Comments on Not-So-Honest Broker

• Disbelief
• Posted by Marny Lemmel , Lecturer at The Pontifical College Josephinum on July 7, 2009 at 8:00am EDT

• It is difficult to believe that the U.S. Education Department Federal Student Aid office would be so unethical.

• Double-Speak
• Posted by Sharon DiLeo on July 7, 2009 at 8:00am EDT

• Why would the U.S. Department of Education outsource its Ombudsman Services to an "outside corporation" to the tune of $300 million dollars? This is an egregious breach of public trust at the expense of those who are most vulnerable--Student Borrowers!

• Far worse than a conflict, it's a congruence of interest
• Posted by Joe Beckmann , Consultant at Schools and Community Agencies on July 7, 2009 at 8:15am EDT

• And that "interest" is a pornographic parody of a pun - paricularly when money and politics converge so efficiently. That the Bush administration should have the legal power to bind this particular office into a ten year contract is equally pornographic, specifically because those same players wreaked havoc in this distinctive part of the economy for its own, personal financial interest. And that the Obama administration - the Arne Duncan administration - should provide such blithe oversight compounds what, in any other nation, would be seen as felonious. How could any level of evaluation ignore the overt conflict between advising debtors and collecting those debts? It is patently absurd to defend such malevolence by citing reimbursement terms, when those same terms "incent" the contractor to serve the same clients multiple times. Such incentives really incense a public sick of the self-dealing of the last crew, and extremely sensitive to the smell of self-dealing by the new one.

  So, the question is, who in Arne's cadre is benefitting from a Vangent contract, and what are their benefits? How do we make that cost them (politically) anything like what it costs the public, at $300,000,000? Framed that way, it shouldn't be too tough a question for advocates to gather and focus evidence.

• Posted by DS on July 7, 2009 at 9:45am EDT

• You know, those of us on campuses learned a while back that the best way to avoid any conflicts of interest is to avoid even the suspicion thereof. But then again, this is the same fox that was watching over the henhouse during the myriad fiascos we've seen in student loan operations for years now...none of which have kept the best interest of students or taxpayers in mind.

• Really?
• Posted by Austin on July 7, 2009 at 10:15am EDT

• Using the logic of this article, how can we trust the insights of Mark Kantrowitz, someone whose website operated for years as a feeder for FastWeb (sold lists of students/parents to credit card companies and anyone else who would pay, and is owned by the same company that owns Mark's site) and was supported by ads from Citibank, who pushed private loans on gullible students? Doesn't Mark bill himself as an independent expert while getting compensation from a company that "exploits" students?

  I think the headline of this piece does not reflect the substance of the article.

• Don't blame the guy left holding the bag
• Posted by DS on July 7, 2009 at 1:15pm EDT

• The Dept of Ed has responsibilities ranging from pre-K to post-doc. As obviously wrong as this is, it's not likely to have made its way to the top of Arne Duncan's to-do list just yet. If the previous administration, with ED under the watchful blind eye of Margaret Spellings, gave this company a mega-contract on their way out the door last year (and the contract may be legally hard to break), that's no more Duncan's fault than Iraq or the economy is his boss' fault. Just up to them, once again, to clean up Bush's mess.

  And thank you, Austin for your comments...Kantrowicz is a bright guy, but how is he a neutral expert when he has never been a practitioner and has prominent lender ads on his site? Yet read just about any article about aid anywhere, he's the only expert any reporter can find.

• Needs Review by GAO or a State AG
• Posted by Student Advocate on July 7, 2009 at 1:15pm EDT

• There are at least two problems here that cannot be explained away: the obvious appearance of a conflict of interest and a corruption of the very definition of an ombudsman.  How could the Department of Education not see both problems?

   

   

  What is needed is an outside oversight body (such as GAO) to look at how many cases have been resolved in favor of borrowers and how many in favor of the student loan industry, with appropriate evaluation techniques.  

   

   

  Perhaps a borrower who was misled by the arrangement should contact his or her state attorney general to investigate.  There is good precedent: such an investigation in 2007 turned up institutions that contracted with the loan industry to answer student financial aid questions but did not disclose to students to whom they were actually speaking.  These institutions were forced to stop the practice, which would be a good outcome at the Department of Education as well.  

• Only in America
• Posted by Dustin , Affiliate Manager on July 7, 2009 at 1:30pm EDT

• I am not going to waste alot of time....Just want to say this does not suprise me at all. Come on people this is the greed capital of the world. And the U.S. Government is first in line...

• Posted by Not Surprised on July 7, 2009 at 1:45pm EDT

• It should come as no surprise that the Government is doing this. Just look at who it awarded servicing contracts to for Student Loans. We all know they are on the take, but what are we going to do about it???

• Conflict of interest, much?
• Posted by Deeply in debt student on July 7, 2009 at 2:15pm EDT

• It is fine that Vangent is not paid per student it begins to collect from; however, as a debt collections agency with a vested interest in collecting anyway, is it not unethical to provide them with details of a borrower's private information that they did neither knowingly or willingly provide? Gathering information from the original lender is one thing, but the possible transmission of information from a government agency to a collections office is highly unethical and a strict violation of my personal privacy. If Blockbuster can't legally show my rentals on my Facebook page, how can the DoE possibly feel that the possibilities for conflict of interest and unethical information sharing is right, just, moral and above all else, legal?

• Disaster Capitalism
• Posted by Ron on July 7, 2009 at 2:45pm EDT

• Just another example of the disaster capitalism that Nomi Klein has written about, where the government sells off the proceeds of disaster--in this case, the student loan crisis--to private interests who reap the benefits. The Dept.'s response is typical of a bureaucratic logic completely unaccountable to the public interest, we shouldn't expect that to change anytime soon.

  Can someone explain all the hate for Mark Kantrowitz?

• always the underlying issue
• Posted by L on July 7, 2009 at 2:45pm EDT

• The problems of the entire country's crash of infrastructure could be cured by the implementation of 1 simple principle: financial incentives should only be given for objectively positive goals. So, loan companies don't get paid more if you default, they get paid more if you make regular payments, and even more if the debt can be negotiated. Same goes for mortgage companies. Same goes for doctors: the healthier your patients become, the more money you make. Teachers: the more successful your students become, the more money you make. Junk food: made so expensive via taxes that it becomes cost prohibitive to create and sell, thus curing a nation ravaged of diseases caused by corn derivatives. Companies: the more air you clean, the greener your business is, the more money the government lets you keep. I mean really, there is not an aspect of life that this principle could not be applied to to make the country and its people prosperous.

  The opposite principle is hugely apparent in the student loan business. Lobbyists + financial incentives to default loans, raise interest rates at random, charges usurious fees + oversight by interested parties + an educational complex that continues to raise tuition rates at a wildly irrational pace + student loans being a necessity for students who are not multi-millionaires= obvious recipe for disaster. In most other countries, debt is bad (and in a large part of the world, charging interest is immoral and illegal) and most people avoid it like the plague. But those countries also usually have structures in place to prevent people from having to leverage their existence to survive (like free healthcare, childcare, and education). That the ombudsman would be an interested party should not be shocking anymore--this tale is an old one when insurance companies are spending $14 million a day for lobbyists on the Hill during a recession...

  This generation can't sit by anymore and allow our elected officials to keep the status quo. If we don't object, en masse, nothing will change.

• I'm Satisfied
• Posted by Ed McKinley on July 7, 2009 at 3:45pm EDT

• After all, if the Dept. of Education awarded this contract and then, in hindsight, looked back on this decision and decided that is was not unethical, the it must be OK.
  Most certainly, had they thought for even one minute that they could have made even the slightest error in judgement I am sure they would have said so immediately.
  Just because this company makes money based on the collection of student loans and may not make any money if they fail to perform at this task, what in the world could cause anyone to think for even one minute that this factor could influence their performance at the Ombudsman's office in any way. I, for one, think that is just jumping to conclusions. It simply would make no sense for them to try and increase their profits by engaging in any kind of activity that would hinder their objectivity when dealing with the resolution of student loan issues at the Dept. of ED.
  I thank those who were kind enough to take a look at it and decide that it was OK. I feel better now.

• Grevious yet minor in comparison to other flaws
• Posted by Peter Beattie , Adjunct professor, English at CUNY on July 7, 2009 at 4:15pm EDT

• Not terribly surprising, sad to say. "Excellent work" to the intrepid person(s) who unearthed this scandal. It's just the tip of the iceberg in a system that makes no sense: putting private profit into education, which is more efficiently conceived of as a public utility. Idiocy is made twice egregious when private profit is protected by unsurpassedly strong anti-bankruptcy provisions, making it impossible for students who made what turned out to be a poor investment to get a clean slate.

• Posted by kgotthardt on July 7, 2009 at 5:45pm EDT

• My experience when I called the Ombuds? Basically, "You owe the money. Pay the loan," even when the school I was attending was breaking the law and ED knew it. I'm not kidding.

  Heather Dunbar is an amazing person. Thank you, Heather, for bringing this to light and reassuring all of us that we weren't just imagining it when it seemed like the Ombuds weren't particularly motivated to help us.

• investigate
• Posted by K. Eng , Consultant on July 7, 2009 at 5:45pm EDT

• I hope that the Department of Justice investigates this.

• Legitimation Crisis
• Posted by Ron on July 7, 2009 at 7:30pm EDT

• It seems that the Department of Education feels it has nothing to worry about that it can casually fluff off this story as "overblown." What it fails to understand is that there is a real legitimation crisis underway in this country, whereby millions of young people saddled with student debt from which there is no recourse are losing any trust in their government as the see how complicit it is in their exploitation. Remember all that good will built up during the Obama campaign? Well, its all about to go poof, as young people realize that his administration is as unaccountable to them as the previous. Nice work in uncovering this story!

• Digusted but not surprised
• Posted by Andy on July 8, 2009 at 8:45am EDT

• I'm not going to spend a lot of time repeating what's already been said, but yes, this seems to be one of the most appalling examples of the Bush administration's selling off public services to the lowest bidder. A wonderful gift to the nation's next generation of educated professionals.

  Thanks to Heather Dunbar, Allan Collinge and Inside Higher Ed for publicizing the issue.

• Collection Agencies and Conflicts
• Posted by Deanne Loonin , Director at NCLC's Student Loan Borrower Assistance Project on July 8, 2009 at 10:30am EDT

• I agree that conflicts of interest and perverse incentives are a big problem in the student loan world. If there is a conflict with Vangent, the Department should investigate and address the problem. However, I suggest looking at the private collection agencies (PCAs) to find the most egregious conflict problems. Schools, guaranty agencies, and the Dept. all hire PCAs not only to collect, but to provide information to borrowers, settle debts, set up rehabilitation plans etc.. PCA staff give out shockingly inaccurate information on a regular basis. This is a disaster. We have urged the Dept. to eliminate its use of PCAs just as the I.R.S. did a few months ago.

  I do not know whether there is a conflict due to the Vangent contractors, but my experience with the federal ombudsman's office is this: Among all entites I deal with, they are by far the most committed to providing borrower-centered services. They don't always succeed and they have little power to change policy (none really) but they have been extremely fair in dealing with my clients' cases. I hear from other borrowers all the time with complaints about PCAs and guaranty agencies, but only occassionally with complaints about the federal ombudsman's office.

  As I have written about many times (see, e.g., http://www.studentloanborrowerassistance.org/uploads/File/REPORTDec07.pdf) there are limits to the ombuds model in any case. They are at best neutral. They are not borrower advocates and never will be as long as they are housed within agencies tht originate, service, or collect loans. To make matters worse, there is a paucity of borrower advocacy resources. And many who claim to be borrower advocates suffer from the same problems alleged here. There are conflicts of interest in this area (e.g. entities that have affiliations with or are funded by creditors), legal advice routinely given by non-lawyers and others without knowledge of complex student loan laws etc..

  It's critical to address conflict issues, but this is only part of the problem. In my experience, the horrible state of borrower services is due just as much to issues that don't get headlines but are just as important, including pervasive incompetency, lack of oversight and lack of borrower remedies. There are good solutions in the federal loan programs for many borrowers (not everyone, but many), but sadly, these solutions don't reach many people because the government, guaranty agencies and their contractors and agents have not made borrower services a high priority and they have not been held to account for this.

• Letter to the Editor
• Posted by Carlo Uchello at Vangent on July 9, 2009 at 3:55pm EDT

•  

  July 9, 2009
  

   

  The July 7th article, “Not-So-Honest Broker” unfairly misrepresents Vangent’s work in support of the U.S. Department of Education’s Ombudsman’s Office and its work with the U.S. Department of Education’s Direct Loan Servicing Center and Default Resolution Group. Furthermore, the article gives the false impression that Vangent is not an honest company. In reality, Vangent and its employees provide valuable financial aid counseling to borrowers and has been a trusted partner with the U.S. Department of Education for over 30 years.
  

   

  First and foremost, Vangent is not a debt collection company. We have never been involved in the collection of delinquent accounts for the U.S. Department of Education’s Office of Federal Student Aid (FSA). In 2005, FSA awarded 17 contracts for Private Collection Agency (PCA) services. Vangent has never been involved in PCA work for FSA.
  

   

  The article confuses two contracts under which Vangent is currently performing work:
  

   

  1. Under a subcontract to ACS (which is a prime contractor to the U.S. Department of Education), Vangent performs Direct Loan Servicing Center and Default Resolution Group (DRG) services for FSA. Our DRG employees assist borrowers with repayment, rehabilitation, consolidation, bankruptcy, questions about Federal tax offsets, and other defaulted loan issues. We also assist borrowers by providing account, loan, and interest information; calculating repayment plans; calculating payoff quotes; and querying school and reference information. We do NOT collect any payments from borrowers.
  2. Under a prime contract with the U.S. Department of Education, Vangent assists FSA’s Office of the Ombudsman in working as a neutral, independent party to help resolve disputes between borrowers, loan holders, servicers, guarantors, and schools when regular channels of dispute resolution have been exhausted. Under this contract, Vangent’s Ombudsman Center employees answer phone calls and work customers’ cases to resolve disputes. Our staff members review customers’ situations, advise them on steps to follow, and perform research and make contacts to bring the parties in dispute together for resolution. We do NOT collect any payments from borrowers.

  
  

  These two contractual arrangements are separate and distinct contracts, and neither of these contracts requires Vangent staff members to engage in collections activities, dunning actions, or dunning decisions.

   

  While several Vangent employees on the Ombudsman contract have had prior experience in working on the DRG contract, this is not a conflict of interest. The DRG service representative background is actually quite desirable for Ombudsman case workers. The DRG service representatives do not perform formal collections functions and are only incented to provide good service. As such, they answer questions and provide information to defaulted borrowers, and are exceptionally well suited to specialize in Ombudsman case work based on their industry expertise. The DRG mission is customer service, not collections. Their training and core skill set are well suited to helping students resolve their loan issues.
  

   

  Vangent receives no incentive financial or otherwise other than to provide excellent service. Our employees are paid an hourly wage with typical benefits. There are no incentives related to the outcome, e.g. fund recovery from their respective customer interactions. FSA makes the determination that a case is closed, not the Vangent Ombudsman caseworker.
  

   

  Furthermore, the U.S. Department of Education has reviewed our relationship with borrowers on these two contracts and has determined that no conflict of interest exists.
  

   

  Carlo Uchello

   

  Vice President, Education Services

   

  Vangent, Inc.

   

  4250 N. Fairfax Drive

   

  Suite 1200

   

  Arlington, VA 22203

   

• just trying to resolve default
• Posted by anon on July 12, 2009 at 5:45am EDT

• I called the default resolution number at the Department of Ed a few weeks ago, in hopes of setting up a reasonable (affordable) payment plan to resolve default and then enter the new IBR plan. They referred me to a collection agency and wouldn't answer any questions. Gee, that is one heck of a default resolution department! Is this normal or standard policy? Past interactions with collection agencies leave me with no trust or desire to have anything to do with them. This sort of approach just seems wrong, and is clearly NOT going to lead to resolution of defaults. One is left to believe that default resolution is not really what they want.

• This is a clear conflict, despite what ED says
• Posted by Alan Collinge , Founder at Studentloanjustice.org on July 12, 2009 at 5:45am EDT

• Regardless of what Vangent or the Education Department say, this is a clear conflict on its face. Suppose someone has a beef with ACS, and calls the Ombudsman. Any Vangent employee (who may well have worked in the Default Resolution Group in the past), knows what is in ACS's best interest, and knows that their company is beholden to ACS. This alone is enough to create a change in the service they receive.

  Instead of excuses, why can't we get acknowlegement of what is obvious, and more disclosure about the relationship between these two units within Vangent? Already, we have 4 members who had complaints about ACS, contacted the Ombudsman, and report bad service (these are from submissions from years past, not solicited after the fact). A big question to us is: Are these two grups sharing information? Are the agents located in the same call center? Are they, in fact, the same people? When we ask these questions to employees of both divisions, they won't even tell us their real names, or their locations. Why the secrecy?

  We elected this new president for better government. Not more of the same. Unfortunately with the Office of Federal Student Aid, it appears that the Fox is still running the Henhouse.

• An obvious conflict of interest
• Posted by Shawn Gorman , Librarian at Harvard University on July 24, 2009 at 12:45pm EDT

• As with so many other federal agencies that pay private contractors to perform the work they should do themselves, the Department of Education is abandoning its responsibility to serve the public by allowing Vangent to operate its ombudsman's office. Vangent simply has no business in this role, and its claims to be neutral are patently absurd.

• Ombudsman / AMSA and DCS
• Posted by The Ables , Student at Some Alabama State College on November 18, 2009 at 4:00pm EST

• Well, my wife and I are just now experiencing this wonderful underworld of greed and deceit.

  Due to financial hardship, last year we let one of her loans go into default. Despite our best efforts to keep up with the barrage of information sent to us by various agencies (often regarding the same loan), we somehow did not complete the paperwork required to place one loan in forbearance.

  We only received an indication of this situation when our Federal Tax Return was offset to pay on this loan. We contacted the lender who referred us to a collection agency and we set up payment arrangements.

  When my wife was expecting a disbursement this fall to pay for tuition and expenses (we are both enrolled - my loan funds were quickly depleted after being paid in August), we were told that we weren't eligible to reinstate her Title IV funding. So, we made another payment and another... (despite being well below the "poverty line" for the state of Alabama (we aren't living large here folks).

  About two weeks ago, we became fed up with the dishonesty of the collection agency (DCS), and contacted the Department of Education Ombudsman who gave us the information to contact the Ombudsman for American Student Assistance. Within a day we had our issue resolved, but we did not receive the funding until today.

  The negligence and malice of DCS has placed our housing situation in jeopardy and has caused us to become subject of usury fees at the university. Furthermore, the day after we received the letter from AMSA regarding Title IV eligibility (which reinstated her student loan eligibility), our account was drafted for another payment by DCS (five days after the previous payment was made). Again, two days later they presented for payment at our bank, causing an overdraft fee total almost equal to the amount due the agency each month.

  The collection agencies are the problem. Their aggressive tactics are not the intent of the law which allows the lender to aggressively pursue persons dodging their obligations. These tactics are being used against students who are currently enrolled, for the collection of Federal Loans. All the while, they are placing us at the hands of further financial difficulty which will ultimately cause us to cease our pursuit of higher education and force us into a low paying career which will certainly not provide the means to pay off the loans which were intended to produce a Teacher and an Engineer.