The Consumer Financial Protection Bureau on Wednesday sent letters to a dozen universities criticizing them for not fully disclosing the arrangements they have with companies to market financial products on their campuses. “We wanted to alert you that this failure to be transparent may pose potential consumer protection risks,” the bureau’s student loan ombudsman, Rohit Chopra, wrote in a letter to twelve Big Ten universities.
The bureau said it looked for the agreements between financial institutions and all Big Ten universities, which represent some of the largest institutions in the country. Of the 13 universities that had contracts with financial institutions to offer products on campus, only one was fully disclosed to the public, Chopra wrote in a new blog post Wednesday.
The CFPB has been probing campus debit cards since last year. Officials at the bureau have said they are concerned that arrangements between colleges and financial institutions to provide debit cards are insufficiently transparent and may have incentives that harm students.
The bureau previously called on financial institutions to disclose the terms of the arrangement, warning companies that it may consider their failure to make public such agreements the type of risky practice that triggers more scrutiny from regulators.
The Education Department is currently in the process of crafting new rules to more tightly regulate campus financial products. The department suggested during rulemaking negotiations earlier this year that it wanted to include a requirement that colleges disclose the agreements they have with banks and other companies to offer debit cards. Federal law already requires such disclosure for credit cards that are affiliated with universities.
The main group representing student aid administrators has backed a proposal to create a federal database that tracks student progress through higher education and into the workforce.
The National Association of Student Financial Aid Administrators announced Wednesday that it now supports a “limited” student-unit record system because it would provide more accurate and comprehensive data than the government’s current collection of information, which leaves out transfer and nontraditional students, for example. “As higher education policy is increasingly focused on student success, completion, and outcomes, including the recent negotiations over gainful employment regulations, it becomes increasingly critical to have robust data that gives an accurate picture,” the group said in a report.
NASFAA is the latest organization to call for a repeal of the federal prohibition on a student unit record database. Last fall, two community college associations backed the proposal, and the Association of Public and Land-grant Universities also supports such a database.
Private colleges, though, have long been resistant to a student unit record database. They argue that storing student-level data in a single federal database would threaten student privacy.
Among the other recommendations for policy changes in the report released Wednesday: eliminating student aid rules that have nothing to do with financial aid, such as the requirement that colleges celebrate Constitution Day, promote voter registration, and make certain disclosures about their athletic department.
The Educational Credit Management Association, a student loan guarantor, announced Monday that it has acquired College Abacus, a website that allows prospective students to compare colleges by net price.
Federal law requires colleges and universities to post net price calculators on their websites. Net price calculators tell students how much they’ll have to pay after grants and scholarships. College Abacus draws from the calculators of nearly 4,000 institutions and lets students compare institutions by price. The site was launched as a for-profit in an attempt to recoup “tremendous startup costs,” said Abigail Seldin, the company’s co-founder. The acquisition by ECMC marks the site’s move to nonprofit status.
College Abacus would not have been able to keep its service free for the long-term and succeed as a business, Seldin said. She said gaining nonprofit status was the best way to keep the site free for students. The company's for-profit status also raised some awkward questions. A "frequently asked questions" tab on the company's old website (the for-profit collegeabacus.com, rather than the new nonprofit collegeabacus.org) included the question: "I noticed that you are incorporated as a C-Corp, not a 501c(3). Are you evil?"
With the ECMC's help, the company will develop a widget by the end of the year that will allow any website to host College Abacus's calculator for free, Seldin said.
The University of North Carolina Board of Governors has adopted a policy that will bar the UNC system's campuses from spending more than 15 percent of tuition revenue on financial aid, The News and Observer reported. Six of the system's campuses -- including UNC Chapel Hill and North Carolina State University -- currently spend larger proportions of tuition revenue on student aid. Officials at Chapel Hill, which has devoted considerable resources to expanding aid for low-income students, have predicted that the policy will lead to considerable increases in student debt levels. Proponents of the policy have said that the policy will limit tuition increases, and that such limits help all students. University officials have said that they plan to try to raise more money so that they can pay for financial aid that would be limited under the new policy.
Four men have been charged with using false identities to apply for student loans in programs in which they were not truly enrolled or eligible to enroll in, The Herald-News reported. They sought a total of $240,000 in loans based on false claims of being students either at Joliet Junior College, Harper College or Elgin Community College, authorities said.
Out-of-pocket contributions to cover the price of college rose in 2014 after three years of decreases, according to the seventh annual installment of a study the lender Sallie Mae released today. Parents in particular are picking up more of tuition costs, and now pay for 30 percent of the total amount from their own income and savings. Higher-income parents contributed a much larger share than their less wealthy peers, the study found. Students paid for 12 percent from their own income and savings. Both parents and students are borrowing less to pay for college. Borrowed funds covered 22 percent of costs, a decline from 27 percent in the two prior years.
Students who participate in the federal work-study program are more likely to graduate and be employed six years after college than their similar counterparts who don’t participate in the program, according to a new study.
Two Columbia University researchers, Judith Scott-Clayton and Veronica Minaya, examined the impact of work-study jobs on students’ academic and future employment outcomes compared to students working in non-work-study jobs and those not working at all.
They found that the work-study program had a positive academic effect – but no impact on later employment – for work-study students who planned to work during college regardless of whether they received the federal benefit (about half of all work-study students). For the other segment of work-study students – students who would not have worked without work-study – the researchers found no or a slightly negative impact on academics but positive effects on their post-college employment.
The authors of the study also found that the positive effects of the work-study program were magnified for lower-income and lower-SAT students compared with their wealthier, higher-scoring peers.
That finding, the authors write, suggest that the effectiveness of the Federal Work-Study program “might be increased by modifying the allocation formula--which currently provides disproportionate support to students at elite private institutions--to better target lower-income and lower-scoring students.”