AS IT TRAVELS THE information superhighway, Nashville's Third National Bank is making a local stop - at Belmont University.
The subsidiary of Atlanta's SunTrust Banks Inc. is using electronic data interchange to process student loan payments and related loan information.
The bank, which has assets of more than $3 billion and operates solely in the Nashville area, is transmitting loan funds and data electronically, effectively eliminating a lot of paperwork.
By using electronic data interchange, the bank can get the funds to the school - and applied to the students' accounts - much faster than with the conventional check method.
David B. Ramsay, Third National's executive vice president, said the use of electronic data interchange for student loans offers "a win-win" situation for all parties involved.
Electronic data interchange "is good for the schools and the bank, because the schools are able to receive consolidated loan information every day while freeing up the staff to concentrate on other tasks and the bank is also able to reduce the amount of paperwork associated with loans as well as do away with the checks completely," Mr. Ramsay said.
"We are able to communicate the information in a more timely manner, and the lenders no longer have to deal with the tremendous volume of checks and other documents usually associated with the student loan process."
Over the last few years, Third National has seen dramatic growth in its student loan department.
The bank found that with the growth came the task of expanding its processing operation with the change of every semester.
In 1991, the bank originated 5,680 loans; in 1992, it originated 7,537; it originated more than 9,600 last year.
In the first six months of 1994, the portfolio grew by 3,836 loans. Mr. Ramsay notes that the bulk of the student loan origination business takes place in the third quarter, and he expects to surpass last year's figures.
While the bank provides loans to students at all Nashville-areas colleges, the electronic data interchange function is currently available only at Belmont.
With the use of electronic data interchange, the funds go directly into the university's coffers instead of having the university receive a check on the student's behalf and wait to have it endorsed and cashed.
"Previously, the university received a check and had to go through the long process of locating the students and getting them to endorse the back of the check and sometimes the student's schedule conflicted and made it a very long process," Mr. Ramsay said.
"Now all the university has to do is have the students sign a document that allows the school to accept the funds on their behalf and the funds are received automatically."
One of the benefits Third National receives from the electronic data interchange function is a prominent place on the "preferred list of lenders" the school sends to students requesting loan information.
"We see a direct correlation between the increase in our portfolio and the offering of the EDI service," said Mr. Ramsay.
"By offering the technology, we think we will be able to increase our market share."
Third National Bank initiated the program when its corporate services and student loan departments were looking for ways to increase the efficiency of the student loan disbursement operation and decrease the paper flow to the university's financial aid and business office.
By using electronic data interchange, the bank is able to send all of the necessary student loan data along with the funds in a single transmission.
Over a year ago, Third National began to look at ways to make its student loan operation more efficient. It found the use of electronic funds transfer was a partial solution, but realized that financial electronic data interchange was the real answer.
"When we looked at the electronic funds transfer piece of the transaction we realized that if we were able to move the money electronically we also had to find a way to transmit the data with it through a single stream of information," Mr. Ramsay said.
"EDI allows us to update the university's computer while providing them with the technology we were developing," he added.
Electronic data interchange allows the bank to increase the efficiencies of its operation because it does not have to create the checks, it does not need to have someone sign the items, and the items do not need to be reconciled.
"We have seen a tremendous savings in check production alone," said Mr. Ramsay.
The bank hopes to expand the electronic data interchange operation to other universities soon.
"We have several other universities that have indicated that they want to be second, third, and fourth in line to start using EDI," said Mr. Ram say.
The officials at Belmont University say they are happy to play guinea pig.
"We think every financial aid office in the country ought to have a system like this one," said Claude Pressnell, director of financial aid.
"The system has proved invaluable to our operation.
"Traditionally, data entry associated with student loans was a major obstacle in providing rapid processing," he continued. "And as a result students did not get their funds as quickly as they might have. Now, through the use of EDI, we have eliminated the long lines and made the process work better for everyone."
Because the university cannot dictate that a student get a loan from Third National, there are cases where the loan payments are not handled electronically.
However, through the automated clearing house, Third National is also processing funds and data from other banks so the school can receive the information electronically.
"Some of the students will get a loan from their hometown bank and the university instructs the bank to transmit the funds and the data to us and we send it to the school," said Mr. Ramsay.
At a Glance
THIRD NATIONAL BANK
Headquarters: Nashville
Assets: $3 billion
Employees: 1,280
Branches: 48
Number of student loans originated:
1994: 3,836*
1993: 9,605
1992: 7,537
1991: 5,680
* First six months of the year
