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College Board Ends Loan Activities

August 23, 2007

The College Board announced Wednesday that it is getting out of the student loan business -- a small, but sometimes controversial, part of the organization that has become more complicated because of this year's heightened scrutiny and regulation of the lending industry.

Under a new law in New York State (where the College Board has its headquarters), and regulations and legislation proposed at the federal level, lenders are barred from reimbursing participants in advisory board and other meetings for their travel expenses. The College Board, which has numerous advisory groups -- many of which have nothing to do with its lending operations -- was concerned that it would have to stop travel reimbursements, which in turn could discourage educators from participating. Many of the board's meetings are in New York City.

"Our membership meetings are critical to our mission, and it is essential that all our members -- regardless of their financial resources or location -- feel comfortable attending without concern that they are violating new laws or code provisions," said a statement from Michael Bartini, senior vice president for enrollment the College Board. "Our membership activities, professional development and informational work with schools and financial aid professionals take precedence over our participation in this, or any, line of business, and we have concluded that, in the best interest of our members, we have been left with no choice other than to end our student loan program,” Bartini said.

The College Board has offered four types of student loans -- in partnerships with lenders, who will continue to manage existing loans. The four programs include basic Stafford loans, graduate student loans, parent loans and private loans -- which lack many of the protections for lenders that the other programs offer. A College Board spokeswoman said that in the fiscal year that ended June 30, the College Board helped issue 74,000 loans -- 10,000 of them to parents and the remainder to students. The total loan volume was $400 million.

The 15-person division of the College Board that has managed the loan programs will be eliminated, and College Board officials said that they would try to find other positions in the organization where possible, and would provide severance to others.

The College Board is best known for its tests, such as the SAT and Advanced Placement exams, and its meetings tend to focus on admissions and financial aid issues, bringing together college admissions officers and high school counselors. When attending College Board meetings, one wouldn't necessarily have the sense that one was at a lender event.

Some experts on student aid have questioned whether it was appropriate for the College Board to profit from student loans. Because the board is known as an association of admissions officers and issues respected reports annually on trends in student aid and loans, it is seen by many parents and students as a trustworthy source of information, these critics say, in part because they don't realize it is making money off of loans. For instance, the College Board is among the groups that have warned that many students may be hurting themselves through private loans, but just last year the board expanded its private lending business through a "strategic alliance" with Citibank, and refused to say how much money it was earning in profits on private loans.

Robert Shireman, founder of the Project on Student Debt, said he was pleased that the College Board was getting out of lending. "I think there are a lot of people who would be surprised to know that the College Board has been involved in the student loan business, and it appears that the College Board has recognized that it is ancillary and it probably played an income-producing role that looked good when they started it, but does ultimately raise conflict of interest problems."

Leaving the loan industry is "the right decision," Shireman said, so those who talk to College Board members about student loans "won't be in the situation where you can wonder about why you got a certain piece of advice."

Some critics of the College Board think that Wednesday's announcement points to broader conflicts of interest that aren't covered by the new loan regulations, but should worry students and their families. Bob Schaeffer, public education director of FairTest: National Center for Fair & Open Testing, said that the College Board "spends huge sums of money building a base of supporters in higher education" and one of the ways this happens is through bringing people to meetings, and in effect sponsoring trips to nice cities.

When admissions officials make decisions on the SAT or other tests, some do so having benefited from trips to board meetings, Schaeffer said. And while the College Board likes to appear to be an honest broker on all kinds of admissions issues, it actually makes money, not only on the SAT fees, but on related products, like testing books that aren't equally available to all test takers, and these financial considerations require the board to have college officials who feel good about it. "The College Board appears to have a neutral face to students and parents, but it doesn't," he said. Ending the loan business was a good move, "but it's one small piece of a larger issue."

 

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