Mud Slinging

In higher education circles, 2006 may be remembered as the year when student loan companies for the first time started to attack each other and financial aid administrators in paid advertisements. Maverick student loan provider MyRichUncle, which offers below market rate federal college loans, roiled the financial aid community with two-page advertisements in the New York Times and USA Today alleging kickbacks and payola to colleges that funnel student business to preferred banks. In the process, MyRichUncle splashed mud on the integrity of college financial aid administrators everywhere.

For those of us far enough away not to get splattered, it serves as a reminder that financial aid administrators are pivotal officials in high-stakes decisions, those involving not just loan companies but students, parents, institutions, donors, states, and even the federal government. If you think that student aid administrators simply give out grant money to the neediest students first, and when funds run out, arrange education loans for students by looking only to those with the best terms and conditions for students, well, think again.

MyRichUncle was wrong to suggest that all financial aid administrators are on the take, but they were right to note the conflicting pressures on financial aid counselors. For example:

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* College Presidents receive <a href="http://www.belleville.com/mld/belleville/news/state/15444373.htm" target="_blank">big financial contributions when a financial aid administrator's institution partners with a local bank that provides student loans</a>.
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* College Presidents and others encourage financial aid officers to provide students with <a href="http://www.civilrightsproject.harvard.edu/research/meritaid/fullreport.php" target="_blank">merit aid</a>, as opposed to need-based financial aid, in order <a href="http://www.usnews.com/usnews/edu/college/rankings/rankindex_brief.php" target="_blank">to boost a colleges U.S. News & World Report ranking</a>. 
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* Lenders offer top financial aid officers free trips to exotic locations where they're educated about private loan products for their college's students.  
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* Lenders have special arrangements with colleges whereby institutions place a solicitous lender on a "preferred provider list that students are encouraged to consider when choosing a loan product.  <a href="/downloads/NASFAA%20List.pdf" target="_blank">Here's a ranking of things financial aid officers are encouraged by national associations to consider when determining preffered providers</a> (see page 12).  You'll see that price to students is barely considered at all.  
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All this and more puts an inordinate strain on overwhelmingly good-hearted, and Higher Ed Watch believes, honest financial aid administrators who tend think of themselves as working in a helping profession. But because higher education has gotten so expensive, today financial aid administrators make big decisions that move millions. As sure as water flows down hill, corrupting temptations follow.

Rather than denying the obvious and fighting it out in the national media, is anyone for re-thinking the whole convoluted and conflict-ridden system?