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The Daily Wildcat

The Daily Wildcat

 

    Neither a borrower nor a lender be?: University financial aid in need of transparency

    You’d be hard-pressed to find a more complex system than the labyrinth-like schemes of college financial aid formulas. But if recent events in New York are any indication, the whole process just got a whole lot muddier.

    Friday, The Wall Street Journal reported that New York Attorney General Andrew Cuomo sent a letter to Education Finance Partners Inc. saying that he intended to file a lawsuit against the San Francisco-based private student loan provider for a kickback scheme that casts doubt on the integrity of the financial aid process.

    Allegedly, the California firm approached certain schools asking to be placed on the schools’ “”preferred lender”” lists, which are used as a reference by college students in search of loans. Because being on the list increases visibility among potential customers, loan providers covet spots on preferred lender lists. In exchange for being placed on the list, then, Education Finance Partners would pay the schools a certain amount of money it had made from the loans.

    Here at the UA, the process is not nearly so mired in conflicts of interest. In fact, according to John Nametz, the UA’s director of financial aid, the UA doesn’t even have preferred lender lists.

    “”We’ve never liked the word ‘preferred’ because there’s a connotation that we have some sort of preference to that lender, and we really don’t,”” Nametz told us.

    Instead, the UA keeps what it likes to call a “”convenience list,”” which lists 10 federal loan providers based on “”the number of UA students who used them in the past.”” Arizona State University has a similar system; lenders with “”proven track records with ASU, faster processing times and (who) provide consistent exemplary customer service”” are placed on a list, although the Sun Devils apparently see fit to call it a “”preferred lender”” list.

    While it might be easy for students and parents (and apparently state attorneys general) to leap to breathless conclusions about underhanded funding tactics, it would seem that the situation in New York and here at the UA can be resolved with a mere move toward transparency.

    The fact of the matter is that the partnerships with Education Finance Partners are, by most measures, largely beneficial. Schools get extra cash flows, students get reduced interest rates and fees and the loan providers get more business. To solve the problem, the schools that have partnered with Education Finance Partners should simply disclose on their Web sites the full details of how the company was placed on the preferred lender list.

    The UA could use a dose of transparency as well: Parents and students would benefit from knowing how the “”most used”” lenders on the convenience list are determined. (According to Nametz, the lenders are those that have booked $2 million or more in UA student loans.)

    In the meantime, Cuomo (and other rabid student “”advocates””) might score some flattering headlines. But if a simple solution can be had while still retaining the benefits for students and parents, government officials should leave school-lender agreement alone.

    Opinions Board
    Editorials are determined by the Wildcat opinions board and written by one of its members. They are Justyn Dillingham, Allison Hornick, Damion LeeNatali, Stan Molever, Nicole Santa Cruz and Matt Stone.

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