put out $9.5 billion in loans this school year to 3.8 million students, is targeted to students from lower-income families, only 15 percent of the potential college population.

Even this program, with a total loan portfolio of $43 billion, has been declining, a victim of deficit reduction. It also has been beset by rising loan defaults and by growing resistance from state loan agencies and banks.

Some efforts to take up the slack are in trouble. Colleges that offer parents a chance to prepay their young children's future tuition at today's prices, for example, are being accused of overestimating the returns they can get on the invested funds. California Gov. George Deukmejian recently vetoed a bill providing such a prepayment plan.

One of the most promising new initiatives is a private-sector program called ConSern, which offers students from middle-income families an alternative source of college financing.

ConSern has begun making flexible, long-term, low-cost, unsecured educational loans to those with good credit. Started three years ago in Washington, D.C., as a local project, it has just gone national.

"Our economy is based almost entirely on double-income families, who can't qualify for those government student loans," says ConSern's founder and president, the Rev. John P. Whalen. "This program steps into the breach."

Early recipients of ConSern loans needed various kinds of help:

Christine Salerno had to supplement her savings from a summer job at a Burger King in Albany, N.Y., and the amount she received from her parents as well as her earnings from a part-time job at another Burger King, in Lakeland, Fla., where she wanted to attend Southeastern College. But she was ineligible for a government loan.

Kathy Stachon, who is married, needed money not only for tuition but also to buy a car to drive the 45 miles between her home in Des Moines and Iowa State University, in Ames, and to pay for day care for her 18-month-old son, Zachary.

Fletcher Hanson, Jr., of Tumbling Shoals, Ark., with two children in college, used earnings from his real-estate and wholesale-lumber business to pay for his son Fletcher's first year at the University of Arkansas. But to pay for Fletcher's second year, Hanson wanted a loan, plus an additional loan for his daughter Elizabeth, who would be attending Memphis College of the Arts.

All of these students pay only the interest on their loans while in school, and can choose flexible terms for the balance, with up to 15 years to repay.

The ConSern program was designed by a consortium of universities, is backed by major financial institutions and is administered by a nonprofit organization. Beginning this month, any business and its employees can participate in ConSern through membership in the U.S. Chamber of Commerce.

U.S. Chamber President Richard L. Lesher and Whalen briefed Secretary of Education William J. Bennett on the plan to extend the ConSern program to the national business community, and he congratulated them on the initiative.

"The great virtue of programs such as this," the secretary said, "is that they rely exclusively on private capital and do not commit federal funds in any way. This kind of activity is self-help at its very best."

Interest in obtaining education loans has intensified in recent years in the face of tuition charges that have risen faster than family incomes and the overall inflation rate.

Whalen, a former president of the Catholic University of America, editor of the 15-volume New Catholic Encyclopedia and executive director of a consortium of 12 Washington-area universities and colleges, says government education-lending to low-income families, even though it reaches only 15 percent of the population, must be continued. "We don't worry about the top 15 percent," Whalen says. "It's the 70 percent in between that really have the problem."

Whalen says higher education today is an economic essential. "Years ago, when I was a boy," he says, "it was a rare person who went to college. Then, after World War II and the GI Bill, a college education became the desideratum of the majority. No longer was it just for the elite.

"Early in our history, this country made an economic accommodation so a person could get shelter, have a home. Later, we developed a second necessity, the monthly payment for a car. Now we have a third necessity, a monthly payment for an education.

"That shows how we are changing," Whalen says. "The first thing, the home, meant stability. The second necessity, the car, gave us mobility. The third thing, education, provides intellectual mobility."