Comments on Cuomo's Plans for Loan Fines

• Questions for Mr. Cuomo
• Posted by Jack on June 22, 2009 at 7:00am EDT

• 1. Why limit eligibility to provide services to companies located in New York? State boundaries did not prevent you from seeking settlements with companies that did virtually no business in the State.
  2. Why the delay in announcing how the money will be spent? You sat on these funds for over a year and have refused to answer questions relating to it.
  3. Will the public get a full accounting of the money--every penny of it? We expect no less from a many so committed to justice as you are.
  4. Will your office publish a log of all--and we mean all--contacts with your office relating to the process that led up to your decision on what to spend the money on and what process to use?
  5. If My Rich Uncle emerges from bankruptcy and reorganizes as a non-profit, will they be eligible for funding?
  6. How's the race for governor going? Did your interest in this running have anything to do with delaying the awarding of funds?

• Cuomo's patronage fund
• Posted by feudi pandola , FAO on June 22, 2009 at 8:30am EDT

• Why not call this "Cuomo Fund" what it is...a patronage fund for whomever he decides is worthy to get a slice of it within his home state. What rubbish! One good thing though, at least My Rich Uncle went bankrupt. Couldn't happen to a nicer company.

• Mr. Cuomo's Fund
• Posted by Steve Biklen on June 22, 2009 at 10:45am EDT

• Will $13.7 million be enough to sustain all of the endeavors mentioned over the long haul?

• Now he can sleep better
• Posted by Sara , Financial Aid Director on June 22, 2009 at 11:00am EDT

• Now Cuomo can sleep better. Since the banks and guaranty agencies paid the government loan fees, gave reduction of interest and principle for on-time payments, and even paid off 1% of the principle upon graduation..... now millions of students can pay a whole lot more! My students were so happy this year when I informed them that Cuomo has cost them A LOT of money and they get to pay more than they did before. YEA!!! Way to go Cuomo! As they are writing out checks to the federal government, I'm sure they will appreciate your web-site which tells them to beware of those three financial aid employees that you exposed.

• A Waste of Funds
• Posted by John E. View , Director of Financial Aid, Scholarships and EOP at SUNY College of Environmental Science and Forestry on June 22, 2009 at 11:01am EDT

• I find it very disturbing that the AG would dole out 13 million dollars (I presume the collections from his SLATE campaign) to create a useless service that is already being provided by NYHESC, every college and university in the US, several national student loan agencies similar to NYHESC such as Sallie Mae, EDFUND, NSLP, ASA, AES, TG, Great Lakes,etc.
  To use this funds will be a duplication of services already existing and simply waste these funds. A more useful, appropriate and functional way to administer these funds is to have the public service associations such as New York State Financial Aid Administrators Association(NYSFAAA) and/or SUNY Financial Aid Administrators(SUNYFAP) access these funds to go into low income schools and target students who without the professional expertise of these volunteers will indeed view access to New York State higher education as unobtainable. Currently both NYSFAAA and
  SUNYFAP have programs that address this. Ironically, NYSFAAA was unable to provide a portion of their public service programming last year at the NY State Fair due to the Fair administration demanding that NYSFAAA, a non-profit group, pay an outrageous fee to staff a public information table. I find the action by that state agency to be an outrage but if NYSFAAA had access to these funds then NY students and their families would be served. Last year they were not and that is certainly one of the many negative unforeseen consequences that has developed by the passage of the SLATE bill.
  The purpose of those funds was to allow non-profit agencies and groups, such as the New York State Financial Aid Administrators Association to expand, implement and improve communications to students, parents and school counselors all the resources available to pay for college as well as financial literacy programs.
  Furthermore, the funds collected, as I understand the law, were to be deposited into an account that would be administered by the State Comptroller with oversight by the NYSED Higher Education Committee.
  Why then is the AG circumventing that process? Why are non profit public service groups being excluded from this process? Where is the transparency now?
  In April, Assemblywoman Lupardo spoke at the SUNYFAP conference. I asked her in the question and answer period after her speech as to the disposition of these collected funds. To my surprise she was not aware they existed. To her credit she initiated contact with the AG's office to establish a meeting to discuss the topic. She has been unsuccessful to date and the reason given was the AG need time to set aside a date. In the meantime this notice gets sent to ad firms to apparently dispose of the funds while no one is looking.
  The SLATE law was passed, and regardless of my personal feelings I have continued to monitor the process so that my profession, whose reputation was tainted by this issue, would have an opportunity to clearly demonstrate that we have been, continue to be and will continue to be the best and strongest advocates for our students and their families to do everything in our power to locate, process and secure ample financial assistance to help them achieve their educational goals.
  Clearly, in my humble opinion, that opportunity is being disallowed my profession and I believe that to be a grave mistake.
  

• Now it is so clear...
• Posted by Bob on June 22, 2009 at 11:30am EDT

• Mr. Cuomo wants to take this initial step into the student loan industry...because with his vast experience he thinks he can do it better. He has been a closet FAO all along.

  What a prince, ...a peach even!

  I think I might sign up to volunteer for his election campaign. He has convinced me.

• Mr. View's comments
• Posted by feudi , FAO on June 22, 2009 at 11:45am EDT

• Thank you very much John View for your excellent letter and comments on the Cuomo Patronage Fund. I certainly appreciate your sentiments and hope that those in power in NY state follow up on this matter. Our profession was publicly pummeled by AG Cuomo and, in the end, he found out that the financial aid community is far more ethical than say, um...Wall Street bankers. I hope he reads your letter and does the right thing with that $13 Mill, but frankly, I wouldn't bet a cup of coffee on it.

• Lower the interest rate on existing loans
• Posted by Jim Dolan on June 22, 2009 at 12:15pm EDT

• Clearly, many schools conspired with lenders to screw the student borrowers. These students and their parents are now struggling to pay back these questionable loans which came with interest rates higher than they should have been.

  Do the right thing with this money. Offer the students (and their families) who were taken advantage of an opportunity to rewrite their student loans at a LOWER INTEREST RATE!

  The borrowers are the ones who need consideration here. The school officials and lenders are lucky they were not prosecuted for larceny.

• Power and Control are a wonderful thing
• Posted by Dave , none at none on June 22, 2009 at 12:15pm EDT

• Having been in this industry for more than 15 years, I can tell you horror stories about Cuomo and his minions. One example of many -- Lenders were actually fined for giving away free student loan literature to colleges and universities - are you kidding. Its not that the literature was misleading -- all the lenders had all applicable legal language and disclosures. It was that the literature was classified as a "gift". Are you kidding? Folks I'm here to tell you -- government run student loans will cost you more. And this "grant" is just one step. Do you think for one minute that Cuomo will not set policy upon the recipients. The "Student Loan Bill of Rights" - a catchphrase generated by Cuomos Office, was created not by Cuomo and his staff. It was created by reputable lenders who saw cheating amongst not so reputable lenders. His office just compiled these suggestions and took credit for them. Companies like NelNet, CLC, NextStudent, CIT and such were instrumental in helping create the Student Loan bill of Rights. Of course you'd never hear that from Cuomos office. Obviously a lawyer in NY has a much greater knowledge of the student loan space than those who've been helping kids and their parents nationally for years. While not a fan, government run student loans for me personally is better - but not for the country. When SAP (special allowance payment) was paid to lenders, the entire country paid for that SAP through taxes and lenders would drive down the interest rate charged to students and parents to be competitive. In a government run program, there is no SAP, therefore students and parents sending their kids to school will make up that difference with higher interest rates -- say goodbye to lender incentives. Cuomos grant is a baby step that parallels the federal govt. And isn't it strange how he collected this money nationally through strong arming schools outside his state and national lenders (and yes some of them needed strong arming), but he'll only re-distribute it locally in the state of NY.

• The right idea.
• Posted by Alan Collinge , Founder at Studentloanjustice.org on June 22, 2009 at 12:15pm EDT

• I applaud this initiative, in theory. An unbiased entity for the purpose of warning/advising students has been needed for a long time. This is something that should have happened years, if not decades ago at the federal level.

  It is inappropriate, however, for any organization that receives funding as a result of the origination, guaranty, servicing.or collection of student loans to participate. Frankly, if this is going to work well, the organization should be staffed by people who have true passion for the issue, and actually want to help students and their families. There are alot of well educated, knowledgeable New York residents whose lives have been trashed by their student loans, and are now unemployed (in some cases, as a result of their student loans, ironically!). Use them.

   

• Legal extortion
• Posted by commonsense101 on June 22, 2009 at 12:15pm EDT

• This fund was nothing other than legally-sanctioned extortion. And the proposal of how to spend it is ridiculous! Some call-in center is going to tell students which loan is better?? About as good as having a twenty-something tell you whether or not you need a medical procedure. Something should be done about this.

• Duomo loan fund
• Posted by Harold Thomas on June 22, 2009 at 1:30pm EDT

• Mr. View makes excellent observations.

  The Attorney General's grant fund may be a day late and $13 million short.

  The State's college financial aid agency, Higher Education Services Corporation (HESC), has a free student loan comparision service called "Student Loan Marketplace" which does NOW just what the Attorney General grant will try to do some time in the future. It allows fair, complete, and transparent comparisons of student loan products. The AG's office must know it exists.

  A public announcement campaign about avalilable student aid, other than loans, is admirable, but isn't worth $13 million as many media do it for free. And, the fact of the matter is that many students will have to borrow to attend college as grant aid does not cover full costs of attendance for most students.

  A better use of the $13 million would be to invest it to produce lower interest rates in the NYHELPs student loan program approved by the Governor and Legislture in March. According to the HESC Web site, NYHELPs will go live in January to offer low cost loans to New Yorkers attending college in NY. An additional infusion of funds in the program's reserve fund would encourage lenders and related bond investors to reduce interest rates.

  According to HESC's Web site, NYHELPs will require students to file for all available federal and state aid, pass financial literacy tests, and have financial need certified by the college EACH YEAR, before they receive the low-cost loan.

  Supporting NYHELPs would be an excellent use of the fine money collected by the AG.

• Mr Dolan's comments
• Posted by Sam , Consultant at none on June 22, 2009 at 2:30pm EDT

• As someone who was a financial aid director at a FFEL school and then went to work for a lender, I have to say I never saw the kind of situation Mr. Dolan describes. We do have evidence that a very few financial aid administrators did conspire to limit students' and parents's choice. This was a violation of trust and professional standards. When we looked at lenders (at my school) we made choices about preferred lenders based upon service, discounts (origination fees and interest rate reductions). We did not limit out students' or parents' choices to our "preferred list" and we tried to deliver every borrower's loan on time.

  As a lender representative, all of my schools did business in a similar way--that is, they made choices about preferred lenders on the basis of service and price to the borrower. I think that the difference between federal loan programs (which have interest rates set by law) and private loan programs; many of which had tiered interest rates such that the borrower (and/or co-borrower) with the highest credit score got the best interest rate, was and is very confusing. Many of the private loan programs were offered with competive rates and repayment options. Some, unfortunately usually open to students and families with lower credit scores, had extremely high interest rates and less attractive repayment plans.

  While I believe my school and many others could have done a better job of educating borrowers about options and repayment costs, borrowers were never forced to take out either a federal or private loan. It is one thing to acknowledge that a very few financial aid administrators tainted an honorable profession; it is quite another to assert that most schools "screwed" borrowers. The evidence suggests that this was not the case.

• Borrower Responsibility?
• Posted by KL on June 23, 2009 at 8:57am EDT

• What about the concept of personal responsibility in borrowing? I'm frustrated that lenders and school officials are getting blamed for students being overburdened by debt and stuck with high interest rates. While I sympathize with those students and their families - hey, they signed the promissory notes. They had the terms of the loan on paper (or at least on the computer screen) in front of them, and they signed on. It takes two parties to make a loan - the borrowers should not be painted as innocent victims, just because they did not perhaps take the time to read the terms of their loan before they signed on to get the money.

  Do some lenders choose to lend out more money than a student needs for their cost of attendance? Yes. I've worked for one such lender. But it's the student (and their parents/family) who apply for and accept this money. Would we expect the lender to play "Big Brother" and advise the student against taking out so much money? Well, it would be nice if they did. But this is *business*. The lender is in the business of making loans. So they make the loans that the students apply for.

  Do some schools choose to maintain a preferred lender list that points students towards select lenders, who may or may not offer the lowest rates/fees? Sure, maybe. Some schools do (or did). But students -if they do their research - could learn that they are able to take out a loan from whichever lender they choose - the school legally can't block their options. And it is my experience that the majority of school financial aid officers really and sincerely have the students' best interests in mind. They know the lenders, they know the business, they've seen thousands of students in similar situations before - they have the information and ability to advise the students as to their best financing options. Unfortunately Cuomo and lenders such as MyRichUncle have conducted such a smear campaign as to try to discredit these school officials and make students/families believe they can't be trusted. That is incredibly unfortunate and unfair.

• Why so dismissive?
• Posted by the watcher on June 23, 2009 at 9:00am EDT

• Doug, it's very disappointing to see you be so dismissive of the Cuomo investigation and the scandals that were uncovered. It's in the self interest of the student loan industry and colleges to downplay the significance of the abuses (which were the worst in the proprietary sector, where many of the most disadvantaged students were misled into taking out subprime private loans with variable, uncapped interest rates as high as 21 percent because of the cozy relationships between the lenders and colleges). But there's no reason for you to do the same. We expect more from Inside Higher Ed.

• Same old way of doing things
• Posted by Anonymous on June 23, 2009 at 11:45am EDT

• Just like class action lawsuits where the injuried class members get a coupon for 10 cents off their next purchase, this does not benefit the actual harmed class. There are so many borrowers who are stuck with loans that never should have been allowed and yet, we are using the money to help future borrowers. That's fine but.......where is the help for the harmed ???? It also reminds me of the tobacco settlement where the actual 40 year addicted person who does not have access to money to try quit smoking programs (not covered by insurance but drug help and alcohol assistance is covered) also is not helped. What is it with helping others and not helping the actually harmed victims? I say the money needs to go to the victims....period. Correct the wrong done and then set about making sure no future harm is done. It's called fair and it's called common sense.

• Misallocation
• Posted by kgotthardt on June 23, 2009 at 12:15pm EDT

• I was so excited when Mr. Cuomo started his investigations and collected back monies, thinking justice was finally on its way. Now, I am highly disappointed in his planned allocations. That money should go back to students, not bureaucracy.

  Ever hear of scholarships, Mr. Cuomo? You know, those things you don't have to pay back, those things that can make or break a student's ability to attend college?

• All excitations, aside (and I understand the thrills)
• Posted by DFS on June 23, 2009 at 3:45pm EDT

• Any time Cuomo has a plan, we are left to consider the quandry of 'Cuomo' with 'Plan.'

  Unless it is towards immediate realization of socialism, of course.

  I'm all aTwitter about it, of course.