Roundup: Week of April 16 - April 20
Blog Post
April 19, 2007
Miller Calls on Spellings to Take Emergency Action on Student Loan Regulations
Representative George Miller (D-CA) sent a letter to Education Secretary Margaret Spellings on Wednesday urging her to implement five student loan "emergency action items." He also harshly criticized the Department of Educations inadequate oversight of the student loan industry in a conference call with reporters. Miller is calling for: a moratorium on preferred lender lists; stricter regulations on inducements and an end to all bribes; full disclosure of any conflicts of interest by institutions and lenders; requiring all institutions and lenders to cease any conflicts of interest; and a full investigation of all Department of Education employees for potential conflicts of interest. Spellings did not directly reply, but a statement by her spokeswoman emphasized Spellings commitment to student loan reform and described her approach as "more deliberative and comprehensive."
UT System Asks Campuses to Remove Preferred Lender Lists
The University of Texas system has asked all 15 campuses to halt the use of preferred lender lists. An email sent Monday requested that distribution of these lists cease immediately, including postings on campuses websites, while the systems administration conducts a review. Officials offered campuses alternatives to the preferred lender lists, including use of nonprofit Texas Guaranteed Student Loan Corporations list of about 100 lenders. Campuses are allowed to keep the lists posted if they prove that they are based on objective and factual matters, such as volume. Administrators have mentioned the possibility of permanently ending the use of preferred lender lists. Financial aid offices were also asked to report any perks that they have accepted from student loan companies, including outright payments or coverage of travel expenses.
Dallas Martin Rescinds Earlier Comments, Apologizes to Cuomo
Dallas Martin, president of the National Association of Student Financial Aid Administrators (NASFAA), has apologized for his criticisms of New York State Attorney General Andrew Cuomos investigation into the student loan industry. Martin wrote Cuomo in a March 19th letter that his actions were an "unwanted character assassination of public servants who only wanted to do what was best for students and their families" and that he expected an apology from Cuomo. As Cuomos investigation continues to uncover numerous improper school-lender relationships, Martin has changed his tune. Martin acknowledged to the Chronicle of Higher Education that he was quick to rush to judgment, and stated that he hopes to work with Cuomo to improve ethics regulations for lenders and colleges. Martin also noted that he regretted the decision by NASFAAs board to reject stricter perk guidelines for financial aid administrators, and admitted that such regulations may have prevented some of the scandals that have recently come to light.
Scrutiny of Deals Between Alumni Associations and Loan Consolidation Companies
Several local newspapers have uncovered financial deals between alumni associations and loan consolidation companies that steer alumni to certain lenders. Loan consolidation companies have pursued and entered into contracts with alumni associations, often without the knowledge of the schools financial aid office, under which associations receive payments for every loan consolidation by an alumnus. For example, the alumni association at Boise State University (subscription required; April 17) has a deal with Nelnet to promote its loan consolidation business to alumni, and each referral nets the association $100. The University of Minnesota Alumni Association canceled its contract with Nelnet on Wednesday, which had given Nelnet the right to market its services by mail to alumni in exchange for $100 for each alumni consolidation application.
Investigations by State Attorney Generals Multiply
State Attorney Generals around the country are following the example of New York State Attorney General Andrew Cuomo and starting their own student loan investigations. Specifically, Arizona, California, Illinois, Massachusetts, Missouri and Rhode Island have all actively joined in Cuomos effort to shed light on the relationships between lenders and schools. California Attorney General Jerry Brown made his first move Tuesday and demanded that San Francisco based Education Finance Partners Inc. and Student Loan Xpress provide details of their business interactions with California colleges. In response to an investigation by the Chicago Tribune, the Attorney Generals office in Illinois is looking into lender arrangements at several colleges. In addition, on Tuesday the National Association of Attorney Generals held a conference call, spearheaded by Cuomo, with more than 100 participants from 40 states to discuss recent investigations and to brainstorm possible solutions.