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- 'Consumer Reports' for Student Loans
- Showdown on Student Aid Ethics
MyRichUncle's Under-the-Radar Buy
The e-mail message last month from the president of Embark, a company whose software colleges use to process online applications from students, promised big changes for its customers. The company's management team, said Adam Park, had, "with the help of outside funding," bought Embark from the Princeton Review, its owner since 2001.
The e-mail message last month from the president of Embark, a company whose software colleges use to process online applications from students, promised big changes for its customers. The company's management team, said Adam Park, had, "with the help of outside funding," bought Embark from the Princeton Review, its owner since 2001. "The infusion of fresh capital," Park wrote, "will allow us to dramatically improve the products you are using, improve all of our services (including our accounting services), and provide the most stable and user friendly website in the business."
What Park's e-mail did not mention is that Embark Corp., the new entity that owns the enrollment software service, is a "wholly owned subsidiary" of MRU Holdings, Inc., the parent company of MyRichUncle, an upstart student loan company that has made its name by marketing directly to students and not-so-subtly questioning the ethics of college financial aid directors. Although the sale of Embark to MRU was quietly reported in a filing that the Princeton Review made to the Securities and Exchange Commission last month, it largely escaped the attention of even Embark's customers until one of the company's competitors drew attention to it in an e-mail last week.
The sale of Embark to a company that is viewed with suspicion (and often intense dislike) by campus officials -- and the fact that Embark officials seemingly sought to hide that fact -- has made some of its college partners extremely angry . And it adds a new twist to the increasingly tangled web of relationships among lenders, college admissions companies, and colleges, a subject that grew white-hot last week amid a controversy involving a new partnership between the Princeton Review and MyRichUncle.
"The whole concept of student lending is one that is being very carefully reviewed, or perhaps carelessly reviewed, by Congress and others," said Jeff Zellers, vice president of enrollment at Muskingum College, which uses Embark. At a time of intense scrutiny of entanglements involving lenders and college officials, he said, "all this does is muddy those waters tremendously."
The Sale of Embark
Embark is one of several companies (others include Hobsons and Apply Yourself) whose software colleges use to accept online applications from students. In 2001, the Princeton Review, the test preparation and college guide company, bought Embark, which had been freestanding, but analysts and others say the company has seemed to stall out in recent years under Princeton Review's control. (Embark officials did not respond to telephone and e-mail messages seeking comment.) The market for these companies has been altered somewhat in recent years by the growth of the Common Application online, which attracted its one-millionth user last week.
Princeton Review decided to sell Embark to “keep us more focused on test preparation and K-12 services,” said Harriet Brand, a spokeswoman. So last month, Princeton Review revealed in the 8-K filing with the SEC, the company sold the online application company to Embark Corp., a “wholly owned subsidiary” of MRU Holdings, for $7 million. “We sold to MyRichUncle,” said Robert Franek, vice president for publishing at Princeton Review.
That may be news to many of Embark’s scores of college customers, which include dozens of graduate schools and undergraduate colleges alike. They got word of the sale of Embark in a February 21 e-mail message from Park, in which he trumpeted the fact that the sale would allow the company to invest $2 million in new and improved services. But nowhere did it – or a brief discussion of the sale on the company’s Web site -- mention MyRichUncle or MRU Holdings.
Last week, though, as financial aid directors blasted the Princeton Review for implying that their institutions had a relationship with MyRichUncle (details on that below), at least some Embark customers received an e-mail from an official at Hobsons, another student recruitment firm, saying that they “may be aware that Embark -- the company best known for providing online applications to higher education institutions -- was acquired in February by MRU Holdings, Inc., parent company of student loan corporation MyRichUncle.”
In an e-mail response to a reporter's questions late Sunday evening, Park wrote: "To clarify your understanding of Embark and MRU, we are not an operating subsidiary of MRU Holdings, rather we are a separate company that is run independently of its financial investors, and as such, we are not part of MyRichUncle."
Asked why his February e-mail to Embark clients did not mention MRU or MyRichUncle, Park said: "[W]e did not mention MRU simply because it is not relevant. When we raised capital before, we did not publicize the names of our investors; it did not not seem to be of significance to our clients, and we have not seen our competitors publicize their investors in their communications. The concern of our clients is the structure of Embark, particularly the products and services we offer, which is exactly what we addressed in our communication."
But Embark's ties to MRU Holdings are likely to be relevant to the many college administrators for whom MyRichUncle is a dirty word. The company has sought to carve out a niche in the cutthroat student loan market by portraying itself as an advocate for students, an honest broker that not only sells loans to student but tries to arm them directly with information they need to make thoughtful, intelligent decisions about their options.
In the course of doing that, though, the company, through eye-catching full-page advertisements in national newspapers and other marketing, has harshly criticized the relationships in which colleges make lists of “preferred” lenders for their students, sometimes through arrangements in which financial aid offices receive services or other benefits from student loan companies. The implication is that other lenders are offering -- and colleges are accepting -- payoffs as part of these relationships.
MyRichUncle’s campaign has earned it praise from advocates for students, and it has been effective on the national level by at least one measure, adding fuel to the push by Congress, the U.S. Education Department and officials in several states to consider toughening restrictions against and limitations on such arrangements.
But in addition to infuriating other lenders, it has also angered many student aid officials, who have argued that the company has unfairly tainted college administrators by painting with an overly broad brush and implying that financial aid offices are putting their own interests above students. In the world of student services, there is no more serious charge, and many campus officials have vowed never to do business with MyRichUncle.
The e-mail from Hobsons hinted at that controversy, inviting those who might be displeased by Embark’s new owner to give its competitors a look: “In the event that you decide to transition away from your relationship with Embark during this potentially unstable time, Hobsons will be happy to work with you on competitive pricing to make the transition financially viable for your institution, and also to ensure that shifting to a new solution provider is as seamless and non-disruptive to your current admission activities as possible.”
In Park's e-mail message Sunday, the Embark president suggested that he was not worried about fallout from a perceived relationship with MRU or MyRichUncle.
"[W]ithin the universe of college administration, we work with admissions offices and have not had much interaction with financial aid administrators," he wrote. "Embark is a software tool used by admissions offices. Our client relationships have been uninterrupted, and moving forward, we are excited to introduce several product enhancements and improved services, not only to strengthen our current relationships, but to form new ones. Our focus remains on running and growing the Embark business and as questions arise, whether caused by competitive innuendo or otherwise, we will openly answer them."
But the early reaction from Embark customers and others suggested trouble ahead for Embark and MyRichUncle. Zellers of Muskingum, which uses Embark to process its online applications, said he feared that the enmity with which many college administrators view MyRichUncle could lead them to drop Embark.
“What are the implications for the Embark product itself if a whole bunch [of colleges] say, ‘We don’t want any part of this, this is not what I’ve bargained for?' " Zellers said. “There is such strong feeling about MyRichUncle that there could be implications … for Embark at a level that might render their product useless. I have no interest in switching to another vendor, but something like this would at least cause us to reconsider that relationship.” Several other Embark customers expressed similar views.
Barmak Nassirian, associate executive director at the American Association of Collegiate Registrars and Admissions Officers, said that many of the admissions and enrollment management officials who use Embark’s services may not be familiar with MyRichUncle’s reputation among financial aid officers. But he said that “as soon as word gets out that MRU is the parent company of Embark,” he envisioned scenarios in which financial aid directors at Embark’s client colleges would wander down the hall and encourage them to “take a second look” at alternatives.
Nassirian and others framed MyRichUncle’s purchase of Embark as consistent with the blurring of lines between the worlds of admissions and financial aid, which has led numerous companies, seeking “synergy” between college applicants and would-be borrowers, to enter both markets: Sallie Mae owns Noel-Levitz, a consulting company that specializes in student recruitment and enrollment management, for instance, and the National Education Loan Network recently purchased Peterson’s, which competes with the Princeton Review in the realms of testing and college guides. In some cases, the companies hope that the relationships they build with applicants (or their parents) will give them a leg up when those students are looking for loans. (Some student aid officials raised the question of whether MRU will seek to use the information about students -- and their finances -- that it collects through Embark's online application process to market its loans. Because MRU officials did not respond to repeated requests for comment, it was unclear whether those concerns are valid.)
But MyRichUncle’s purchase of Embark, Nassirian said, is “complicated by the fact that MRU, for better or worse, has decided to poke a finger in the eye of institutions,” arguing that the “intermediation of schools has not been helpful in advancing the best interests of students.” He added: “It may well end up being the case that they bought something that had a certain market value, and the very act of their ownership of that could end up diminishing the value of that asset.”
Princeton Review and MyRichUncle
Princeton Review officials just got their own sense of the powerful reaction that MyRichUncle provokes. Franek, the Princeton Review vice president, said that during the company’s negotiations with MRU Holdings over the sale of Embark, Review officials became enamored of MyRichUncle’s “student advocacy approach,” which he said seemed consistent with the Review’s own.
“It seemed very clear that their mission statement of student advocacy and just providing good loan products for students was their No. 1 priority,” Franek said. Although the Review had struck previous partnerships with lenders, he said, “we had never had a loan provider that we thought (1) provides great loans to students and (2) tries to demystify the financial aid process [in the same way that] the Princeton Review does” in admissions.
So last Thursday, the Princeton Review began promoting a relationship in which it has dubbed MyRichUncle its “partner lender.” (Franek said that the arrangement is a traditional advertising deal, in which MyRichUncle is paying Princeton Review an undisclosed sum in return for visibility on its Web site.)
The problem, to many college financial aid officers, is that Princeton Review promoted the MyRichUncle partnership on its profile pages for individual colleges, in which it appeared to list MyRichUncle as the “partner lender” of the institutions themselves, not of Princeton Review. Financial aid officers unleashed a blizzard of criticism on the Review.
Some of them said they were upset that the Review had implied that they had struck a deal with any lender at all, given the intense federal and state scrutiny of such relationships now. (Princeton Review officials noted that the Web site has long included a “partner lender” link on individual college profile pages, and that the only change last week was that Chase, which had been its previous partner,’ was replaced by MyRichUncle.)
That surprised some financial aid officers, who said they just didn’t pay very close attention to the Princeton Review pages for their institutions. But it also suggested the depth of the dislike for MyRichUncle in many financial aid offices, as exemplified by one message representative of the many posted on the Finaid-L listserv: “The Princeton Review has in one fell swoop created an implied endorsement from every school in their database for a lender that has repeatedly attacked the financial aid profession and is actively trying to remove the financial aid professionals from the process of providing researched information to our students….
“Yes, they probably made a lot of money from this lender to do what they did, but at the same time they have estranged most of the schools they claim assist with this Web site. As another colleague said, ‘shame on them,’ and I hope it does them no good in the long run. Way to be in the pocket of the lender and not thinking of the students and parents first.”
Friday and over the weekend, Review officials made a series of cascading changes to the Web site to respond to the changes. First, they changed the link on each institution’s page to say that MyRichUncle was “Princeton Review’s partner lender,” not the institutions’. Insufficient, college aid officials complained.
Saturday, the Review eliminated the “partner lender” line entirely from the financial aid section of each campus’s page, and instead placed a box on the right-hand side on each institution’s page that pointed interested readers to a “Princeton Review Featured Partner” page about MyRichUncle.
Several college officials who had criticized the Princeton Review said they thought the company's quick response would probably shield it from any longterm damage. But the imbroglio offered yet more proof of just how combustible the terrain surrounding student loans, admissions and money is.
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