NEWS SCOOP: Sallie Mae Demands SUNY Colleges Turn Over Students' Personal Data
"State open record laws were created to provide citizens with access to public records in order to hold government officials accountable for their actions. It's unconscionable that Sallie Mae and other private loan providers are trying to use open government laws to lure students into risky and expensive private loans."
Stephen Burd
New America Foundation
Higher Ed Watch
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Lenders that market private loans directly to students are increasingly using state open government laws to demand public colleges turn over personal data on their students.
Late last month, student loan giant Sallie Mae filed a New York Freedom of Information Law request asking community colleges in the State University of New York (SUNY) system to provide the company with the names, telephone numbers, and home mailing and e-mail addresses of "all admitted and enrolled students for academic year 2007-2008." The request, which came from the company's Direct Marketing division, also asked the schools to identify the age, graduating class, and major of each student listed.
Such requests from direct-to-consumer private student loan companies are raising alarms among college financial aid administrators, who worry that the companies are trying to lure their students to take on unnecessarily high levels of debt. They have also caught the attention of the Education Department. In a letter to college officials in September, Diane Auer Jones, the Department's Assistant Secretary for Postsecondary Education, warned them to be extremely careful about the types of information they release.
The Federal Family Education Rights and Privacy Act (FERPA) prohibits colleges from disclosing "personally identifiable information from a student's education records" without that student's written consent, with some limited exceptions. Schools, for instance, do not have to get a student's permission before releasing "directory information," which includes "the student's name, address, telephone listing, e-mail address, major field of study, and other information that generally would not be considered harmful or an invasion of privacy," Jones noted in her letter. Individual students, however, have the right to bar their colleges from releasing that type of information about them.
Some lenders have used open record requests to try to get colleges to provide them with lists of students who are in financial distress. One loan provider, for example, filed a particularly aggressive request with George Fox University in Oregon. In an e-mail message posted on an Internet discussion group for financial aid administrators, Robert A. Clarke, the university's Financial Aid Director, reported that the lender had specifically asked for lists of students and recent graduates with federal loans and those who were delinquent in repaying them. According to Jones' letter, colleges are prohibited from giving out information on "a student's financial aid status" without that student's authorization. In addition, "institutions are not required by FERPA," she wrote, "to actively seek such consent."
Sallie Mae appears to have carefully crafted its New York Freedom of Information Law request to ensure that the information it was seeking -- all of which could be classified as "directory information" -- was FERPA proof.
Nevertheless, SUNY officials are expected to reject Sallie Mae's request, arguing that the New York statute allows state agencies to deny access to lists of names and addresses that have been sought for commercial purposes, as no public purpose is served by such a disclosure. Should the university take this action, Sallie Mae will have 30 days to file an appeal, and if that fails, seek a judicial review of the case.
It is unclear how far Sallie Mae will push the issue. But one thing's for certain -- the loan giant is not one to duck a fight. We at Higher Ed Watch plan to track this battle closely because it could have major implications for students. We believe that if Sallie Mae succeeds in using state open record laws in New York or other states to gain customers, the floodgates will open and students will be sitting ducks, not just for loan providers but all sorts of other commercial enterprises, including credit card companies.
State open record laws were created to provide citizens with access to public records in order to hold government officials accountable for their actions. It is unconscionable that Sallie Mae and other private loan providers are trying to use open government laws to lure students into risky and expensive private loans.
Editor's Note, Oct. 12: A previous version of this post noted that "Sallie Mae and other private loan providers are trying to use open government laws to lure students into risky and expensive private loans before exhausting cheaper and safer federal loans." In fact, one in five private student loan borrowers does assume a private loan before they exhaust safer, cheaper federal loan options. However, we have been reminded that in wake of its original buyout agreement with JC Flowers and Company, Sallie Mae announced it would urge borrowers to exhaust federal loans first. We applaud this policy. How vigorous and successful the strategy has been for Sallie Mae is uncertain. Perhaps they'll tell us. Regardless, not all private loan providers have adopted similar 'encouragement' policies. New America has altered its original post to remove reference to federal loan exhaustion. But it continues to be a topic on which our future work will focus.
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What's Good for the Goose...
Cross posted with commentary
Thanks for the important heads-up. I posted this on my blog with commentary:
http://www.financialaidpodcast.com/2007/10/10/sallie-mae-goes-for-the-jugular/
And this is surprising because...?
Please explain to me why any of this is surprising? One of the most hated companies in America, seeing its stock price languish, public sentiment turning against it, public policy turning against it, and its merger prospects dimming, is doing what it has always done. SLM Corporation is taking a well-intended public policy like student loans/freedom of information and bastardizing it for profit. I don't see how it will work, given that most college graduates don't respond to junk mail. Then again, SLM Corporation Chairman Albert L. Lord has his own $15 million golf course, so perhaps they know something I don't. PS - Congratulations to Tom Joyce on his promotion -- a pot-sweetener to keep someone from jumping a sinking ship if I ever saw one.
Jason Paskowitz
SUNY-Binghamton '88
Sallie Mae: Discraceful, yes - Direct-to-Consumer, no
While the information about Sallie Mae's tactics in obtaining student data is both shocking and unscrupulous, this was also disappointing to read as it is erroneous in how it categorizes Sallie Mae in the student loan industry as direct-to-consumer player.
Sallie Mae is NOT a lender that markets private loans directly to students. Sallie Mae is primarily a school channel player, and the LARGEST school channel player nonetheless. So the categorization of Sallie Mae among direct-to-consumer players is incorrect. The fact that Sallie Mae is testing tactics, unconscionable tactics at that, with which to approach students does not make them a direct-to-consumer player either. It actually makes them a school-channel player with really bad ideas about how to participate in the direct-to-consumer channel. Therefore, the choice to weave throughout the post the notion *that direct-to-consumer players are increasingly taking on this tactic to target students* is a rather bad one.
Surely Sallie Mae and their FOIA request are big enough flames to flag on their own without the broader, incorrect context of them as a direct-to-consumer player.
Sue Lewis
Higher Ed Watch Response
We hold a different view.
Sallie Mae is actually a very active, and growing player, in the direct-to-consumer private loan market. In the first quarter of 2007, the loan company reports that it made more than $241 million in direct-to-consumer private loans, a 64 percent increase from the amount it had originated in the same quarter a year earlier [see http://www.salliemae.com/about/news_info/newsreleases/04242007.htm].
You're right that Sallie Mae is the leading school channel player, but it is also an active and growing force in the direct-to-consumer market.
NAF Truthiness
Another manufactured scandel to further the aims of the guardians of the temple of higher education. I like how it's a forgone conclusion that Sallie Mae is going to force students into unnecessary debt if they get their hands on this list. The truth is, that much more personal information (other than name and address) concerning American consumers is bought and sold each and every day in an effort by private industry to more efficiently reach their customer base. There isn't anything nefarious about a company attempting to narrow its marketing spend by targeting the people most probable to use its products and services. In competitive industries (student lending is not-thanks to the government by the way) that savings is usually passed along to consumers. Looks like Sallie found a perfectly legal (and cheap) way to market to students who may need private loans.
It's especially hypocritical for colleges and universities to complain about something like this when they (legally too) get the ultimate insight into their customer base via the FASFA (that they use to dole out the federal, state, and institutional largesse-AKA price discrimination). Get real NAF! Time to bring the real debate out into the open: Private Student Loans represent a clear and present danger to the current status quo in higher education (free-market products and services vs. government products and services). Rising tuition caused by inefficient schools makes higher education unaffordable in the short-run, not modestly-priced Private Student Loans.
Any actual evidence?
As a regular reader of the NAF site and someone who tries to contribute to the public debate on these critical issues, I think you may have gone too far this time.
Sallie Mae is trying to "lure students into risky and expensive private loans?"
Stephen, if you have proof of such nefarious intent or actions, then please post it, but you can't keep yelling "Fire!" in a crowded movie theater without any evidence to back it up. It weakens NAF credibility and lowers the organization's standing from respected policy institute to just another "screamer" in the debate.
NAF Truthiness Part II
How about those 1 in 5 (20% for those of you whom socialized education failed) student borrowers who don't fully utilize the government programs? There is a lot of innuendo thrown around here and in the popular press that these folks are being mislead by deceptive advertising from DTC marketers-indeed "predatory lending" (whatever that means). It would still be called predatory lending even if 100% utilized all federal aid, but let's ignore that inconvenient truth here for a minute (the socialists among us need something to justify their existence). Are all those 20% being mislead? I offer a different perspective for you to chew on. How about people just choosing to spend more because it's more convenient to obtain a private loan than a government loan (time is important for these folks)? Surely, some of these folks are represented in that 20% number? How about the oddball or two that just don't want to deal with government programs in any shape or form? I'm sure some of the latter are also represented in that 20%. There are probably plenty of other reasons I can't think of right now for people not to choose federal loans-you get the picture.
Let's say we eliminate all of the legitimate reasons people choose not to use federal aid and come-up with a number that represents those that were mislead (those that would have choosen to use the federal aid to a greater extent then they did had they been more informed). What is that number? Fifteen-percent (15%)? Ten-percent (10%)? Five-percent (5%)? Unfortunately, it probably isn't zero. Whatever the number is, do we need to eliminate a business (replace it with the Direct Loan Program) that serves 80+% of it's customers well? Do we need to impose draconian regulation on that industry such that it is more expensive to operate and thus less appealing for new entrants to enter (which makes it more expensive for consumers and easier politically to replace with the Direct Loan Program)? Consumers in a free market are in the driver's seat no matter what the fear mongers say. When companies are exposed as not serving their customer's needs very well they aren't around very long b/c rational consumers don't buy from them. Government plays a role in guaranteeing that this happens-it's an umpire. If government doesn't guarantee the competitiveness of an industry then it's the consumer's responsibility to vote those politicians out of government. Government should never become the industry-that's socialism and in no way is that good for Americans.
Let's put some reasons around the 1 in 5 and eliminate the innuendo.
Truthiness?!
Patrick,
I am going to type this slowly so that it is very clear. Having actually attended college and graduate school with the assistance of federal as well as private student loans, I can honestly tell you one thing: Students by and large don't care about "choice." They care about getting their funding in a timely matter -- and I can tell you from personal experience that, when all procedures are followed, private loan checks and federal loan checks show up at the same time at the beginning of the semester.
Your banging on the tired, old free-market/consumer choice drum is also out of place here. Securing funding for one's higher educational pursuits is not a "free market" activity like having an array of choices of toothpaste flavors. It is an investment that most advanced societies realize is central for their continued stability and success. Third-world countries like the United States put the profits of small oligopolies of needless big bank middlemen (SLM Corp., Nelnet, etc.) above educating their population. This isn't socialism -- it's a matter of national security.
Not Compelling
Jason, national security is not a compelling reason to force everyone to borrow from the government. In fact, our individual liberty / privacy as Americans is often enchroached upon in the name of national security. For example, the Japanese American internment camps in WWII. Watch Ken Burns' documentary about WWII to see how raw the emotions still are today among those Japenese Americans who were forced into these camps b/c they were a potential "threat" to America's national security. Or how about Abraham Lincoln suspending the writ of habeus corpus during the Civil War? What about Bush and Cheney today-what individual rights have these two ignored in the name of national security? These are extremes of course but the point is that we should not bend the rules of the consititution whenever politicians think it is expidient to do so. Real harm to our democracy is the inevitable result.
No one will argue with you that education is important for our country's competitiveness, and that many social benefits accrue to society from an educated populace. But that doesn't mean that we should subsidize higher education. The free-market has produced numerous benefits for society. People pursuing their own self-interests unimpeded by government is not a recipe for social disaster. People have a real incentive (a self-interest) to obtain a higher education-increased lifetime earnings. I think you've questioned in the past the veracity of the lifetime earnings premiums college graduates enjoy. The College Board says they are $450,000 in today's dollars for college graduates, and $570,000 for those college graduates who go on to obtain higher degrees. There isn't any need for taxpayer sacrifice to make the investment more profitable for the individual American and society will benefit irrespective of the taxpayer subsidy. Changing to a free-market system of financing higher education won't limit access, qualified students will be able to find money. It's the degree and the future earnings it confers that are important-not a person's current social / economic status.
P.S., I think it is much easier to obtain a private loan than it is to fill-out the instrusive FAFSA. I disagree that students and their parents are indifferent to time considerations (the checks may get there at the same time, but it takes more paperwork for federal loans). Why else would Hillary make FAFSA reform part of her higher education agenda? She wants to make her socialized product as appealing as possible!
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