Be wary of student loan counselors who charge fees

THE ISSUE Families are paying student loan counselors for advice they can get for free at colleges.

WITH the economy crumbling, household budgets tightening and college tuition skyrocketing, student loans are reaching record levels, creating a tempting market for professional consultants. Families must realize that paying fees for consultation is unnecessary, since college assistance of students in obtaining federal loans is free.

Many parents know little about student loan programs, which were unnecessary for most collegians decades ago. As the need increased, the U.S. Education Department began requiring all students to undergo "initial counseling" when they applied for a federal loan for the first time. The number of students submitting the Free Application for Federal Student Aid rose from 7.7 million in the 2007-08 academic year to 9 million in the current academic year.

However, students and parents in Hawaii have been lured to Nichole Buendia, 28, a self-proclaimed expert on paying for college, for private counseling. While a student at Farrington High School, Buendia entered beauty contests in an attempt to win a scholarship, and later became a mortgage solicitor.

Buendia never has worked as a college financial aid counselor, and has been sued 10 times in Hawaii courts for alleged financial misdealing. Three financial institutions have won judgments against her, and she is on probation from her convictions last year on four counts of perjury, a felony.

She has continued to be featured speaker at workshops held at public libraries by College Planning Specialists, a for-profit company formed last year by Shane Sarae to sell consultation for student loans. The company takes in fees that Buendia says range from "a couple hundred to a couple thousand dollars."

The Sarae operation is not unique. "It's a multimillion-dollar industry," Mike Young, career counselor at Kalani High School, told the Star-Bulletin's Susan Essoyan. "They scare people into thinking that if they don't sign up, they're not going to get any financial aid."

Applying for financial aid is complicated, with several types of loans, terms and interest rates. "The process can seem like untying a Gordian knot," says consultant Kal Chany, author of "Paying for College Without Going Broke." (Not to be confused with "How to Get Your Child a 4-year College Education Without Going Broke," with authorship claimed on the Internet by at least 20 people, including Ran Caruthers, a Californian hired by Sarae as coach and consultant.)

Ron Lieber, who writes the "Your Money" column for The New York Times, advises students to "find people in the financial aid office who really know their stuff, and then make one of them your friend for the next four years." The Education Department requires colleges to make people available after the initial counseling, he notes, and counselors are likely to welcome the break from reading financial forms and spreadsheets.