This is all very revealing. But what is driving this discussion? Is it the need for more government regulations? Or as it is pointed out in the article, some individuals in our government think that more students need to go to direct lending?

If schools are not flocking to direct lending their must be a reason, my guess is that the schools can’t handle it. Most university and financial aid offices are understaffed and under budgeted. Therefore we need “help” not more compliance and cost issues.

Our lenders serve a function, most of our representatives have past financial aid experience, so they can relate to a schools issues and help. They do more then just push loans, they act as a resource for educational information and industry information. Many of our loan representatative do high school college nights, is that a conflict of interest? One of the items in the Spelling’s commission report is that high school students receive little or no information. Well, if we have people who are willing to take their time and talk to high school people about college and affordability, then I say let them do it.But guess what, they do not “push” their loan product, it is a generic talk. Also, some institutions use lender representatives for exit counseling (something required by our government for students) they come in and hold session after session for graduating seniors, giving them the facts plus financial advice, that most college staff’s can’t do, or have the time to do.

So, think about it, what is the reason for this “big” flap? Is there a bigger issue here?

We have the Spelling’s report that is generating some negative comments; we have Senator Kennedy trying to push direct lending and getting no where. We also have the PELL funding matters not to mention the TRIO programs.....maybe just maybe, someone is trying to make fire where there is smoke.Trying to direct attention away from the real issues of college funding (grants) and college access for poor people.

I am not naive enough not to believe there are not “greedy” people out here in financial aid land. But putting it in prespective, if everyone had to deal with the kind of people (students and families) that most financial aid people have to deal with, a baseball ticket doesn’t seem to be such a bad thing. Heaven help us all, if we all have to be “perfect” and by the way whos definition will we use for perfect? Senator’s Kennedy? President Bush? President Clinton’s? Senator Clinton’s? It isn’t easy being perfect.

Yes there is money in loans, the loan industry was created by the government, and the question needs to be asked why? My quess a the answer is a political one. Congress needed to get more people to vote, so why not give more people something, therefore people might vote. If aid was given just to the poor, most of our congress people would not take their time for it, but middle class and others get loans, and these people vote.

I wonder what will be next.

Jim, at 8:31 am EDT on April 6, 2007

Student loan industry practices

As part of his investigation, I’d like to see Mr. Cuomo look in to the interest rates charged by lenders such as Sallie Mae. One student I know paid 13.72% interest on her loan from Sallie Mae. Meanwhile, the former CEO of Sallie MAE, Al Lord, made over $41,000,000 in stock options before he left the company. I also know of one student who defaulted on loans valued at about $560. He has now been advised that this debt of a few years ago has now swollen to over $2,400! He can’t go back to school until this is paid. These are the sort of abuses that need fixing too, in addition to the abuses noted by Mr. Cuomo at places like Penn.

I disagree completely with John Edwards that the solution is to turn all loans over to the feds through the Direct Loan program. I’d like to see a study done on the repayment rates of direct loans versus other lenders. I don’t think the federal government should have a monopoly on student loans. This is, after all, America.

feudi pandola, at 9:01 am EDT on April 6, 2007

Ethics? Did someone mention ethics?

I am fascinated as well as appalled to see persons on this thread defending the financial aid officials who received perks and “gifts” for steering students to the “right” lenders, or even profited from buying stock in the loan companies they tried to get students to “prefer.”

I am aware this sort of thing is common practice in many businesses. Of course it is. Doctors get “gifts” from high-pressure drug sales staff. Instructors, always at the bottom of the barrel, get $5 Starbucks gift cards to induce them to make the “right” textbook choices. Indeed, I can remember when the recording industry’s practice was to send out salesmen equipped with vest-pocket samples of the store manager’s drug of choice. (It was the Seventies, you know.)

The name for this stuff is corruption, people. What’s so hard about that?

Now for a wider view. I believe the root of at least part of the problem lies in the fact that medicine, education, (and, for that matter, the arts) are no longer thought of as professions, but as businesses. Doctors are no longer in charge of medicine and professors are no longer in charge of higher education. In both fields, ever-thickening layers of administrators and bureaucrats, many of whom have scanty credentials and a hazy knowledge of the profession itself, run their institutions as profit-making enterprises, making sure to do plenty of good for themselves along the way. This scandal is an outstanding example of the corrupt practices they have engaged in, but there are many, many other, less blatant examples.

Charlotte Pressler, at 10:45 am EDT on April 6, 2007

To the lender...thank you for dinner.

God love the financial aid director who uses his or her influence to make lenders compete for their business..(including the department of ed) Many professionals use RFPs or negotiate directly....on behalf of their students....to acquire lower rates, brochures, extra staff during crunch times, call center help from lenders, all in the spirit of serving their students better. There are very few financial aid professionals “in it for the money". They love their students and work hard to get them the best possible rates/service and encourage them to borrow as little as possible...that is the standard. So what if a lender takes them to dinner and tries to establish a relationship so they can “pitch” their products and services. It keeps the financial aid folks aware of the new products and increases the competition. We all know the FAOs can’t afford to eat at those restaurants on their salary! Conferences and advisory boards at resorts...why not? Every industry in the world does this...it is standard sales practice. Financial Aid Officers are professionals, not sheep, and they know that perks are part of the lender’s sales tool kit...but they don’t have to buy....and they won’t, unless it benefits their students.

However, when the incentive becomes a personal monetary gain, such as stock options for the specific financial aid officer, it crosses the line. I believe this is very isolated and likely involves very few FAOs and lenders.

It is a shame the entire industry is taking a hit on this. I’m afraid the financial aid officers will have to increase their budgets for next year...because the lenders will be afraid to give the free pens and sticky pads, etc....and oh, don’t forget to pack a lunch for NASFAA.

retired lender rep, at 11:00 am EDT on April 6, 2007

For political gain or the students

I’ll agree that the student loan industry needs some direction. Lending and college are still “in business” however. If Sen Kennedy, Rep Miller, and AG Cuomo want to place some restrictions on lender school relations, stop the trips and revenue sharing. But not allowing taking someone out to lunch is a bit excessive. It sounds like their next proposal will be to have a lender and financial aid officer sit on the opposite side of glass and have to talk via telephone like in prison.

Does the industry need to have a more guidelines, yes. But to restrict normal business activity seems to overstep boundaries. Lunch or the occasional local sports event, I’m not sure what the big deal is? Flying someone to the Superbowl or Final Four or providing NBA playoff tickets or NFL season tickets, thats very excessive. But sitting in the stands of a local college or pro-team regular season game, what’s the big deal. Do you think that all of people in the seats of a baseball game are families? Look at the score board when they list all of groups attending the game. A lot of those are companies with customers. That’s normal business. Is AG Cuomo going after all of the companies listed on the score board at a Mets games? He may want to see if any of the businesses had customers with them. If so, go get em’ AG.

It seems to me that Kennedy and Miller are looking to make enough noise so it will be viewed as going against students if you don’t vote with them on the Sunshine Act or their push for Direct Lending. You don’t what to be against students, do you? But everything they are yelling about in FFEL is what they are proposing with Direct. No choice of lender and “kickbacks” to the schools that stay in Direct for 5 years. I don’t hear much talk of about the cost of attendance which is the reason students need these loans. They are playing politics to get their pet program pushed through.

With troops in Iraq & Afghanistan, hurricane victims still in trailers on the Gulf Coast, health care becoming more out of reach, I find it hard to belief Congress needs to worry if a financial aid office employee goes to lunch or went to see the local minor league baseball team. Eliminate the revenue sharing, stock options, and tropical trips. But some thing are just business, let them be. Most of the Financial Aid professionals know what it over the line and what it just part of business and getting to have fun once and a while.

Bill, at 1:15 pm EDT on April 6, 2007

Math lesson

” .. Granted I have seen some interesting things that border on inducements in my time, but this industry is no different ..”

* “Free” pens @ convention — NBD; put into cost of loans.

* A free staff lunch, every Friday, at MD’s office — over the top.

* 10,000 stock options @ $1, sold at $10/option — FBI investigation?

* Hilliary’s “adventure” in beef futures ($1,000 that became $100,000) — a vast, right-wing conspiracy?

http://www.washingtonpost.com/wp-...al/whitewater/stories/wwtr940527.htm

Baz, at 1:50 pm EDT on April 6, 2007

Nothin in life is free

Ted: the fact that you could borrow a federally guaranteed loan at a better rate that Direct is due to the sizeable profit margin that lender has. “Loan Financing Bank” can pay your loan fees for you saving you a penny because they know they can milk a pound out of the taxpapyers. The Direct Loan program would not have to resort to “buying schools” if the schools were doing the other part of their job: being stewards of taxpayer funds. That’s the biggest piece I see missing in all of this. If others in my profession do not wake up and take responsibility for correcting this mess we created, I don’t see education funding ever changing for the better. Be prepared: pell grants can’t go up, loan limits can’t go up interest rates won’t get cut because we have made the selfish, shortsighted decision to let the money go to lenders. Good for us!

AN FAO, Fin Aid Officer, at 2:55 pm EDT on April 6, 2007

Who Else in ED holds financial interests in lenders?

I light of the discovery of an ED official holding student loan stock, I strongly believe that it would be appropriate for a thorough investigation into the financial interests of all staff at ED who work on higher education financing.

What other ED employees (or their family members) hold stock or other interests in student loan companies? How high and deep does this go?

Not only do the lenders nowadays attribute their record profits to penalties and fees from defaulted loans...ED makes 20 cents for every dollar it pays out in default claims.

In other words: The whole system is awash in cash, much of which is stripped from those who fell behind, as one of the comments above shows. This is predatory lending.

Too many people have had their lives wrecked by a student loan system astonishingly lacking in standard consumer protections for too many years, for this issue to be dropped.

Given that there will continue to be a viable FFELP program in the future, we at least need the most basic consumer protections back, including bankruptcy protections of some sort (for all loans, Direct, FFELP, or private), and refinancing rights.

Not to mention ED should stop stealing peoples Social Security and Disability Checks, hugely needed income that typically doesn’t even cover the fees and penalties slapped onto the debt.

Once the “swamp” is “drained", I would hope that legislation will occur that puts student loans at least on a par with credit cards, and payday loans.

Alan Collinge, Founder at Stuentloanjustice.org, at 3:30 pm EDT on April 6, 2007

Teachable moment: Harry Truman

Fellow student loan borrowers: ignore all the politicians who want to get elected to “protect” students, as well as their taxpayer-supported bureaucrat-minions.

Recall what Harry Truman (use Wikipedia) said about when someone offers to help you — “go home and lock the meat freezer.”

You are your own best friend in this. Before borrowing — understand what you are signing. Any doubts — don’t sign.

If already in deep water — go to authentic non-profit credit counseling. Prepare to play hard-ball.

The U.S. has the best student financial aid system in the world. But, contrary to the politicians, you are still responsible for your actions. Any doubts — don’t sign. Lots of people take a more measured approach to college — you can, too.

Baz, at 6:45 pm EDT on April 6, 2007

We surrendered on the War on Poverty

“But putting it in prespective (sic), if everyone had to deal with the kind of people (students and families) that most financial aid people have to deal with, a baseball ticket doesn’t seem to be such a bad thing.” Who are you and why do you work in this field? If you think the students and families (your customer and the reason for the existance of your job) are suck a pain, you’re in the wrong field! So do us all a favor and LEAVE!

Second this lending just illustrates the demise of the U.S. We continue to espouse how we good we are, yet when it comes to business, anything goes. No morality, no ethics, no consideration for fair play. If we can make a bigger profit by ripping you off, so be it. If we can get the business by giving you perks, so be it. After all, it’s deductible as a business expense and fully paid for by the customer, the students.

In the 60’s we had the war on poverty. Our goal was to end poverty in the richest nation on earth. Our goal was to reach out our hand to our less fortunate neighbor. Our goal was to end the divide between the haves and have nots. Then along came the 80’s and the war on government and regulations. The war on welfare and other government subsidies for the poor. And now we have corporate welfare and nothing for the poor. We have tax breaks for the rich, because by their twisted logic, that will help the poor! (Obviously by this logic we should have a reverse graduated income tax. The more you make the less you pay. Make the poor pay 99% and the rich 1%. But I digress.)

We need to get back to our war on poverty and in that war include a war on greed. Greed does not make the world a better place, it makes Enrons and the like. For ourselves and the betterment of society, we need to Decrease the cost of post secondary education. We need to stop funding the corporations and the rich and fund Education. Funding Education brings future tax revenues that keep up with inflation. Funding education ends the shortage of skilled workers and ends the needs for high-tech worker visas (Bill Gates!).

In 1975 when I started college I was a 30 hr/wk busboy and the cost for a quarter at the University of Toledo was two weeks pay. 60 hours of labor at $3.00 per hours paid for 10 weeks of college. The cost of college now for a busboy is a student loan because we spent the money else where. Where did we spend it>

We have troops in 178 nations, a war on terror, a war on drugs and more people incarcerated (85% for drug related crimes) than any other nation. Hmmm, I wonder what we spend money on? Time to change our priorities and stop this craziness. If we change the system, the corruption of the Financial Aide Officers becomes a moot point. If we make it so a busboy can pay cash for college ...

Tom, at 1:55 pm EDT on April 8, 2007

Scrutiny and Self-Scrutiny on Loans

I did not realize how dependant we’ve become as a society...and it’s very sad. Maybe I’m the exception, but I made a decision on my own regarding my student loans. I attended a Financial Aid Night, packed with those “nasty” lenders, as a Senior in High School and then met with my “corrupted” student loan counselor later that spring. I still somehow managed to make an educated decision and picked a lender. Did I sell myself short during this process? Should I have expected a parade for my ability to use free will and fill out a FAFSA with my parents?

I’m about to enter the “real world” and am leaning toward a postion that makes the current student loan environment close to my heart. It scares me to death that adults like yourselves have gone to such lengths to display your lack of independence.

It’s true, everything I needed to know I learned in kindergarten.

1)If you don’t think someone is playing nice...don’t play with them. No one at any time sat me on a mat next to an individual and declared that this person will be my friend because his parents paid the principal to make it happen and the principal instructed the teacher of how things are going to work for the time being, or until the contract with the parents has completed.

2)If someone offers you something, always say, “please,” and, “thank you.” No other obligations are necesary at that time. I don’t remember, but I think it’s safe to assume that when I received my first milk at school, I was not obligated to only drink said milk my entire time at school, nor was said milk receiving any type of unfair promotion in the sand box.

3) I’m somebody special. I’m an individual who over time will learn to think, speak, and read independant of the environment around me.

I know this entry is laced with sarcasm, and I hope some of you found humor in the simplicity of my explainations. My point, directed to Cuomo, Kennedy, and my soon to be peers, pure and simple is this:

“We’re all adults capable of making important decisions. We can either lead, follow, or get out of the way, but we must accept the fact that our actions are our own.”

-anonymous

Thank you for your time,

A future colleague

Student loan borrower, Lead, follow, or get out of the way... at Real life, at 3:50 pm EDT on April 10, 2007

Student loan fraud

Here’s an angle I did not notice anyone else commenting on: I entered a PhD program seven years ago that was supposed to take me three to complete. It took twice that long, due primarily to two doctoral commmittees falling apart. One due to the firing by the U. of my major professor, another due to the promotion of another major committee member.

So, I ended up borrowing twice the money I first committed to the program and now have a 6-figure debt. But, I am not alone. In fact, so many others from our institution experienced similar delays, we are considering taking action to determine if this is a widespread and intentional practice to get more of those student loan dollars into the University.

Dr. Tony Husemann, Science Dept. Chair at Calvary Christian Academy, at 12:00 pm EDT on April 17, 2007