I don’t mean to get into semantics, but am I the only one that thinks it’s laughable that there is the expectation of objectivity from something called a Preferred Lender List?

Kevin, at 11:56 am EDT on April 10, 2007

fees from student loans

All universities should reveal any tacked on fees that are charged students. One example is a special fee to the student for paying online as is used by one large lender. Any universities that receive payments from the lenders for some or all loans to students should also be putting that forth poublicly as well.

This would be more important than the few cases of kickbacks, consulting and other special payments going to individuals

Lee Richardson, at 12:11 pm EDT on April 10, 2007

Preferred Lending Lists “Laughable"?

Not if you understand the complexity of the relationship.

I am a graduate student at one of the named universities in this scandal that relies on financial aid to attend my program of study. I have been counseled by the Financial Aid office that I am to not seek out lending sources other than the Preferred Lenders and it is required of me to report to the office ANY private lending sources I seek out. If I have chosen a lender not on their Preferred List, then I’ve been notified that I will face additional scrutiny in my future financial aid applications. My ability to secure even Federal Student Loans such as Stafford Loans has been threatened by the Financial Aid office if I choose lenders not on their Preferred List. This is hardly “laughable.”

Student, at 1:56 pm EDT on April 10, 2007

Report it, don’t sit there...

If indeed this happened to you, “Student,” please inform the AG’s office in your State as soon as you can. If what you note is accurate, and in even a small way deals with Federal loan programs (not Private Loans), it is clearly illegal.

It is important that all of you know that there are many Directors of Financial Aid (ethical, student-centered members of the aid community)happy to see this disgusting chapter come crashing down. Some of us have fought to exclude lenders from State and National level committee work. As a result, all of us have been quickly placed on the curb, denied positions on Federal policy boards, and soon limited in our ability to participate on State and National level discussions. When lenders have forced their way onto committees, we have resigned in disgust rather than serve. Yes, we are here —- we too are completely sickened by what these men and women did.

The sad part about this situaion is that the aid directors in question likely believe that they did nothing wrong. I imagine they really believe their time in the profession resulted in an “expert opinion” which, in turn, resulted in compensation. The idea that a two-day conference in Vermont, or an eight hour discussion “on the Bay,” does not align well with an $80,000 donation to one’s own company was likely never considered.

Take this for what it’s worth, but the lenders in question are not to blame. Lenders simply took advantage of a long-standing weakness within the aid profession: an exagerated sense of professional importance within the arena of amazing amounts of money. It was only a matter of time ...

InsideAid, Sounds Line a Crime To Me, at 5:10 pm EDT on April 10, 2007

Bigger issue — personal responsibility

Yet another case of “I’m shocked, shocked” about alleged fraud when government-subsidized financing is abused.

Fellow student loan borrowers — it is our names on those loan documents. Not the administration. Not the faculty. Our names. We’re on the hook for the money.

So — ask hard questions. Require substantive answers. Look at all alternatives, including multiple lenders.

Along that line —

Why so many administrators? Why so many ridiculous “kumbaya” sessions? Why are overhead costs so high? Why do they go up, faster than inflation? Why do so many syllabi look the same, every year?

Students first, people.

L.C.G., at 5:35 pm EDT on April 10, 2007

Higher Ed Scandals

Maybe when Cuomo gets done with the student loan industry he could take a look at a few other things, like the relationship of business officers to vendors (why is it that the NACUBO conference is always in such a nice place?) Or maybe the cozy relationship between professors and the text book industry (hmmmm...professors that write text books and then require them for their classes, even though they are never used?) Or maybe the relationship between universities and corporations like Barnes and Noble (outsourced bookstores?) Or how about the relationship between grants officers and granting agencies? I bet he (Cuomo) could find all kinds of interesting things. Or perhaps someone should turn the tables and investigate the relationships between Cuomo, Kennedy, and My Rich Uncle?

BC, at 5:30 am EDT on April 11, 2007

Keep It Real

You yourself said that students won’t realize these benefits? Really? I have looked at a few companies like SLM & NNI and both seem to waive any origination fees, offer a.25% ACH reduction, offer a 1% interest reductions or even 3%+ Principal reductions. Don’t make it sound like MRU is this great company and the other companies don’t offer these same types of benefits to not only their stafford loan customers but also to their consolidation customers.

TooManyLies, at 9:31 pm EDT on April 11, 2007

More than Cheapest Loans

Keep It Real, it’s more than just the cheapest loan on the market. Don’t forget to mix in service and history. Daewoo made some of the cheapest cars a few years ago, but they are no longer part of the US car market. How many do you see on the road? Just because they were the cheapest doesn’t mean they are the best.

I talked to a FOA professional about the nightmare it was to get MRU to certify the wonderful Stafford loan you claim they have, delaying the funding for the student. What service was that to the student? How long will MRU be around? Maybe 5 years more, maybe 100, who knows. Earning trust and demonstrating solid customer service is part of the total package. Why would a FAO send a student to a company that provides poor service just because it would save the student a couple hundred dollars over a 10 year loan. Mr. Real, I’m sure you go to places that charge a little more for better service, don’t you?

Bill, at 12:00 pm EDT on April 12, 2007

Re: Its more than service

Bill,You bring up somewhat good points. I would imagine if you talked to the Daewoo buyer’s three things would happen. 1. Some of the buyers hated it. 2. Some of the buyers have no opinion and 3. Some of the buyers love their car. Just because they were the cheapest doesn’t make them the best (what is best? And by who’s standard?). Shouldn’t the consumer at least be able to decide for themselves what is best? The bottom line is the consumer/student borrower should be aware of all available lending options. The notion that a Financial Aid Office can determine what is “best” for every student is ridiculous.

As for MyRichUncle being around 5 years or 100 years has no relevance. Earning trust does have relevance. If you are suggesting all new loan players are dishonest or do not provide solid customer service you are misguided. If that line of thinking were true, the following is also true. The results from Mr. Cumos investigation has resulted in uncovering dishonest and unethical financial aid officers and offices. As a result, all financial aid officers and offices are dishonest and unethical. As it relates to the Daewoo, where will the Financial Aid Office be in years to come?

By the way, the early claims that MyRichUncle made regarding business as usual in the financial aid office/industry is now showing to be true. I guess we can put a tick mark in the trust column for MyRichUncle.

I also have talked to FAO’s and have personally processed both MyRichUncle private and Federal Loans and can tell you each were processed without delay. In fact, one particular student was approved for a private loan via MyRichUncle when all other lenders on our list denied her – including Sallie, Citi and Key Bank. Thanks to funding via MyRichUncle this student is going to be the first in her family to graduate from college.

Finally, your comment “Why would a FAO send a student to a company that provides poor service just because it would save the student a couple hundred dollars over a 10 year loan.” This is exactly one of the reasons our industry has been deservingly put in the spotlight of greed and unethical behavior. Since when were we financial aid officers granted such almighty power to “send” kids to where we think is best? I’m not sure about your office, but can tell you with 100% confidence our office/university does not payback a single loan for our students. Thus, we give them options (via things to look for when selecting a lender) and let them and their families determine what is best for their situation.

And yes, I do go to places because of service, but I also loan money from banks that will save me the most money – I’m the one paying it back. I have yet to talk to anyone who has said “ ya know, I got approved for a Mortgage at company “A” at an interest rate of 5.5%, but didn’t take it. Instead, I took out a loan with my local bank at an interest rate of 10.5% because they know my name, provide outstanding customer service and I know they are going to be around next year.”

Maybe I’m hanging with the wrong crowd of successful honest community leaders?

Keep It Real!

Keep It Real, at 2:42 pm EDT on April 12, 2007

Re: Dayofreckoning

No egg here trust me... I’m only here for one thing, the student. Now that my stock options and expense paid trips are gone, what else is there. Those darn politicians are just trying to make a name for themselves. It’s a wonder if I’ll even be able to fill my bag with all the grerat giveaways at this years conference. Now thats some egg...

Keep It Real, at 4:56 pm EDT on April 12, 2007

PREFERRED LENDERS

One thing I haven’t seen in all the press coverage of this issue is a solid explanation of how preferred lender lists came into being.

Now—I am not defending the actions of any of those practitioners who personally profited from their relationships with lenders. I am disgusted by this; these people are giving the rest of us a bad name, and should know better.

However the public should understand that preferred lender lists got started years ago as a PROTECTION for students. The fact is that as the system is set up, the students may borrow from any lender out there. And there are so many of them—thousands—that we in the business starting seeing students who chose to deal with lenders which had unfavorable policies. I remember back in the 80’s, dealing with students who had borrowed from a different lender every year. When they went into repayment all those loans required a minimum payment every month, whereas students who stuck with one lender hcould have them serialized so that there was only one monthly payment. There were also situations where schools were dealing with paper loan applications generated by any of of 50 guarantee agencies in the country. Each one was different, each agency had different guidelines, and it was very difficult to help your student if his application got caught in some bureacratic snag.

The preferred lender list came into being when college financial aid offices finally got hip to the fact that they could demand better customer service from lenders in exchange for lending volume. When you had the clout of 3000 kids using the same lender, if they did not treat students right, if they did not offer good service, you could threaten to take your business elsewhere. All of this served to greatly improve and streamline the process for students. Before that I had kids eating potato chip and mustard sandwiches while they waited for their long delayed loan checks. So a preffere list was the only conscionable thing to, if you wanted to advocate and serve your students well.

Now the whole thing has gotten out of hand...but we should remember this practice had its roots in helping students naviagte a bad system to begin with.

Disgusted, at 12:55 pm EDT on April 13, 2007