Inside Higher Ed

Michael Dannenberg in Inside Higher Ed | 'Hedging Bets on Student Loan Availability'

Communications — Thu, 13 Mar 2008 13:02:00 -0400

New America in the News:

Hedging Bets on Student Loan Availability (Inside Higher Ed)

. . . “I think he’s doing the right thing in seeking to calm fears of parents or financial aid officers scared by newspaper headlines, and by demonstrating that Congress is ready to act should there be widespread problems for students themselves, as opposed to some lenders,” said Michael Dannenberg, director of the Education Policy Program at the New America Foundation. Dannenberg said that Kennedy’s plan should be viewed not as opening the door to students’ borrowing more but as allowing them to shift their borrowing to less-costly federal loans rather than more expensive private ones. . .

New America Foundation in Inside Higher Ed | 'A Student Loan Credit Crunch — But for Whom?'

Communications — Wed, 12 Mar 2008 08:34:00 -0400

New America in the News:

A Student Loan Credit Crunch — But for Whom? (Inside Higher Ed)

. . . “Students with poor credit ratings, particularly those at trade schools whose graduates have poor repayment track records, might be unable to find a willing private student loan provider,” the New America Foundation’s Education Policy Program wrote on its blog this month. “All students, however, who apply for a private student loan with a creditworthy co-signer should be able to obtain a loan and obtain it at a lower interest rate than they otherwise would receive. Private student loan borrowers who don’t have a creditworthy co-signer and who are pursuing academic programs at schools with dubious job placement and loan repayment track records should consider lower cost education options.”

The idea suggested in the New America post — that the credit crunch isn’t a major problem because it is affecting mostly students at for-profit colleges, and should actually prod students who take out costly private loans at for-profit schools to enroll instead in community colleges or other lower-cost institutions — has been a subtext of some of the discussion surrounding the credit crunch, and reveal just how differently the crisis is perceived in various quarters. . . .

Inside Higher Ed Quotes Stephen Burd on Kennedy's Lending Report

Communications — Wed, 05 Sep 2007 13:01:00 -0400

New America in the News:

The office of Sen. Edward M. Kennedy (D-Mass.) released a report Tuesday [September 5, 2007] that scrutinizes a batch of practices and policies that in many cases, the senator alleges, violate federal laws and regulations governing dealings between colleges and lenders. Many of the findings build on accusations and revelations that have emerged in previous months...

***

“We followed the rules in place at the time, and we did so in a way that benefited students,” Martha Holler, a Sallie Mae spokeswoman, said in response to the charges leveled against the lender in Kennedy’s report.

Some lenders argued that the fact that Congress and the Education Department are now poised to change those rules and laws, in new regulatory guidance and pending amendments to the Higher Education, renders the Kennedy report unimportant. But others said the senator’s report should provide an impetus to officials at the Education Department, who have asserted on multiple occasions that they have been unable to uncover or prosecute much in the way of meaningful inducements in the federal student loan programs.

“I don’t think there are any excuses left for the department to not look into this,” said Stephen Burd, a senior research fellow at the New America Foundation, which itself has investigated wrongdoing in the loan programs. “This report seems to lay out the case and provide really strong evidence that there were quid pro quo arrangements and that laws were violated. It should provide the department with what it has needed to prove that laws were violated.”

This excerpt is from Inside Higher Ed. For the complete article, please click on this link.

Michael Dannenberg on Education Department in Inside Higher Ed

Communications — Tue, 10 Jul 2007 10:12:00 -0400

New America in the News:

For months, leaders at the U.S. Education Department have battled the impression, fostered by Democratic members of Congress and New York Attorney General Andrew M. Cuomo, that the Bush administration did far too little to regulate the behavior of lenders and colleges until its hand was forced by the burgeoning scandal in the student loan industry...

Jeff Baker, who directs the policy liaison and implementation staff in the Education Department’s Federal Student Aid office, said at Monday’s session at the NASFAA annual conference that the department had sent letters late last month to more than 900 colleges where at least 80 percent of the institution’s federal student loan volume is held by one lender...

Asked if the June 29 letter represented an uptick in the department’s oversight of the loan programs, Baker said: “It’s our obligation to make sure our schools are in compliance. This is what we do.”

It’s what they’re supposed to do, but not necessarily what they’ve done sufficiently, as critics see it...

Michael Dannenberg, director of the education policy program at the New America Foundation, characterized the department’s scrutiny of colleges with one dominant lender as a “positive sign,” but said the Department of Education “still has a long way to go when it comes to oversight of the student loan program…. We’ve had scores of critical news stories, multiple investigations, firings and resignations of financial aid officials, reports of kickbacks, stock options, cash payments, and luxury gifts being offered by lenders to college officials and yet not one lender has been disciplined by the Department of Education. Why has Student Loan Xpress, which gave insider stock to leading college and federal officials, not been disciplined by the U.S. Department of Education?..”

For the complete article, please visit the Inside Higher Ed website.

Inside Higher Ed Quotes Stephen Burd on Lenders' Letter

Communications — Thu, 14 Jun 2007 10:14:00 -0400

New America in the News:

“Thank you for considering signing on to the attached group letter, which encourages Congress to continue making higher education accessible and affordable using the widest range of government- and private-sector loan programs and partnerships,” the handwritten letter begins.

Written on joint Nelnet and Consumer Bankers Association letterhead, messages like this one have been faxed to local chapters of the American Federation of Teachers, AFL-CIO and other unions over the past couple of months, setting off a backlash over what the unions say is a misleading campaign to gain support for continued federal subsidies to the student loan industry — subsidies many Democrats are pushing to scale back...

The lenders’ argument has been that competition in the private market has led to rates that are currently lower than those of the government’s competing direct loan program, with profits allowing for investments in technology and greater efficiency that reduce the rate of loan defaults. The faxed letters emphasize that the student loan programs have been working and that without subsidies, the FFEL program could be destroyed, leading to less choices for students...

“This just appears to be what the loan industry does best: spreading fear to try to keep their subsidies high. It’s an unfortunate effort to mislead people about what’s really at stake,” said Stephen Burd, a senior research fellow at the New America Foundation who has been investigating the student loan industry...

The New America Foundation’s Higher Ed Watch blog wrote that “while there might be public support for increasing the accountability for defaults on the college level, it’s hard to stomach the thought of a system where the students who most need help getting to and getting through college are offered the most expensive loans and the least forgiving terms.”

For the complete article, please visit the Inside Higher Ed website.

Inside Higher Ed Follows Up On Higher Ed Watch, Student Loan Scandal

Communications — Tue, 22 May 2007 08:17:00 -0400

New America in the News:

The financial aid directors at Columbia and Johns Hopkins Universities have lost their jobs, the second and third casualties of the student loan controversy that has battered higher education.

In a terse statement e-mailed to reporters late Monday afternoon, Columbia announced that it had dismissed David Charlow, its executive director of financial aid and senior associate dean of student affairs, six weeks after it suspended him amid charges that he had owned stock in Student Loan Xpress, a loan company that appeared on a list of preferred lenders to which Columbia had referred students for loans. The charges, which emerged from the investigation sparked by New York Attorney General Andrew M. Cuomo, were first revealed by the New America Foundation...

For the complete article, please visit the Inside Higher Ed website.

To read New America's Higher Ed Watch blog post that sparked the investigation, please click here.

Inside Higher Ed Recaps Student Loan Scandals

Communications — Tue, 17 Apr 2007 18:33:00 -0400

New America in the News:

It is not often that one’s research topic is the lead story in the national media, but the topic of financial aid has been in the forefront of the American consciousness from San Diego (home of Student Loan Xpress) to Albany, N.Y., (home to New York Attorney General Andrew M. Cuomo) and points in between.

The stories of scandals, kickbacks, influence peddling, and fleecing — to highlight just a few of the phrases used by politicians and reporters — in the student loan business have dominated the headlines the last two weeks...

We have a couple of key players to thank for much of the scrutiny. Upon taking office earlier this year, Attorney General Cuomo began investigating the relationship between higher education institutions and student loan providers. He was looking to see if colleges and universities receive benefits from the providers in order to place them on the preferred lender lists used to direct students to loan providers. And the New America Foundation, through its Higher Ed Watch blog, broke the story of three financial aid directors around the country (as well as an official in the Department of Education who oversaw lenders) receiving and subsequently selling stock in Student Loan Xpress.

Attorney General Cuomo’s investigation received a fair amount of media coverage, but the story gained real legs and moved to the front pages when the focus shifted from relationships between loan providers and universities to relationships between lenders and specific financial aid officials at the institutions. As with most scandals, it is a much better story when the media can put the name and face of a real person on it, rather than just the moniker of a multi-billion dollar higher education institution.

Stirred up by the initial disclosures by the New America Foundation regarding high-ranking financial aid officers at Columbia University, the University of Texas at Austin, and the University of Southern California, reporters around the country have uncovered other apparently untoward relationships between financial aid officials and student loan companies...

For the complete article, please visit the Inside Higher Ed website.

Inside Higher Ed Reports on Student Loan Scandals

Communications — Fri, 13 Apr 2007 14:30:00 -0400

New America in the News:

With the scandal over conflicts of interest in student loans continuing to grow, Education Secretary Margaret Spellings is pledging tougher enforcement of ethics rules, as the Education Department released more information about sale of stock in a lender by an official who works on student loan issues.

And in a sign of just how volatile the loan industry is today (and how lucrative it remains), reports emerged Friday morning that Sallie Mae, the industry giant, is in talks to be bought out by private equity in a deal for more than $20 billion, according to The New York Times.

A statement released by the department late Thursday said that Spellings has asked Susan Winchell, the department’s chief ethics officer, to review “best practices” on its own financial disclosure forms to identify ways that the department might improve. Spellings also has directed that each financial disclosure form now be reviewed by at least two lawyers.

Last week, Spellings placed on leave Matteo Fontana, an Education Department official who works on student loan issues, after the New America Foundation reported that he had sold at least $100,000 in stock in the Education Lending Group, which owned Student Loan Xpress, a lender at the center of the current controversy...

For the complete article, please visit the Inside Higher Ed website.

Inside Higher Ed Reports on Higher Ed Watch Scoop

Communications — Thu, 05 Apr 2007 14:31:00 -0400

New America in the News:

On Wednesday, the other shoe dropped in a growing investigation of colleges’ ties to the lenders they recommend to their students — and many experts on the loan programs were stunned by the developments.

Administrators at Columbia University, the University of Texas at Austin and the University of Southern California were reported to have owned stock in a lender that they placed on their “preferred” list for students. Andrew M. Cuomo, New York State’s attorney general, sent a subpoena to Columbia Wednesday and letters to the other institutions, seeking details. The colleges involved are not disputing the stock ownership, which was reported in public filings.

“We are seeing more and more suspicious practices and dealings between university officers and loan companies come to light,” said a spokesman for Cuomo. “This creates even more questions about the integrity of the student loan industry and the process by which colleges steer students to loans...”

Wednesday’s revelations were triggered by an investigation by the New America Foundation, which has been critical of lender-college ties and which posted details and some of the relevant documents online. The foundation noted that the stock held by the three officials was apparently worth more than $100,000 when it was sold. The foundation also noted personal endorsements of the company made by Charlow to students. “Students going to their financial aid office think they’re getting advice from an impartial, informed intermediary. We’re finding that advice isn’t always impartial and it isn’t always fully informed,” said the foundation’s blog on higher education. (In the spirit of full disclosure, the foundation report was prepared by Stephen Burd, a former colleague of this writer...)

For the complete article, please visit the Inside Higher Ed website.

To read the Higher Ed Watch blog post, please click here.

Michael Dannenberg on Nelnet, Univ. of Nebraska in Inside Higher Ed

Communications — Mon, 05 Mar 2007 20:32:00 -0500

New America in the News:

Three years ago, the University of Nebraska’s Board of Regents, eager to find more funds for undergraduate need-based financial aid for students at its flagship campus in Lincoln, struck a deal in which the National Education Loan Network, would provide loan funds that the university would administer to its graduate and professional students. As part of the arrangement, authorized through a process known as “school as lender,” Nelnet, as the Lincoln-based lender is known, would give the institution more than 6 percent of the profits to use for need-based aid...

It appears to have been a win-win-win situation for the university, actually. The student newspaper at Nebraska reported last month that at the time the university’s regents approved the deal with Nelnet, the University of Nebraska Foundation, which supports the institution financially but is independently controlled, owned more than 840,000 shares of Nelnet stock (some of which the foundation sold the following year, at a significantly higher price). That fact was not revealed to the regents, nor did the one regent who was also a trustee of the foundation, James McClurg, disclose it under state contracting rules...

“Why is this a big deal?” Higher Ed Watch, a blog produced by the New America Foundation, said last month. "The Nelnet-NU Foundation-University of Nebraska love triangle demonstrates how, behind the scenes, universities can have multiple financial relationships with student loan providers that may undermine the integrity of their role as informed intermediaries between banks and students..."

The school as lender program has grown controversial amid concerns that by letting colleges share in lender profits, it gives institutions a financial incentive to increase their students’ loan burden. Amid those and other concerns, Congress has cooled on the program, voting last year not to let any more colleges enter into such arrangements, though allowing existing programs to continue, at least for now...

“It’s hard not to find the conflict of interest,” wrote Michael Dannenberg of the Higher Ed Watch blog last month. “UNL is a direct beneficiary of the Nebraska University Foundation, and thus has an undeniable stake in its financial health. Choosing Nelnet as its partner in 2004 (over four other student loan providers) was a profitable choice for UNL for reasons outside of the actual arrangement...”

For the complete article, please visit the Inside Higher Ed website.