Until the company filed for “Chapter 11” bankruptcy in 2008, The Education Resources Institute, Inc., better known as TERI, had played a major role in many American student’s college life over the past 25 years. An average student, that is, for whom the goal and norm then – as now – is to get through college academically, yes, but also to successfully wing it through financially. And thus for whom, most likely, the only way, or at least the best option, was through an educational loan.
TERI, a non-profit organization based in Boston, Massachusetts, was established in 1985. Its vision, as stated in its website which is still up, is to provide access to education in the United States at all levels, for aspiring students of all backgrounds and ages. A private student loan program, which the same website announces has been suspended a result of its bankruptcy declaration, was among the services the company offered to achieve this goal.
Despite having keeled over as a result of financial and legal problems directly related to the national financial woes, TERI has so far retained its reputation and description as “the oldest and largest non-profit guarantor of private education loans in the country.”
And while it’s true that if you’re planning to or are already in college today, you no longer have the option of a so-called “Teri private student loan,” it may help to understand what exactly a “Teri loan” means. And subsequently – and as you may soon realize, more importantly – what the even more often used term these days, the “non-Teri private student loan,” refers to.
The Private Student Loan Option
Anyone who dreams of a college education, as you most probably do, knows that the best financial support package to back that dream is a scholarship grant whose conditions do not include repayment of the costs involved in seeing you through to graduation day. But even without that scholarship windfall – or wealthy parents and generous benefactors – an aspiring and determined high school graduate student can still get a shot at a college degree through an educational loan.
Unlike an outright grant which does not financially tie you down after graduation, an educational loan is financial aid in support of college studies, which must be repaid with interest and over a period agreed upon by the lender of the funds and the borrower. These terms are among the set of the conditions for approval of the loan.
As in most other types of loans, the funds for the loan are provided by a lender (a bank or a financial institution), who agrees to lend them to the borrower. In this case, the loan is applied for by either the student himself/herself or the parent of the student, who will be directly responsible for the repayment of the loan. Normally, because it is the nature of banks and financial institutions to make sure they get the borrowed funds back, they seek out a guarantor, who in effect assures the lender that the money will be paid back, if not by the borrower, then by the guarantor himself.
Since education is and has always been a top priority in the United States, the federal government has long been involved in providing funding for education, either through direct loans that are available to parents or students, or by serving as guarantor for the loans granted to students and their parents through the Department of Education.
It can happen though, that the loan amount received from or guaranteed by federal funds may not be enough to cover all the expenses of a college student. This is where the private student loan or private education loan option comes in.
This type of loan is also known as an alternative student loan, seeming to imply or counsel that you have this option when financial assistance from the government is not enough for your needs. Unlike a federal-funded loan which put a premium on the student’s need, a private student loan doesn’t consider that, but looks instead at income and credit worthiness. In short, how capable you will be to pay back the loan.
TERI as Loan Guarantor
The role that The Education Resources Institute (TERI) assumed until 2008 was a guarantor for the loans that students received from their creditors or the lending institutions.
TERI basically served as a vital link between banks and financing groups, which were willing to lend tuition money to students, on the one hand, and the students in need of funds on the other.
In time, TERI also linked up the banks and students with the schools that they wished to enroll in, such that a “Teri school” came to mean an institution accredited by TERI. In terms of loan accessibility, this meant that if you were accepted for enrolment in a “Teri school,” you were eligible or qualified for a private student loan that would be guaranteed by TERI. Conversely, it also meant that TERI had to approve the school and the course that you intended to enroll in, for you to qualify for the loan. There had also been reports that students had to meet a certain academic load requirement to assure loan application approval.
At the time, the TERI Supplemental Loan program was operational, it offered loans for students and/or their parents for undergraduate (college), graduate and continuing education courses. Loans were also available for degrees in the health professions and at various levels of a medical professional’s training, including medical residency.
Processing was easy – you could access all the information, download the forms, fill them up and transmit them through the TERI website. And, as the company heralded, it offered interest rates that were competitive, preliminary or initial approval in about 15 minutes when inquiring through their website or by phone, and loan disbursement in five days if all the requirements are in order. On average, a loan applicant could borrow from $1,000 to $20,000 at variable interest, payable up to 25 years under several possible payment schemes.
At peak operation, TERI announced that it had private education loans offered by more than 30 financial institutions that it was partnering with, and available in over 5,000 schools. Over the years that it had managed the loan program, the company is said to have provided more than $20 billion in loan guarantees that supported around a million students in various levels of education, from grade school to post-graduate courses.
What Caused the TERI Crash?
College students hoping to tap funding sources other than the government lost one such source when The Educational Resources Institute filed for bankruptcy in April 2008. Months before, TERI had borne the brunt of defaults on the loans that it had guaranteed over the recent years. Obviously, the economic downturn that swept the nation over the past few years took its toll on families, crippling their capacity to pay educational loans.
In financial circles, it was surmised that the TERI had not adequately prepared for this, and as it became more cash-strapped, loan disbursement checks bounced, causing worries among its partner banks and investors. This loss of confidence caused it even more financial problems.
The company has been quick to assure the public, however, that it is only the loan program that has been suspended – and only temporarily to allow them to restructure the program in the hope of getting it back on the tract. Filing for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code grants the company that privilege, while enabling the company to continue with its other operations such as the promotion of college access and counseling in loan management.
If you go to the TERI website these days, there is a statement immediately in its home page announcing the suspension of the loan program. Meanwhile, all other pages related to this program have been discontinued.
Since TERI’s filing of bankruptcy in 2008, the company as well as the student loans market industry has been swamped with questions from students and their parents, especially regarding loans that they have defaulted on, unable to or delayed in paying, or have been already re-structured. In some cases, cases and counter-suits have been filed by creditor lending institutions and borrowers. There is much to learn on loans and how to handle them by reading through these reports.
Check Out the Non-Teri Student Loans
Obviously, one unfortunate result of this tragic turn of events for TERI has been the loss of another possible fund support for college students like you, hoping for a lifeline to get them through the semester, the school year, or all the way to graduation day.
Interestingly, a new segment has emerged in the private student loans world, and you may have heard of it as well – the “non Teri private student loans.” While there is no clear definition or explanation of what a “non teri” student loan is, it doesn’t take too much imagination to conclude that such “non-Teri” loans provide access to funds that are available not only through The Educational Resources Institute network.
Whatever your source of supplementary funds for your college needs though, you’ll never go wrong by heeding the counsel of the wise and the experienced, not only in academic life but in the world of banking and finance, of borrowing and lending.
Seek out government or federal funded financial support as a first option – and then, only as a last resort, and after having done extensive research and pencil pushing, go for a private student loan – Teri or non-teri!
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