Loans can make or break a student's future. With the average loan debt of recent graduates at $23,521, paying back loans and their accrued interest can create a serious financial burden for students.
A recent lender-bribing scandal-in which lending firms bribed several schools' financial aid officers to direct students into their loan programs, which often had much higher interest rates than the federal loans also available to students-led Sen. Edward Kennedy, D-Mass., to facilitate an investigation to uncover corrupt practices between schools and lenders.
Lori Crooks, Duke's senior associate director of undergraduate financial aid, was mentioned in an April 17 Wall Street Journal article as having received a lobster dinner from a loan company.
Jim Belvin, director of financial aid, said the article failed to mention the circumstance under which Crooks received this dinner.
"[Crooks] dropped her card in a fish bowl, and her name was drawn innocently," he said. "She received a lobster dinner-two lobsters mailed to her house from New England."
Belvin said although schools participating in unethical lending practices should be punished, such offenses are isolated incidents that do not reflect the general procedures followed by financial aid offices.
"It's really important to understand that almost every barrel you can imagine will have a spoiled, or rotten, apple or two," he said. "But mostly, the aid offices around the country are run in an effort to support students."
No consensus was reached after four meetings from December 2006 to April 2007 between financial aid directors from various colleges and universities, the Department of Education and a member of the United States Student Association concerning a ban on the marketing practices used by lenders.
The Department of Education, however, submitted its own proposed set of rules to the Federal Register May 31. These rules will take effect next summer if approved after a 60-day comment period.
"It's unfortunate that they weren't able to come to a consensus [in the April meeting]," USSA Legislative Director Rebecca Thompson said "It's unfortunate to have student participation in a process that's so strenuous and to take all of that progress off the table and have the Department of Education simply draft their own. It simply takes the students' voices out of it."
Thompson said USSA and the Department of Education clashed over proposed issues that, if passed, would specifically benefit students.
Under the Department of Education's proposed rules, colleges and universities would be required to include at least three companies on the preferred lender list they provide for students and explain why the lenders are recommended. The new rules would also ban lenders from offering gifts and payments to financial aid officers.
In an effort to further eradicate the bias toward preferred lenders and to provide students with more accessible alternatives, Sen. Charles Schumer, D-N.Y., and New York Attorney General Andrew Cuomo issued a proposal Sunday that would require all lenders to detail loan amounts, interest and fees in a table on the college loan application.
Duke currently has five lenders on its preferred lenders list.
"It is critically important to understand that we make no recommendations to students, but we tell them some names and then we give them more information so they can opt to go elsewhere," Belvin said.
Shirley Ort, associate provost and director of scholarships and student aid at the University of North Carolina at Chapel Hill, said she believes some of the measures may be overly restrictive.
"Prohibiting institutional financial aid administrators from having their way paid to a lender advisory board meeting is counterproductive," Ort said. "I don't think stopping the payment of a reasonable business expense is in the best interest of helping the lenders or schools or families."
UNC uses the College Foundation of North Carolina as its preferred lender, but students can choose to use any other lender.
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