A report released Tuesday by Sen. Edward Kennedy, D-Mass., exposed some student loan lenders and institutions of higher education for engaging in exchanges of inappropriate donations and benefits.?
As Chairman of the Health, Education, Labor and Pensions Committee, Kennedy released the report providing details of inappropriate marketing practices in the student loan industry that had been previously discussed in Congressional hearings, media reports and inquiries, according to Kennedy's press secretary Melissa Wagoner.
Wagoner explained that some lenders provided donations, services, private loan funds and other benefits to colleges in exchange for preferential treatment with regard to student loans, including placement on colleges' preferred-lender lists.
"There have been ongoing investigations regarding marketing practices in the student loan industry, and it was decided by the senator that industry needs oversight," Wagoner said.
In response to the report, Eric Solomon, spokesperson for Nelnet, an education planning and financing company that is one of the lenders accused of improper actions in the investigation, said Nelnet is complying with the new industry reforms.
"We publicly released a review of our own business practices on our Web site, which included references to virtually all of the matters in the report and have adopted a Student Loan Code of Conduct," Solomon said.
He denied to comment further because the investigation is still underway.
Not only are lenders under scrutiny, but several universities, including the University of Maryland, Georgia State University and the University of Nebraska, are being investigated.
According to Student Financial Services Director Yvonne Hubbard, "99.9 percent of financial aid offices at universities are looking [out] for students and do good by students and [there are] a few schools that choose to bend the rules." Hubbard added that the University has been very careful when dealing with lenders to avoid crossing unethical boundaries.
"We follow Virginia code of ethics very strictly," she said. "The University requires us to act in an appropriate way and follow a code of ethics."
Three years ago the University set up a special committee to carefully select a preferred lender, Bank of America, Hubbard said, noting that the University's goal was to get the best possible deal for students.
Currently, the University is in the process of deciding whether to select three lenders or to return to direct loans to provide more options for students, Hubbard said. The University plans to invite Student Council to appoint students to a committee to have input into the decision.
Of the many changes to come, the most important change would be to carefully monitor the relationship between the lenders and the universities and ensure the relationship remains within the set guidelines.
The University "follows [the] Virginia code of ethics very strictly," Hubbard said, noting that the University "wouldn't even allow them [the lenders] to buy donuts or bring anything to office. [The University] doesn't want to have that kind of relationship with them"
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