After having read snippets of each posting I felt I should comment. I have worked in the student loan industry so I guess you could say I am qualified to talk about this.

Student lending is a billion dollar industry. So it is a safe statement that it has it’s place in the economy. Kickbaks, gifting, whatever you want to call it are all charged back to the borrower in one form or another.

The first thing the schools ask when approached by a new provider is: what do we get? It is automatic. We were actually surprised at how open and blunt they were about the expectations. And no we did not participate in this.

Second, who exactly do you think pays for the gifts? Well, the borrower does through interest rates and points charged on the loan. I hope no one thought this was an act of charity. And yes, being a preferred lender there is a benefit to both the school as well as the lender. The more volume a lender has the more money it makes, thus the gifting to the schools.

How does this go wrong? Poor underwriting by lenders who were just going for volume resulting in loan default. This was not the exception, this was the rule. For example, look up Sallie Mae and the investigation into their underwriting. What else is the problem in this? The borrower has a loan through a lender that makes their life a living hell by losing payments, not reporting properly on the payments can substantially screw up a your credit report and the world renowned poor customer service.

Oh and by the way — institutions should offer a variety of lenders because borrowers are all different. Some do not have perfect credit, others do or have a co-signer that does and can help them to secure a better interest rate. The problem is that most students do not know anyting about loans and usually end up getting screwed over by a place like Astive with a 25% interest rate. That is highway robbery and makes me think of the credit card companies that take advantage of the students — but I’m sure that’s a whole other message board.

James, at 5:15 am EST on February 19, 2008

Deceptive Lender practices

While I am not an apologist for student lenders, the unusually high level of bombastic rhetoric on the part of Mr. Cuomo ("an unoly alliance"?) is a both unfair and unfounded. More likely, it is a transparent attempt to pad his political resume to further his political aspirations. Luckily for politicians, statements they make don’t have to stand up to logic and reason. If Mr. Cuomo has evidence of a law being violated he should shut up and file his charges. I have not heard of any charges being filed yet? The current political climate lends (pun intended) itself to this type of “red herring” The fact that one or two actors may have done something out of a field of thousands of FAO’s and student lenders constitute exceptions. I am sure that Mr. Cuomo learned in his logic classes in law school that exceptions prove the rule. The rule being that the vast majority of FAO’s and lenders are honest, law abiding men and women of integrity. If you have evidence of an unholy alliance, please share it Mr. Cuomo. Otherwise, this is nothing but a solution in search of a problem. What this discussion does not need is another politician willing to let the “tail wag the dog” for selfish political gain.

Robert Foultz, Assistant Director of Financial Aid at West Chester University of PA, at 8:45 am EDT on March 16, 2007

Typed too quickly: the last sentence should read 60+ colleges and universities rather than 60+ lenders.

The Valley below Capitol Hill, at 12:05 pm EDT on March 16, 2007

Re: Deceptive Lender Practices

Re:Deceptive Lender Practices posted by Robert Foultz, Assistant Director of Financial Aid at West Chester University of PA, at 8:45 am EDT on March 16, 2007.

It is nice to see West Chester University of PA has ONE lender listed as a “preferred lender” on the West Chester University Financial Aid website (http://www.wcupa.edu/_SERVICES/FIN_AID/altlns.asp). I’m sure the West Chester University President, student body and alumni appreciate the openness in which your financial aid office operates. I find it note worthy the web page does disclose students can go to the financial aid office for a complete list of options. Way to keep it balanced. I can see it now… “Hey students, West Chester University of PA has ONE preferred lender, but for your convenience (err inconvenience) you can hike over to the financial aid office and we will be happy to show you a list of other options – right after we get done explaining how your loan will be delayed and you might get dropped from class if you pick another lender.”

You can find Mr. Foultz comments below. I invite each of you to visit the above link and view for your self why these comments are grossly hypocritical. Ladies and gentleman, this is exactly why the financial aid industry is under deserved attack. Mr. Foultz, please do not feel alone. This exact scenario can be found all over the country at different college and university campuses.

Please, keep it real! Deceptive Lender practicesWhile I am not an apologist for student lenders, the unusually high level of bombastic rhetoric on the part of Mr. Cuomo ("an unoly alliance"?) is a both unfair and unfounded. More likely, it is a transparent attempt to pad his political resume to further his political aspirations. Luckily for politicians, statements they make don’t have to stand up to logic and reason. If Mr. Cuomo has evidence of a law being violated he should shut up and file his charges. I have not heard of any charges being filed yet? The current political climate lends (pun intended) itself to this type of “red herring” The fact that one or two actors may have done something out of a field of thousands of FAO’s and student lenders constitute exceptions. I am sure that Mr. Cuomo learned in his logic classes in law school that exceptions prove the rule. The rule being that the vast majority of FAO’s and lenders are honest, law abiding men and women of integrity. If you have evidence of an unholy alliance, please share it Mr. Cuomo. Otherwise, this is nothing but a solution in search of a problem. What this discussion does not need is another politician willing to let the “tail wag the dog” for selfish political gain.

Keep it real, at 2:15 pm EDT on March 17, 2007

Lender lists in the real world

It’s offensive to me that colleges would be automatically presumed guilty of some wrongdoing based on the number of banks on their preferred lender lists, and I can see that many are very willing to presume guilt despite being in possession of precious little in the way of facts. The US Dept of Ed themselves have as much as admitted that the number of legitimate complaints they’ve received on this whole issue may be less than a dozen schools nationwide.

Let’s not forget that these are not car loans or mortgages...these are highly regulated Federal loans with many of the terms etched in statutory stone. Stafford lenders cannot offer 0.9% financing like Volkswagen or subprime mortgages...the “better rates” that everyone is screaming about are barely negligible amounts of money to most borrowers.

I have been serenaded by countless lenders over the years trying to get onto my lender list, and like virtually every other aid professional, I have constructed that list based primarily on the bank’s proven track record of service to the borrower. And with more lenders in the business than most students want to keep track of, a short lender list is a service that most students and parents expect so that their decision about a lender is made easier.

I suspect that several of the angry postings may be students or parents frustrated about the high cost of education, and this seems a good opportunity to vent and point fingers. Believe me folks, financial aid administrators are the one group of higher ed professionals most on your side on this issue. We are your biggest advocates, it’s a shame that you’re portraying us as the enemy.

DS, at 6:00 pm EDT on March 18, 2007

Re: Keep it real

Keep it real never suggested otherwise, but thanks for the clarification.

Kind of curious how a federal loan list would include several options, but the alternative loan list does not (side note: the same ONE alternative preferred lender also happens to be the first choice for federal loans too). — No doubt coincidence? I wonder which type of loan is more profitable for a bank/lender? I wonder which type of loan a borrower would benefit more from if they could openly “comparison” shop?

The clarification is appreciated, but the facts don’t lie. This is a perfect example where the financial aid office wants to paint a pretty picture, but a little research reveals a serious hidden agenda – at the students and parents cost!

Keep it real!

Keep it real, at 5:30 am EDT on March 19, 2007

Deceptive Lender Practices

Mr. Foultz,So why not openly (like your federal loans) allow students seeking alternative loans to compare/research options on your schools financial aid website (like your federal loans). Like it or not, perception is everything. The perception here is that you’re hiding (or steering business to ONE lender at the potential cost of your students and parents) additional funding options from your students (if not, make the other options available online for the consumer/student to compare). Sure, the student can hike over to the financial aid office for a complete list of options, but what is the perception in this scenario. In addition, we all know how easy it is to get students into our office – NOT!

Also, by having your lenders listed in alpha order is not the issue. The issue is only having ONE alternative loan option on your financial aid website for your students to see. Curious to know if your president is aware of your office only disclosing ONE alternative loan lender via online to your students?

Surely the highest admin levels at our universities want transparency for their students?

Again, which loan type would a borrower benefit more from if they could “comparison” shop? The answer is the same as which type of loan is more profitable for a bank/lender.

Please, keep it real!

Keep it real, at 10:45 am EDT on March 19, 2007

I have not missed the point at all. I would argue that you have. A search of Google using the term “Student Loans” returns 6,830,000 hits. You can winnow it down to 3,880,000 hits for “private student loans". Assuming it were physically possible to do so should we post all of these on our website so that students can “comparison shop"? If not , how many lenders should be posted there? what is the magic number? Are you arguing that we should not use our expertise accumulated over years of experience in dealing with lenders to help students? Further, when a student asks us to certify an alternative loan which is clearly inferior to the one which we “prefer” we should and do that right away correct, but I hear no sympathy for you for those students. We do certify those loans as well, by the way. Of course, if we turn a blind eye and let students borrow a clearly inferior loan product without pointing out it’s deficiencies I am sure Mr. Real, you would be condemning us for that as well.Again, if you know the magic number please share. But if anyone wants to discuss the merits of any private loan they wish to borrow with us, well that is what we are there to do. By the way, you seem inordinately preoccupied with what our President “knows". You must not work at a college, or you would know that you don’t keep secrets from your president. Feel free to contact her.

Robert Foultz, Assistant Director of Financial Aid at West Chester U of PA, at 1:36 pm EDT on March 19, 2007

FAO, I appreciate your opinion. There is no “one size fits all” approach as current proposed legislation would like to pretend. Each College is different. The student populations are different in makeup, the COA’s are quite different, the resources available to each college are different. So each college should have the ability to determine how to best utilize their resources, and must customize advice to fit their students. All loans come with standard sets of factors that can be analyzed scientifically. If we evaluate each lenders products we can ascertain which are the best. This is not rocket science. While some may see presumption, others may see advocacy. I would not dare to tell you what was the “correct” way to administer your loan program at your school. Please accord to us at WCU the right to determine what the best fit is here. BTW, In my career I have worked as an FAO in two states, across four different sectors as an fao so I have a basis for comparison. And for purposes of complete disclosure, I worked as a lender for a short period of time as well. Again, if someone wants a lender not on our lists we will certify there loan, but if we feel that a loan which the student or parent wants to borrow is clearly inferior, we will attempt to educate them. Once done it is still there decision. My objection is to the “look the other way/shotgun” approach to populating a lender list. Too many FAO’s look the other way. Do it too much and it will translate to your default rate.

Robert Foultz, at 8:45 am EDT on March 20, 2007

Deceptive Bloggers aka Mr. Keep it Real

“So, what you are saying is your financial aid office is unable to find a loan that compares favorably (or equal) to the ONE option you currently offer your students on line?”

No, you are saying that. Anyone who goes back to read my prior comments will clearly see that I did not say that. We are saying we have found the best option, but that students are free to continue shopping. And yes, it is possible to put forward a quite reasonable and defensible argument for a best loan. Just ask the Department of Education. They do it.

“Quite frankly, this does not pass the smell test — it stinks and your students and parents will continue to suffer.”

I am waiting for your proof that our students are suffering. As you are so knowledgeable...and have made such fantastic claims...please feel free to provide your evidence. The only smell in the air is that of a dishonest and cowardly blogger who hides behind a sham alias.

“"There is better money saving loan options available that could and should be posted online for your students to compare.”

Please list them here.

“...your office does not offer WCU students more than ONE online resource to compare private loans.”

Again, no basis in fact. Our office does not offer any private loans, but there are plenty of lenders and websites that do. And our students will use them in spite of our website. BTW our website prevents nothing.

“Your university is now under the microscope of “bad apples” and this watchdog will not go away. This will not be looked upon favorably by your students, parents or alumni.”

Wow, you make the most outrageous claims. Can you back any of them up?

We have not broken any law, we have passed all of our audits, we have a low default rate and the only complaints I see are from you. You don’t have the knowledge, right or standing to speak for any part of the WCU community.

“There are several loan options available that are better than the ONE online option you offer.”

Again, please feel free to list them and be prepared to show why they are better.

“By the way, as I read NASFAA’s take on preferred lender lists WCU does not even meet their reccomendations. Note Monograph 15: Guide to Developing a Preferred Lender List provides guidance to schools that participate in the FFEL program (HELLO) for constructing student loan lender lists. It includes general principles, benefits, and tools to help develop an impartial list of student loan providers from which students may select a lender that they believe best meets their needs. Found at www.nasfaa.org

Hello! Private loans are not FFEl loans and your right about one thing, they are a recommendation.

Keep it honest. I have made all my comments and not hid behind a sham pseudonym. For someone so concerned about transparency please share with all of us who you are and where you work. Or perhaps you are afraid that you might be scrutinized in the same way.

Just as I thought you are “keeping it hidden"!

Robert Foultz, at 5:46 pm EDT on March 20, 2007

Dear Keep It Real...

I have to address some of your comments...

“Please explain what makes your ONE private lender the best? I can assure you it is not price! And from experience it is not service.”

On the contrary...there are a few Student Loan companies out there who are better because of their service. They go beyond the call of duty and do whatever they can for their student loan borrowers including, but not limited to; Loan Counseling, Debt Counseling, Repayment Options, Credit Counseling as well as providing the student with cost comparisons and better interest rates.

“Nope, I just smelled it again. The odor is definitely coming from your financial aid website that only allows students to compare ONE private loan lender.”

Their site isn’t “only” allowing students to compare ONE private loan lender...their site is giving a recommendation. Kind of like your buddy telling you “Hey, I just had the best pizza in the world, it was Papa Johns.” They aren’t twisting the students’ arms forcing them to pick the lender that is on their site. They are saying that with their experience they have found the best processing, results and customer service from this particular lender.

“Errrr it prevents the student from being able to openly compare private loans.”

This isn’t true. It isn’t preventing the student from doing anything. I don’t see a firewall that prevents the student from going to google.com and researching on their own. I don’t see a death threat to the students’ saying that if they don’t pick this one lender they won’t be approved or even admitted into school, do you?

“Just because you are not breaking the law does not mean you are doing what is best for your students.”

Most, if not all FAAs and people in FAOs have their students’ best interests in mind. The FAAs aren’t there to make a quick buck, they are there to make sure that the students get the funds they need to go to school in the best way possible.

“Give me a break. If you are going to offer only ONE private loan lender on your website, shouldn’t you be the one telling your students why it is the best? Well, I guess not. Ethics comes into play here and when you do not offer the best loan for students to compare I guess you can not disclose as such.”

The school does tell their students why it is the best. Usually those facts are, no fees, lower interest rates, better borrower benefits, better approval ratings for the students, etc. All Private Loans need to be certified by the Financial Aid Office and this doesn’t happen without the student. However, it is really up to the student and their families to make up their minds about loans and which direction to go in.

“The watch of the watchdog will continue and your students will realize sooner or later, what a disservice having only one lender to compare is. Then there will be some tuff questions to answer —”

There is no disservice happening here. The student usually has 10 fingers and can type in any lender they want into google.com and do their comparisons...it isn’t up to the school to provide all of that information and last time I checked, it was still a free country and we were all born with free will and the student can pick whichever loan they please...

FAO and FAA supporter, In The Financial Arena, at 9:05 pm EDT on March 22, 2007