From indulging those with a sweet tooth to lining pockets, lending institutions have been buying the favor of sticky-fingered college administrators for some time now. Instead of protecting their students from predatory lenders’ high interest rates, hidden fees, and poor service, many school officials appear to have fed students and their families directly into student-loan companies’ gaping maw in exchange for a few dollars or a nice vacation — or a box of chocolates.
Now that the players are getting caught, students find they need protection — not only from lenders themselves but from their own colleges and universities. So public officials, at the national and state levels, are trying to provide that assurance, by proposing laws banning the receipt of gifts from student-loan companies and making the process of recommending lenders more transparent.
Not surprisingly, efforts to impose ethical order on the unruly student-loan–university-administration nexus are meeting resistance. College and university administrators, including many in Massachusetts, insist that they can police their own operations, thanks.
That claim took a blow on the chin last week when Emerson College fired its dean of enrollment, Daniel Pinch, for earning $36,000 as a consultant for Collegiate Funding Services Inc. (CFS) while he was recommending CFS to students for loan consolidation.
Pinch’s actions were disclosed not by college officials, who say they have been blindsided by the allegations, but in a report issued by a US Senate committee chaired by Edward Kennedy. The report further showed that Pinch also lobbied on behalf of CFS, lent his name to CFS marketing materials, and even recommended CFS to financial-aid officers at other schools.
CFS is one of 16 lending institutions whose nefarious dealings are documented in the report of Kennedy’s Senate Committee on Health, Education, Labor and Pensions. The 16 companies, including Sallie Mae, Nelnet, Citibank, Bank of America, and other huge names, dominate the market (of more than 3000 lenders) in large part because students select them from their school’s so-called preferred-lender list.
Those lists are select, indeed: among 3000-plus options, only two made it on to Emerson’s list; other schools typically include no more than five. The 12 million undergraduates who annually take out an average of $4000 in loans each rarely even know that other choices exist.
Schools insist that they put only lenders with the best rates and service on their lists. But the Kennedy report suggests that baser considerations — quid pro quo arrangements — might too often be at work. Regardless, this much is clear: untangling the web of relationships that determine how lucrative student loans are made has become increasingly pressing for students, their families, and government representatives.
Emerson is not the only Massachusetts school with the ignominious distinction of appearing in Kennedy’s report. Also making cameos were financial-aid directors at Lesley University, Tufts University, Boston University, Wellesley College, and Mass Bay Community College, which all appear on a list of Student Lending Associates’ gift recipients.
Bizarrely, officials at Boston College, Massachusetts School of Law at Andover, and Salem State College received chocolate rewards for ranking among the “Top 100 volume producing schools” by lending company Student Loan Xpress. Citizens Bank documents show that it wrote and paid for the Massachusetts College of Pharmacy’s financing handbook, its “Financing Your Education” brochure, its award letter to students, and even some of its business cards.