The national uproar over inappropriate relationships between universities and the private firms that dole out loans to their students finally reached the top yesterday, toppling the head of the Federal Student Aid office.
But as Theresa Shaw steps down from the Education Department’s top student-loan office post amid allegations of lax oversight, some on the university end of the financial aid business are beginning to push back. They are claiming politicians on Capitol Hill have been too quick to consider sweeping legislation without looking at all sides of the issue and may end up hurting students in the process.
One is Sarah Bauder, the financial aid director at this university who is considered a national voice on financial aid issues. She is working with the Education Department on a task force that will retool the department’s loan regulations and lender practices in an effort to head off the need for any legislation.
“I don’t think [the politicians] are looking at all the facts,” she said. “They’re making broad sweeping motions” based on the unethical behavior of “a small percentage of individuals.”
The scandal was touched off two months ago when New York State Attorney General Andrew Cuomo began investigating school officials who were steering students toward specific lenders in return for money and stock options. Loan companies were also found data-mining the department’s National Student Loan Database to search for potential borrowers. It is illegal for anyone besides students and their families to use the database unless permission is granted.
University System of Maryland officials undertook a review of system schools’ loan practices after an official at Johns Hopkins University in Baltimore was suspended for inappropriate behavior, but College Park has not been investigated.
Congress is now considering legislation encouraged by Cuomo and sponsored by Sen. Ted Kennedy (D-Mass.), chair of the Senate’s Committee on Health, Education, Labor and Pensions, that would make it illegal for financial aid officers to serve on loan companies’ advisory boards.
But Bauder and others, including Republican legislators, see the boards as a beneficial way for schools to work with companies to get the best rates for students and to make the loan services simpler to use, she said.
Heather McDonnell, director of financial aid at Sarah Lawrence College in Bronxville, N.Y., agrees. She said the uproar over student aid officer misconduct has been blown out of proportion because a handful of aid officers took money for serving on loan company boards.
“Financial aid people have served as resources to anyone involved in the financial aid process, which includes lenders and the government,” she said.
Alternative legislation, sponsored by Rep. Buck McKeon (R-Calif.), the ranking member of the House committee, would allow university staff to serve on advisory boards, but would prevent them from receiving any compensation.
“Our bill explicitly allows an institution to negotiate lower interest rates or fees on loan products for … students,” McKeon told Cuomo in April. “Simply put, it benefits students.”
However, Bauder says the evidence Cuomo is touting is not enough to warrant a change in the current law.
Cuomo has fired back, denounced the task force that Bauder is on as coming together too late.
“It has recently been reported that the DOE rule-making process, which was supposed to resolve these issues, has broken down,” Cuomo told the Congressional Committee on Education and Labor in April. “To me, that is like saying the fire truck has stalled on the way to the fire. It is simply unacceptable.”
Bauder said the task force process, which requires unanimous approval by members, might be a bit flawed, but certainly didn’t break down.
According to Bauder, the group agreed on 16 of 22 provisions and will issue a report on June 1. Bauder said she can not comment until it’s released.
