Aug. 1, 2007

Cuomo Targets Fire Back

Voices of defiance have been few and far between as the student loan inquiry rumbled through higher education in recent months. But as the annual meeting of the National Association of College and University Business Officers came to a close Tuesday, a “town hall meeting” on student loans showcased the stories of two institutions that fought New York Attorney General Andrew M. Cuomo — one that ultimately folded, and another that is still fighting, at least rhetorically.

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It’s not that the dozens of college officials who spoke or listened embraced or defended some of the more egregious practices that Cuomo’s investigation uncovered, particularly those involving personal profit for individual financial aid officers. And most of the business officers seemed to accept the premise that the student loan scandal will ultimately prove to have been a helpful, if bitterly painful, wakeup call for higher education institutions that may have been lax in guarding against individual and institutional conflicts of interest.

But the overriding themes of Tuesday’s session were that the student loan investigation has unfairly tarred higher education institutions and their officials for engaging in practices designed to help, not hurt students, and that Cuomo sometimes overreached in his accusations and legal theorizing. Those are sentiments that are commonly shared around water coolers and over beers but rarely in public as they were Tuesday, with a representative of Cuomo’s office in the audience, no less.

(In a related matter, Cuomo announced Tuesday that he had reached a settlement in which the National Education Loan Network, or Nelnet, would pay $2 million to the attorney general’s education fund and cease its arrangements with nearly 120 alumni associations in which it had exclusive rights to consolidate the loans of their members.)

The defiance at Tuesday’s NACUBO session came in two degrees of intensity. Thomas Elzey’s was, by necessity, watered down. Drexel University, where Elzey is senior vice president, chief financial officer and treasuer, had the most visible and direct conflict with Cuomo’s office. When the attorney general challenged Drexel’s arrangement with Education Finance Partners, in which the university received about $125,000 a year in revenue based on a share of private loans its students borrowed from the lender and used the proceeds for need-based aid for other students, Drexel decided to fight.

“We didn’t think we were doing anything wrong,” Elzey said Tuesday, describing the arrangement as a “win-win” that directed “all those resources back to students.” Not only had the university chosen Education Finance through a competitive bidding process in which it made the best proposal, he said, but Drexel had disclosed to student borrowers that the university was “receiving some benefit” from the lender as part of the deal. (Cuomo asserted otherwise in his news release announcing the settlement, saying that “Drexel did not disclose this information to its students or their families.") Critics who felt that Cuomo’s office had been bullying colleges and maligning financial aid officers with sweeping generalizations about ethical lapses cheered Drexel for standing up to him.

But as instances of individual wrongdoing at other colleges mounted and “the whole story became a snowball rolling down a hill,” Elzey said Tuesday, Drexel officials changed their minds and decided to settle. They agreed in April to refund the money the university had received from Education Finance to student borrowers whose loans, Cuomo argued, had cost them more than they might have if Drexel had negotiated a lower interest rate for them, rather than sharing in a portion of the loan profits. “When it all was said and done, we didn’t want to see the name Drexel University dragged through the mud,” Elzey said.

Having signed the settlement agreement, which Elzey said limits Drexel’s ability to comment on the outcome of the investigation, Elzey said he felt obliged to offer what he called a “sanitized presentation” at the NACUBO meeting. “Some universities were unfairly treated in this process. That’s all I’m going to say,” Elzey said. (Whether the Cuomo settlements impose a “gag order” on college officials, as one participant in Tuesday’s session suggested, is disputable. Most of the settlement agreements preclude colleges from sharing information about “any nonpublic aspect” of the investigation, though they say that colleges can issue “public statements.")

The Case of Clemson

If Drexel’s defiance was watered down, like decaf coffee from a highway rest stop, think of Clemson University’s as a double espresso. Strolling the stage and speaking in a Southern drawl, Clemson’s general counsel, Clay Steadman, spun a tale of the South Carolina institution’s encounter with Cuomo. It began with the innocuous request for information about its practices that came in February and built to a late-night telephone call in late March in which a Cuomo aide urged Clemson officials to sign (within 48 hours) an agreement in which it consented to abandon its own revenue sharing arrangement with Education Finance Partners, which was awarded through South Carolina’s competitive bidding process. Clemson was among the dozen colleges Cuomo cited in his March 22 news release in which he threatened to sue Education Finance.)

Steadman had several problems with the proposed agreement, he told the attorney general’s aide. First, Clemson officials were confident that Cuomo had no jurisdiction to bring a legal claim in South Carolina. Second, Steadman said, he was troubled by language implying that Clemson had accepted “kickbacks,” among other things. And third, he expressed concern that he was being asked to sign a “draft” agreement, and was jarred when the Cuomo official responded that the office wanted Steadman to sign the agreement draft “but we might change it later.”

“It was at this point in the conversation where the phrase ‘go to hell’ started to appear,” Steadman said, explaining that, “as some of you may know, we don’t have a great tradition of reacting well to threats of aggression, particularly from Northern states.”

Acknowledging with only a little bit of sheepishness that his reaction “may have been an appropriate sentiment, but it’s not really a fundamentally sound legal theory,” Steadman said that he called Cuomo’s office the next day and informed its officials that he and South Carolina’s attorney general would conduct an investigation of their own into the Education Finance-Clemson relationship.

That review found “no violation, legal or ethical,” although Steadman noted that it prompted Clemson to strengthen its disclosure to students about the deal. Since then, Steadman said, Clemson has ended its arrangements with Education Finance and another lender, the National Education Loan Network, “not because it violated the law, but because it seemed to be becoming a best practice in industry” not to have such arrangements.

When informed that South Carolina’s own investigation had cleared Clemson, Cuomo’s office told Steadman that “in light of that, we were no longer an active target of their investigation.... That is something less than I would have liked,” he said, suggesting that an apology would have been in order given that Cuomo made “statements to the public and the press ... insinuating that we engaged in unethical practices, which was not true.”

A lawyer for Cuomo’s office shifted somewhat uncomfortably in her seat, but did not speak, as those sorts of barbs flew the attorney general’s way. (She said after the event that she could not comment on it.)

But even in expressing regret that “the innocent do get splattered with the mud” in inquiries like Cuomo’s, as Marcus F. Buckley, vice president for finance and administration at New York’s College of Saint Rose, put it, he quickly added that “it is also important to remember that “some of us out there lost our moral compass.” Buckley encouraged his colleagues to view the student loan scandal as a “warning shot to all of us to make sure all of our respective houses are in order,” not just in financial aid but in all interactions in which colleges and universities are intermediaries, in one fashion or another, between businesses and students.

Another official expressed concern that applying the same principles Cuomo used to judge student loan arrangements to other situations “where we get significant revenues returned to our schools that are used to support our indirect costs or other services” could result in revelations that are “just as embarrassing, even though we’re doing what we should be doing” — finding sources of revenue other than tuition and state funds.

Steadman suggested that colleges use four standards to judge the propriety of business arrangements, especially one that might return revenue to the institutions: Was it competitively awarded? What were the criteria used? (A decision made based on the size of the revenue stream back to the institution “could be a problem,” he said.) Was there full disclosure to the students? Can you show a direct relationship between any returned revenue and the welfare of students?

“If you do all those four things, there are still going to be people who think it’s inappropriate.” Cuomo, Steadman said, “thinks any revenue sharing is inappropriate. But I disagree.”

New Line of Inquiry?

Also during Tuesday’s session, it became apparent that colleges may face more scrutiny on student loans — this time from the U.S. Education Department. F. Robert Huth Jr., executive vice president and treasurer at Middlebury College, revealed during the town hall that regulators from the agency had asked Middlebury officials to set aside three days for a review of their practices in allocating student loans.

The inquiry appears to be an outgrowth of the department’s announcement last month that it had sent letters to hundreds of colleges where at least 80 percent of the federal student loan volume goes to one lender, out of concern that colleges might be inappropriately directing student borrowers to one “preferred lender.” Huth said that a vast majority of its student borrow through Nelnet. He told his colleagues at Tuesday’s meeting that he had been told that Middlebury was one of the 30 colleges facing such a review, but when he asked for a hands of others that were aware of such requests at their institutions, no hands went up.

“God help you,” one audience member said.

— Doug Lederman

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Comments

If the universities are trying to “help", then why did the New School take hundreds of dollars off the top of my private loan and now I am the one who has to pay that money back?

Nanette Rayman, at 8:30 am EDT on August 1, 2007

no excuses

“Full disclosure to students” is no excuse for maintaining less than arm’s length relationships. Here’s why:

The fact that the professional associations failed to identify this issue as a threat indicts them — this is their original mission for their members; and the institutions also share in the blame (even though individually they may not be culpable) because they have delegated the institutional effectiveness functions over to the professional associations.

Moral laxity is always blameworthy, whether it occurs at the level of the individual institution or at the level of the professional associations responsible for representing the best interests of those institutions. Just delegating moral responsibility does NOT absolve the institutions, as demonstrated by this unfortunate episode.

Glen S. McGhee, Dir., at Florida Higher Education Accountability Project, at 9:05 am EDT on August 1, 2007

Nanette, have you checked with your school? It may not have been them at all. Loans have fees called ‘origination fees’ that are taken out of them to cover administrative costs. With some loans, there is also a ‘guarantee fee’ taken. Often, lenders waive them, but not always. In either case, any reductions should be disclosed in the promisory note you sign.

Paul, at 9:30 am EDT on August 1, 2007

ALTERNATIVE LOANS

What is wrong with this whole picture is that not one problem has been fixed. If we are talking about the amount of loan debt students are getting into, the problem with alternative loans and the burden they are inflicting, what has Cuomo really accomplished? The government wants to act like the really did something but they haven’t done anything but bully a bunch of schools and lenders (not counting the guilty ones). Have they raised the ffelp limits to help keep these students from the alternative loans? NO, Have they addressed the high interests rates and fees of alternative loans, NO. Ok over 5 years they will raise Pell grant; big deal.What does that do for me as a student in repayment? NOTHING. I may have Pell grant while in school or may not but the amount they raise that is nothing compared to my debt in loans. This is all political dancing and nothing more. Cuomo and Kennedy never borrowed one dime for college. I bet they haven’t even bought their own meal in quite a while. When they do purchase a meal, you can bet it is on the tax payers dime.

IHE reader, at 9:30 am EDT on August 1, 2007

It’s About Time

It’s about time that someone stood up to the bully in the school yard and I congratulate you Clemson University. Take a look at Mr. Cuomo’s record when running HUD. His own secretary accused him of taking BRIBES while holding that politically appointed office. (Check his record on the internet — I did.) Did he do it? He says no. If his word is good enough — and it impacted EVERY tax payer in the United States, why is the word of college and university officials not sufficient? (Incidentially, his record as HUD director was not terribly good and HUD was placed on the critical list for management issues during his entire tenure.)

Higher Education is expensive. Until the Federal Government and the State Governments step up and place K-16 education as a top priority, loans are going to be needed. I agree that some have lost their moral compass, and that starts right at the foot of the current President of the United States and all Congressional representatives who don’t make education their top priority.

Wake up people. New York; I can’t believe your tax payers aren’t screaming and hollering that this man, with likely presidential aspirations, is spending your tax dollars on investigations in other states so he can make a name for himself. If we all band together, we can stop the bully. And Mr. Cuomo — you are the bully!

Sandy, at 9:30 am EDT on August 1, 2007

Cuomo Settlements Simply Greenmail

It is unfortunate that the unethical acts of a few FFELP participants have been generalized to indict the entire program. But if we are going to generalize, MOST schools, lenders, guarantors and servicers are out there acting in the best interest of students. I have been in this industry for over 15 years and over that time the “arm’s length” has seemed to have gotten longer in MOST cases. I remember a time where [local lender] received a majority of the student loans from [local college] and other lenders were shut out, their marketing representatives hearing phrases like “I’ve done business with [local bank] for twenty years, why would I want to add another lender to my ‘list’?” I have not heard an instance of this in at least ten years and certainly [local bank] did not contribute to [local college’s] financial aid making additional institutional scholarships available to students.

That being said, the Cuomo inquiry is not about helping students or holding colleges to a moral standard. It is about POLITICS. Cuomo is running for political office and he intends to hang his hat on the “cleanup” of the student loan industry and branding it under the guise of protecting the rights of New Yorkers. You can bet that the focus will shift to the “cleanup” of the health care or some other industry when student loans reach a point of diminishing voter returns.

Mark, at 9:50 am EDT on August 1, 2007

About time I agree

Sandy I couldn’t agree more; this is just nothing but the bully on the play ground.The problem is one by one everyone folded. See he didn’t fold when questioned on the HUD issues.He had so much political backing from his fathers strong political ties that he was able to hide behind his homies. Makes you wonder who exactly are all his homies. Then throw in Kennedy and you have a power house and they own the school yard so it is basically bend over. The biggest mistake was for first Citibank, and then Sallie to go running and sign his stupid Code. If they would have stood strong and stood behind their schools, we could have weeded out the bad apples and gotten through this. I am hearing commercial after commercial of all these loans now telling people to borrow $40 thousand for their education on and on. What a mess they have created.

Kay, at 10:01 am EDT on August 1, 2007

Cuomo and the student loan industry clean-up

I disagree with many of the posters here. When Cuomo first announced his findings, I thought the whole matter was over-blown too...until FAO’s at some of the major schools in the country were caught with the hands in the cookie jar...until my alm mater, Penn, paid back $1.6 Million...until many alumni associations were found getting greased by lenders.

I don’t dispute that Cuomo has national political ambitions. So what? He did, in fact, expose some very sleazy business practices in a field I’ve devoted my life to for the past fifteen years...and it is disgraceful that a whole generation of students are graduating with what amounts to 30 year mortgages on their backs due to their student loan debt levels. Andrew Cuomo has NOTHING to do with that reality.

feudi pandola, at 10:50 am EDT on August 1, 2007

Alternative Loans

No one is addressing the proliferation of direct to consumer loans, I had a student who borrowed $15,000 and when she received the check and the disclosure statement she was supposed to pay back over $58,000 for that one loan. I talk until I am blue in the face trying to get students and parents to understand what they are doing to themselves. The most effective tool I have found is the loan calculator with an amortization table on Bankrate.com. When they see the total amount they are going to owe sometimes they pause and reconsider. I just talked to a Mother who’s daughter died last semester. Every month she writes an $800+ check to cover the loan she co-signed. Why are these issues not being discussed.

Martha, FAO, at 11:10 am EDT on August 1, 2007

Laughable

Sandy and Kay,It is comments like yours that illustrate we still have a big problem in the industry. As a result of Cuomo’s investigation we now have more transparency in the FAO for all borrowers. How can this be bad? I suggest you get over your personal feelings towards Cuomo and work towards complete conflict free loan options for students. If you want to make an arguement, attack the cost of tuition. Like it or not, we have a two headed monster (loan scandals and cost of tuition) and right now only one seems to be getting the attention. Your attacks on Cuomo are not relevant and only demonstrate personal conflict with him. For the good of the cause and student, it would be nice to see you and the industry embrace the good that has come as a result of his investigation.

Best,Matt C

Matt C, Sandy and Kay, at 11:15 am EDT on August 1, 2007

So who is to blame

So Cuomo isn’t to blame for students huge debts and we can call agree. However, no matter what the amount of grease, the point is still what has he accomplished in regards to student loan debt? That is the biggest question. Also Congrats to you that in 15 years you stayed so clean. I guess it is safe to say you never ate at a conference, never used a lender pen, paper, paper clip, or otherwise? I mean after all it is the lenders support that makes the conferences affordable for colleges. Our registration cost are incredibly reduced because of corporate support. Be careful when pointing a finger, because 4 are pointing back. So if you can confidently say you have never used anything that has been offered up by a lender, then go ahead and lets hear what else you have to say.Again, all the lenders have been attacked and several schools. I would love to see how much that is going to change one dime of borrowing this next academic year and all the years to come as college cost continue to rise and will rise a bit faster without some of the support lenders have offered. These cost will now trickle down to the students. That is a guarantee.

kay, at 11:15 am EDT on August 1, 2007

The School’s Side of the Story

I have yet to see anyone address the impact on a school’s default rate when we deal with incompetent FFELP lenders. Yes, we have a lender list that represents lenders who have demonstrated exceptional customer service. In the past, we allowed any lender to be on our list who requested to be there. However, in a few short weeks we learned that call centers operational hours were geared towards East Coast schools. We are on the west coast. Customer Service reps., did not know if their company had any repayment incentives and worst yet, some could not answer where students were to mail a payment. We have had lenders who have sold their loans, have servicers no one has heard of or knows how to get in touch with. We have spent hours on the telephone with voice mail prompts that lead administrators into the abyss. What were our students faced with? Frustration! And as a result, non payment of their student loans. Then who has to answer for that? The financial aid office, because of the high default rate. I’ve been in financial aid for over 20 years. I have worked at private and public schools, undergraduate and graduate schools. You better bet your bottom dollar you are going to answer to students and their parents if you have lenders who are incompetent. I ask folks out there, “If you were to purchase several defective products from Sears are you going to blame the manufacturer or are you going to blame Sears for carrying the product? You are going to blame Sears! I am so angry behind the climate these accusations have brought to this community. And I certainly do not appreciate showing up to Easter Dinner having my family question my ethics because of an ad that My Rich Uncle ran in the Los Angeles Times. I am mad as heck and know that this dietribe is riddled with grammatical errors. I just needed to get this off of my chest. My Rich Uncle and Cuomo need to recognize that the FFELP industry is very competitive and quite frankly oversaturated with lenders. Just because someone wants to be in the industry they cannot hollar foul just because students, parents and schools select a better product. The alternative loan industry is one that needs a second look. Yes, the loans are convenient, but what happens when a student has unforseen circumstances and has to extend their education?

Cindy Mathews, Financial Aid Counselor, at 11:20 am EDT on August 1, 2007

Greased Wheels

If only the students and parents really knew what was going on in higher ed. There were a few bad apples in financial aid, but they are just the tip of the iceberg. Cuomo could target so much more...textbook publishing, the whole higher ed “consulting” industry, and the really big kahuna, ATHLETICS. Students have no idea how much of their precious loan money is going to pay for pampered prima donnas to eat steak and lobster and travel around the country to play trivial games that no one remembers a year later. That, combined with the fact that many professors simply brainwash their students in the latest politically correct leftist ideology and don’t even bother to teach students how to think for themselves anymore, the whole of higher ed has turned into one giant scam.

BH, at 1:20 pm EDT on August 1, 2007

Just when you thought this was going to die down

I guess this isn’t blowing over as fast as many of us would like. I wish there would have been more South Carolinas from the start. It may have fizzed out a bit.

The investigation brought to light some real ugly transactions, like stock options, consulting fees, paid tuition, call centers of lender reps, and to lesser extent fajita lunches w/ happy hour to follow to stay on a list.For all of the supposed “good” Mr Cuomo has said he’s done, let’s look at the down side.

Creating distrust of the Financial Aid Office for students and parents. Families trying to go on their own and getting the wrong information. Aid not ready on time for school or at higher rates because of something that was found on the internet.

Attendees at conferences acting like the other side has cooties. Schools don’t want to been seen with lenders, lenders don’t want to act like they are doing something wrong by being with a school. I still can’t figure out how a meal at a conference bought buy a lender has a negative effect on the financial aid process. Reservations for 25 and we’d like seperate checks.

The worst of it is that it’s done nothing to address the real problem of the cost of school. The real problem will take Congress to play nice for a change, not a state AG. No one in Washington seems to want to do that. Cuomo may have claimed to clean up the industry, but the students still are having to take the loans out. They just may not being choosing a lender the school has on a list. Could be at a higher rate, could be at a lower rate. Could be more than the cost of attendence. How clean did it get? Seems to me that it’s more smeared than cleaned up. In all of his allegations he has not proven that loans cost students any more money, only that the school got a slice of pie. I don’t like that business model, but it doesn’t seem illegal as long as the school allowed other loans to get certified.

In the end the students still have to borrow way to much to get through school, Mr Cuomo has a political golden egg, Kennedy & Miller can point to something for their DL push, and the schools and families have to look through the smeared window of the financial aid process with no debt relief.

Bill, at 1:20 pm EDT on August 1, 2007

The real issues

Let’s get real here. Cuomo has painted the entire financial aid industry as corrupt, and has portrayed financial aid professionals as greedy, non-caring people. I hate to break the news to everyone, the people that work in the financial aid offices at colleges and universities do not do it for the money. In fact, most FAO’s make less per year than students are borrowing to go to college. So why do they do it? They actually care about the student’s they work for. Shocking, I know. True, there are some individuals (as in any industry), who have lost their moral compass. But to generalize about FAO’s receiving “kickbacks” and financial gain from lenders is ridiculous. Is getting free pens, or the occasional lunch a “kickback"?? I can not think of an industry that uses vendors that doesn’t involve some kind of perks to their clients (hmm...pharmaceutical, insurance, retail...I could go on).

FAO’s are there to help the student through the financial aid process. Not one FAO wants students to go into debt to go to college, but unfortunately there isn’t always a choice. Grant funding is barely increasing and is usually available only to the neediest of students. Many grants also run out becuase there is only so much to give. So what option is left? FFELP loans, which barely cover books and supplies at some schools. After FFELP loans, the other alternative is private loans. In many states, private loans were almost unheard of several years ago. Why is it so prevalent now? Because schools keeping raising tuition, and FFELP loans are not incresing at the same rate. Why isn’t anyone complaning about deregulation of tuition and how expensive college has gotten? That is the real issue. If school didn’t cost so much, feredal aid could cover it, thus making the “evil” private loans unneccesary.

Student loans are designed to be manageable for students. They are flexible, offering low interest rates, many repayments options, and “safeguards” in case a student becomes unemployed or disabled, etc. The problems occur when students are trying to pay back student loans in addition to the many credit cards they receieved while in college. No one is pointing any fingers at the credit card industry who preys on students, offering interest rates as high as 24% and huge late fees. The credit card industry is truly out there to keep the students in debt, so they can make money off interest, late fees, and over the limit fees. Why is this industry not being scrutinized? Let’s leave the FAO’s alone to do their job, helping students, and look at the other issues student’s are facing.

Jennifer, at 1:20 pm EDT on August 1, 2007

motivations?

Anything Cuomo has done has been motivated by his political aspirations and, unfortunately, none of it is going to help the individual student borrower in the end. Even if every school and lender in the country were to sign his “Code of Conduct” would next years students enjoy a reduced loan burden upon graduation? Of course not. Do students need and deserve our help to reduce their student loan debts? Absolutely!

So I ask you this: Which course of action is going to result in higher savings for todays student borrowers?

A) Schools selecting student loan providers through a competitive bidding process like Clemson

-OR-

B) The AG’s office of New York dictating the required lender selection process to every school in the country

D, at 5:25 am EDT on August 2, 2007

Cuomo on the Campaign Trail

Cleverly, Cuomo has found a low cost way to begin his 2016 national campaign for the Whilte House. And students in the higher education enterprise will fund that campaign through the increased costs of student loans that his so-called ethics reforms will ultimately produce. In an era of transparency and campaign finance reform, this is an interesting outcome for us all.

Three cheers for Clemson and South Carolina for refusing to “collude” with Cuomo.

A New Yorker, at 10:25 am EDT on August 2, 2007

Get Real

Matt, you obviously have your head in the clouds. I’ve been in the industry for 25 years, and that’s 10 more than you. I’ve seen reauthorizations that would make your hair curl because congress doesn’t care about anything other than getting re-elected. You missed my point. I could think Cuomo is best thing since applesause and I would still call him a bully on this subject. All of the responses who have spoken to the real issues, you are correct. We don’t have more aid, it’s not a top priority, student now think those of us in the business are evil and only out for kick-backs: hate to tell you, but most of those pens don’t write, and those that do are put on the counter for our students. And guess what, that keeps our budgets down which in turn help to keep the university’s budget down. Do I take stock, no. And neither do 99% of the aid officers in this country. I ask you, how many have gone to court? None that I know of, just yet anyway. Have a small handfull (my count is currently 19) been really, really stupid — oh yeah. But I ask you, as a result of this, do you see the interest rate on MRU’s alternative loans (and don’t give me that crap about theirs being the lowest in the country, we have students in this state who have gotten one of their loans at rates as high as 19.8%), Sallie Mae’s alternative loans, Citi’s alternative loans, Chase’s alternative loans gone down. Not to my eye they haven’t. I didn’t start out disliking Mr. Cuomo but a bully is a bully and like Kay, I’m tired of bending over. He did himself in, as did those who really did do something inappropriate, and NONE of our students have won.

I’d love to see you ask a professor to take a pay freeze, let alone a cut to keep tuition from rising. And do we or don’t we add on to our basketball, hockey or football arenas? Do we allow our book stores to put credit card advertisements in the bottom of plastic bags so they get the bag free (keeping down the cost of books)?

And incidentially, what about the parents who are part of the baby boom generation thinking that any money in their savings is “theirs” without stopping to remember what their parents sacrificed to get them through college? So you see, it’s not just one little fix. Our families, legislators and college administrators alike need to think about our priorities and put our children first.

Sandy, at 11:10 am EDT on August 2, 2007

I don’t know about the individual schools, but the lenders themselves can’t be trusted and need to be closely policed.

I’m overseas, so dealing with financial matters is sometimes a bit more difficult than if I were in-country. Registered return-receipt mail is essentially impossible from Japan at this point, for example. And lenders seem to consciously take advantage of this.

A couple of years ago, when I was making my last payment to the Student Loan Corporation, they simply refused to acknowledge it. They claimed they’d never received it, so that my loan continued and continued to accrue interest. Eventually I received the money orders I had sent to them back, as a result of a trace performed by EMS because I’d insured the package. The Student Loan Corporation mailed back the money orders that they still claimed they had never received in one of their own envelopes. And of course, they charged me interest until they again received the payment I’d already sent them once.

Currently, I’m making my last few payments to Sallie Mae. Recently I sent them a $1000 payment, split into a $300 and a $700 money order because the Japanese Postal Service won’t make a single money order valued at more than 100,000 yen (though they don’t charge anything extra for larger payments that are split into more than one money order). Well, Sallie Mae acknowledged receipt of the $300 money order and disclaimed all knowledge of the $700 money order that arrived in the same envelope.

Of course, they are continuing to show interest accruing on that $700. It is their position that they “cannot do anything until [they] receive copies of the front and back of the canceled money order.” Since it’s in their possession, obviously I cannot get those copies. And they indeed refuse to do _anything_—like talk to the person who opened the envelope and processed the $300 money order for them or even give me the name of the bank they deposited it into to speed up the tracing process—until I send them a copy of the canceled money order.

From their point of view, if they choose to burn or shred my payments, as long as I cannot produce the ashes or shredded money orders or in any other way correct _their_ mistakes or misbehavior, they have a right to continue collecting interest and demanding the principal they’ve destroyed—forever. All “mistakes” made by Sallie Mae, true mistakes or flatly intentional mistakes, are the responsibility of the person who received a Sallie Mae loan to correct, and due to their interest (pun unavoidable) in having such problems remain unresolved for as long as possible, they will take no steps at their end to resolve them.

It is curious to me that such hard-to-believe things have happened to me twice with different companies since I moved to Japan. One company is able to send the payment back, but claims both before and after that it never received the payment??? If that was a human message rather than a corporate one, we’d claim that person was insane. And the other company somehow managed to lose all track of a money order that came to them sandwiched between another money order and a payment slip in an EMS envelope?? That’s just really hard to do. And it’s impossible—and of no interest to them whatsoever—to check on the person who processed this payment??

My guess/suspicion is that this sort of “extortion-through-error” is a student loan company policy for persons paying overseas. Performed systematically for the thousands of recent graduates in the Japanese JET program and in other parts of the English-language teaching industry, along with anyone else taking work overseas before finishing up student loans, this could inflate profits enough to be worthwile. At the same time, the individual lendees are robbed of little enough money that it’s not worth tons of time and effort to do anything about it but complain (in my case through IHE) and warn others in need of student loan financing away from the student loan companies one knows to be questionable in their practices.

Thane Doss, at 11:41 am EDT on August 2, 2007

Wailing Weasels?

Pompous, venal and self-serving — that’s what Cuomo uncovered and that’s what I STILL read here in some of these posts. Do you folks ever stop to think that Cuomo et. al. may be reading what you write? It seems to me that more than half of you STILL do not get it!

Bruce, at 3:15 am EDT on August 3, 2007

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