More than Carribean Vacations
Yesterday the New York Times reported that the student lender Loan to Learn invited college officials on a Carribean vacation for two, all expenses paid. Some observers thought it looked like "an attempt to buy access into college financial aid offices."
Today, Loan to Learn cancelled the trip ($), citing an "unfortunate perception" created by "inaccurate reports in the media." But questions continue about what lenders are allowed to do to win loan business -- and what deals they are actually striking with colleges.
The Higher Education Act prohibits lenders from "offering, directly or indirectly, points, premiums, payments, or other inducements to any educational institution or individual to secure applicants" for federal loans. But what does that mean?
Three years ago, the Department of Educations's independent inspector general found evidence that lenders and colleges were "bargaining" over loan volume. That sure sounds like "inducements" might be involved. But, as the Chronicle of Higher Education ($) reported, Education officials never followed up.
More recently, the banks and colleges sat down to try to clarify the rules. Give them credit for taking the problem seriously, but the guidelines they came up with aren't much clearer than the law itself. Meanwhile, lenders' gifts to college officials continue to create controversy.
When a college recommends a bank, students ought to be able to know for sure that the recommendation was made based upon their interests. Education needs to write clear rules governing the relationships between lenders and schools -- and then enforce them.
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