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During this last month of school, LMU seniors -- particularly those who are dirt poor like me-will be sitting through a variety of workshops and counseling sessions about student loans. Last Tuesday, I had the fabulous opportunity to attend a "mandatory" workshop that, to my disappointment, turned out to be nothing more than an hour-long advertisement for one of LMU's "preferred lenders." More on that session in a minute.
The very next day, the Associated Press ran a story about how officials at three major universities (Columbia, University of Texas and USC) were found to have owned stock in the companies they listed as "preferred lenders." You don't have to be a journalist to see the connection.
I didn't want to jump to any conclusions, but thought there might at least be a remote possibility that if this was going on at other universities, unsavory business practices could be happening here at LMU. According to the Associated Press, student loans are an $85 billion industry, and LMU might just be hungry for a slice of that.
I contacted Dr. Anne Prisco, LMU's vice president for enrollment management. She assured me that LMU's preferred lenders are selected through a "rigorous" process, and that LMU abides by professional and ethical standards.
That is comforting, but it doesn't change the fact that the workshop I attended seemed sketchy, at best. The other 20 or so attendees and I were given packets with two kinds of fliers: those from EdFund (which Prisco explained is the "state guarantor") and those from a company called All Student Loans. Seeing as how I've never been a debt-ridden college senior before, I had no idea what all this meant.
As I sat listening to the speaker -- who, coincidentally, turned out to be from All Student Loans -- I only got more confused. Not by the terms "Stafford" or "forbearance" or "consolidation," but by the tricks they were trying to play. I kept hearing about "some lending companies" who would offer to consolidate at a bad rate, and what would happen "when we send you mail."
At last I raised my hand to ask the speaker what her affiliation was. The woman told us she was from ASL; the LMU financial aid representative said that ASL is one of the companies on LMU's list of "preferred lenders." The woman added that she was doing this session "as a service."
Yeah, I'm sure she was taking time to come lecture to bored college students simply out of the goodness of her heart.
It really chaps my hide how LMU brings in these random outside companies and parades them around like our buddies. Did this woman really want me to believe that she and her company didn't have any financial stake in the workshops they were holding?
Clearly, this creates a conflict of interest that makes such representatives unqualified to give advice. It's like replacing a doctor with a representative from a pharmaceutical company for your annual physical -- of course they're going to find all sorts of maladies and diseases -- diseases they can fix for five easy payments of $99.99!
The original e-mail that I received from the Financial Aid office said that these sessions were mandatory -- required under federal law -- and that a hold would be placed on my student account until I attended one. When I left this advertisement-I mean, workshop -- I was told that the hold would be taken off of my account once I completed forms with my name and personal information, relatives' addresses, loan type and other information.
We were told we could fill out one of two forms, either the one from EdFund or ASL. So you'll take the hold off my account as soon as I turn over all my personal information-and relatives' personal information -- to some random company? What a great deal! I'm glad it was "mandatory" for me to relinquish that data. That's in the "federal law" for sure.
I was curious about how LMU selects its "preferred lenders," and why one of their representatives would come talk to us. Shouldn't an employee from the LMU Financial Aid office know just as much about the student loan process?
Frankly, I wondered if Shady Lane is a two-way street -- if the lender and LMU both benefit by pulling one over on students. LMU's biggest commitment and priority should be to its students, and having ties to an outside company that wants students' money clearly gets in the way.
Prisco informed me that preferred lenders were selected because they "provide the most competitive interest rates, benefits and services for all LMU students and parents." She added that the lenders "do not provide compensation to either LMU or individual staff."
As for the representative at the workshop, Prisco explained that the university wants to "give students guidance from experts in the student loan industry." It makes sense, but the "experts" still have an agenda, whether they admit it or not. Obviously, generating business is going to be at the top of any professional's priorities, and this interferes with their ability to give unbiased "expert" advice on loans.
I know I probably seem harsh, but this scenario is exactly what's being investigated at Columbia, University of Texas and USC. Those aren't small or backwaters schools, and one is right in our own backyard.
According to last Wednesday's AP article, "Securities and Exchange Commission records for Education Lending Group Inc. show officials at the three schools in September 2003 owned at least 1,500 shares each of the company. Education Lending Group's subsidiary, Student Loan Xpress, is listed as a preferred lender at each school." In typical above-and-beyond Columbia fashion, Associate Dean of Student Affairs David Charlow went a step further by owning 7,500 shares of ELG's stock at the time of the prospectus.
I'm an English major, so I'm still not even sure what this so-called "market of stocks" is, or what those above numbers mean. But I'm pretty sure that it's bad to have such a large stake in a company that you just happen to be promoting to broke, innocent students.
Prisco also informed me that Student Loan Xpress is not one of LMU's preferred lenders. But those that are on the list still have reason to sweet-talk university officials to maintain their status.
In case you don't want to take my word for it, the SEC's 2003 filing acknowledged how a financial institution can benefit from being on a "preferred" list: "Being on a preferred lender list at an educational institution provides Student Loan Xpress, Inc., with the opportunity to generate more student loans at that institution."
Finally, the AP article adds the icing on the incriminatory cake: "Investigators found that many colleges have established questionable 'preferred lender' lists and entered into revenue sharing and other financial arrangements with those lenders. Some colleges have 'exclusive' preferred lender agreements with the companies. In some cases, investigators said, lenders provided all-expense-paid trips for college financial aid officers to exotic locations in return for directing students to the lenders."
On the surface, this preferred lender list might seem like your typical symbiotic business relationship -- the student loan company scratches a university's back, and vice versa. However, the difference between this and a normal arrangement is that in the middle of that comfy back-scratching, students are being screwed. We're not being given honest financial advice-advice that could make or break us after graduation.
I'm not saying that LMU has shady business practices like USC, UT and Columbia. In fact, Prisco's words assured me that LMU doesn't have the kickbacks and favors that other universities do from student lenders. But from the workshop I attended last week, it seems like they are inching closer in that direction. I'd just like to know who's going to be there to scratch my back when I'm broke.
I invite the LMU Financial Aid office to start holding some workshops for students that actually educate us about our financial positions, not just who can profit from our debt.
This is the opinion of Rachel Jones, a senior English major from New Brighton, Minn. Please send comments to rjones@theloyolan.com.
