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Dallas Martin, president of the National Association of Student Financial Aid Administrators, told the Wall Street Journal last week that many administrators are upset that their integrity is under assault, and that revenue sharing agreements are "normal business practices."
But there's more going on than revenue sharing agreements,
however normal or unacceptable they are. According to Cuomo's release: Lenders
pay for all-expense-paid trips for financial aid officers (and their spouses)
to high-end resorts such as Pebble Beach, Calif., as well as exotic locations
in the Caribbean and elsewhere. Lenders also provide schools with other benefits
such as computer systems and put representatives from schools on their advisory
boards in order to further curry favor with the schools. Lenders
set up funds and credit lines for schools to use in exchange for schools putting
the lenders on their preferred lender lists.Lenders offer
large payments to schools to drop out of the direct federal loan program so that
the lenders get more business. Lenders set up call centers
for schools. When students call the schools' financial aid centers, they actually
get representatives of the lenders.Lenders on preferred
lender lists agree to sell loans to a single lender so there is actually no real
choice for the student.Lenders sell loans to other lenders,
often wiping out the back-end benefits originally promised to the students without
the students ever knowing. Legislation
to protect students
Cuomo isn't the only one on the offensive. So
is Sen. Edward Kennedy D-Mass., who heads the Senate Health, Education, Labor
and Pensions Committee. He's conducting his own investigation of potential conflicts
of interest. He has written to 16 lenders, asking them to submit any and all documentation
of incentives they provided since January of 2001 to colleges and universities
for the purpose of getting placed on their preferred lender lists.
In addition he and Sen. Richard J. Durbin D-Ill.,
introduced the Student
Loan Sunshine Act, which includes the following provisions:
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Provisions of the Student Loan Sunshine Act |
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| • | Requires
full disclosure of arrangements between lenders and schools. | | • | Bans
gifts from lenders to college employees that are worth more than $10. |
| • | Prohibits
lenders from participating in call centers during peak loan processing times. |
| • | Requires
the development of a clear disclosure form that reports the terms and conditions
of student loans uniformly. | | • | Demands
that colleges' preferred lender lists contain a minimum of three non-affiliated
lenders. | | • | Requires
private lenders who provide loans directly to consumers to first notify the borrower's
school before agreements are struck so that the school can inform the student
of any remaining federal loan options available. | |
"Going to college is hard enough. Students shouldn't
have to worry about being exploited when they take out student loans," Sen.
Kennedy said. |
