NASFAA Under the Microscope

In March, Dallas Martin, President of the National Association of Student Financial Aid Administrators (NASFAA), sent a scathing letter to New York State Attorney General Andrew Cuomo demanding "a prompt and public apology" for his "unwarranted character assassination of public servants who only want to do what is best for their students and their families."

Mr. Martin may want reconsider his demand. Higher Ed Watch's and Mr. Cuomo's investigations have uncovered personal financial arrangements between financial aid officials and at least one student loan company. Yesterday, NASFAA found itself the target of another investigation and recipient of some very bad press.

A front page splash in yesterdays Wall Street Journal (subscription only) scrutinizes NASFAA's ties to the student loan industry. The damaging investigative piece highlights large contributions and perks given to NASFAA by student loan providers like Sallie Mae and cites examples of NASFAA taking the loan industrys line, often over the best interests of students.

Lender Money to NASFAA

Insiders have known about NASFAAs connections to student loan providers for a long while (see "Romancing the Schools"). But yesterday's Journal article offers more color highlighting how lenders funnel financial support to NASFAA through sponsorship fees for the association's annual conferencean event that generated one quarter of NASFAAs $7.9 million in revenue in 2005.

For NASFAA's upcoming conference, for example, KeyBank has paid $20,000 to sponsor the opening session. OneSimpleLoan has paid almost $11,000 to sponsor the National Chairmans reception. Student Loan Xpress has paid almost $3,000 to sponsor a breakfast. Sallie Mae is a confirmed "chair level" sponsor.

For past NASFAA events, lenders have also provided outside perks to attendees, such as Broadway show tickets, dinners at the Rainbow Room, and trips up the Space Needle. Perhaps most surprising to Higher Ed Watch is the revelation that officials from student loan companies serve as the Presidents of three state associations of financial aid administrators.

Pro-Lender Policy Positions Taken by NASFAA

Yesterday's Wall Street Journal article uncovers a particularly shocking example (especially given the recent Student Loan Xpress scandal) of questionable policy positions taken by NASFAA's leadership, unknown to many financial aid officers.

In 2004, NASFAAs board voted against setting rules to restrict gifts from lenders. The vote came after a task force had recommended that the NASFAA Board do something about the growing number of lender perks, and even advised the board to propose a federal law requiring the public reporting of gifts worth more than $50. But the board voted no, 13-14.

More recently, NASFAA's leadership decided to oppose a Department of Education planned rule to require that schools name a minimum of three lenders on preferred lender lists. NASFAA's leadership has said that because some schools have found one lender who offers very favorable loan terms, there is no need to require them to identify additional preferred lenders for students. Those silly students might make the wrong choice.

Next Steps

We would be shocked if other media outlets do not pursue additional investigations of NASFAAs state affiliates. A good place to start might be in New York State, where the New York Student Financial Aid Administrators Association offers some interesting (ahem, loan company) sponsorship opportunities, including a massage therapy group and a magician for conference attendees. A magician.

In light of recent reports and yesterday's Wall Street Journal article, we have a question for Mr. Martin: Do you still think New York State Attorney General Andrew Cuomo owes you and others an apology?

Addendum:

Under attack, NASFAA Board Chair Janet Dodson on Wednesday urged the association's members to contact lawmakers, and provided specific talking points for them to use. "Your job is easy," she advises them, "All you have to do is tell the truth."

The truth, that is, according to NASFAA.

In your own words,

• Explain that while you do not condone abuses in the student aid programs, these practices do not occur at your institution...
• Let lawmakers know that the recent hype surrounding student loans is incomplete...
• Remind lawmakers that everyone's goal is the same: to provide the best loans possible to students...
• Describe the careful process you use to achieve this goal...

Or, in the words of an acerbic colleague: "Your job is easy! Tell the truth, which consists of the following four items..."