Long before this year's incoming freshmen crack a book at Mississippi State University, many will get an education in online borrowing.
For the past three years Bruce Crain, Mississippi State's director of financial aid, has been steadily beefing up the section of its Web site where a growing list of institutions make loans available on a point-and-click basis. A host of local banks have been brushing up on new technology to make the grade.
To get on the list, "you've got to participate electronically," Mr. Crain said. "Our students expect it, the schools expect it, and, really, the feds expect it. Probably a third or half of those banks are local Mississippi banks, and the majority of student loans go through our local banks."
Such tech expectations have been molding the student loan business from coast to coast. Buoyed by a tidal wave of college-bound youngsters who need to cover ever-rising costs, student borrowing has soared, and Mr. Crain's counterparts around the country are pushing Web links to a pool of eager borrowers. And though national lenders have been raising the technology ante by continually speeding up the lending process, some community bankers say they have a built-in edge.
"If you're a parent and wanted to find a way to pay for school, you'd want to do that with your own bank," said Shelby Burkhardt, the student loan director at National Bank of Commerce, a unit of NBC Capital Corp. of Starkville, not far from Mississippi State's main campus.
By relying on a Web-based system, community banks like the $1 billion-asset National Bank of Commerce have learned how to keep their costs down while lining up low-interest loans.
Meanwhile, secondary buyers and service groups have been offering to handle the more expensive end of maintaining the loans.
"I think we're seeing community banks come back into" the student loan business "that got out of it," said Norg Sanderson, the president of Student Loan Finance Corp., a secondary student loan buyer in Aberdeen, S.D., which over the past five years has added hundreds of community banks to its list of borrowers. "You can't have a person in the bank to do that for just a few loans. It's all about critical mass and efficiency."
While student lending in general has been growing at 8% to 10% a year for the past few years, Student Loan Finance's community-bank-generated portfolio has been swelling at an annual rate of 22% to 23%, according to Mr. Sanderson.
But Phillip Wambsganns, the marketing director for the North Texas Higher Education Servicing Corp., a Dallas nonprofit that works with community banks that offer student loans, says they are not for every bank. A major consideration: The competition is fierce. Big lenders like Citigroup Inc. and Bank One Corp. can operate nationwide and have assembled sophisticated and very popular Web sites.
To be successful, a community bank needs at least one major hometown school to put it on its preferred provider list and must develop a way to channel loans electronically through the school's financial aid office, Mr. Wambsganns said.
But opportunities exist. Just a year after moving over to the $1.1 billion-asset TexasBank in Weatherford after 17 years at a nearby institution, Earlene Blocker has managed to get her bank on lender lists at several universities in the Dallas-Fort Worth area.
"You get to know everybody" through the financial aid contacts, said Ms. Blocker, the vice president in charge of student loans. "It's like one big family," and those relationships are "key to making it work."
But those contacts are just one way TexasBank implements its hands-on marketing strategy. It also distributes literature at college nights at local high schools.
The payoff? Ms. Blocker is projecting, conservatively, that its student loan portfolio will grow by 15% to 20% in the coming year. …