IU: University did not accept loan kickbacks

Last week, a student-loan reform bill was approved by the U.S. House of Representatives, which is investigating ongoing practices at colleges and universities related to preferential treatment given to particular lenders.\nThe legislation could affect IU’s relationship with Sallie Mae, the loan processing agent IU uses. \nOn Thursday, May 10, Rep. George Miller, D-Calif., who chairs the House Education and Labor Committee, mentioned IU in a statement he gave during a hearing on the student-loan reform legislation. He said IU left the direct lending program in 2004 for Sallie Mae when the loan provider offered the University a “$3 million line of credit.” \nIU sent a letter to Miller on Friday, asking the congressman to correct the statement. \nLarry MacIntyre, director of IU media relations, said he could not stress enough the inaccuracy of Miller’s statement.\n“That is abolutely incorrect,” he said. “That is why, on Friday, we sent a letter to congressman Miller asking that to be corrected. We received no loan guarantees, and none of our employees received any monetary incomes. Period.”\nThe letter, written by Thomas Healy, vice president of government relations, explains IU’s student-loan program and the reasoning behind the decision to sign with Sallie Mae. Healy wrote that the University hopes the official record will be corrected, and that IU did not receive any payments for leaving the government’s direct loan program.\nMacIntyre explained that, up until about three years ago, each IU campus had its own student-aid arrangement. Bloomington was under the direct loan program with the federal government, and other IU campuses had their own lending arrangements. \nIU changed to a student management system called PeopleSoft, a program that provides a standardized way to manage student finances and a way to keep track of students, MacIntyre said.\nWhen PeopleSoft was being installed in 2003 and 2004, MacIntyre said IU hired an accounting consultant who recommended the University switch to a uniform student-aid system across all IU campuses.\nMacIntyre said IU accepted several proposals, all analyzed by the purchasing department, to see which proposal would be best for students. \n“We determined that Sallie Mae had the best deal,” MacIntyre said. “Sallie Mae offered us no loan processing fees for students, which was an improvement. ... Students on a number of campuses before dealt with companies that did charge loan processing fees.” \nMacIntyre explained that students are still free to go to any lender, and IU will accept that lender. But, if students came to IU and asked to apply for a loan, students would then be referred to Sallie Mae, only because IU needed a company to do business with.\n“But that didn’t stop students from going elsewhere,” MacIntyre said. “Occassionally that would happen.”\nMacIntyre said IU has received “no money under the table” or “kickbacks.”\n“What is alleged is that Sallie Mae has done such things,” MacIntyre said. “None of that has happened at IU or nothing along the lines that has been alleged at other universities.”\nAccording to the legislation passed by the House on Wednesday, the act would require colleges and universities to develop codes of conduct for student-loan practices. In addition, it would bar agreements in which universities receive revenue from student loans along as well as authorize the U.S. Department of Education to regulate the loan industry. \nProhibition of university officials from sitting on loan-company advisory boards and banning gifts from lenders to financial-aid officials and their family members would also be part of the legislation that was passed by the House and now awaits the Senate’s approval.\nThis legislation comes after investigation led to suspicions that various college and university financial-aid officials hold stock in loan companies whose services they recommended in return. These investigations include colleges and universities all over the country. \nMacIntyre strongly objected to the congressman’s statement.\n“Miller was wrong,” he said. “We believe he was misinformed because there has been incorrect information from media stating that we have $3 million.”\nMacIntyre explained that the $3 million came from something else entirely. When IU decided to do business with Sallie Mae, the company told IU that it would make up to $3 million a year in opportunity loans available to students who did not qualify for other student loans.\n“These are students whose credit is at the limit or they are foreign students,” MacIntyre said, citing some situations. “The opportunity loans are for students when they need it. It is a standard practice in the industry as they make opportunity loans for many of the universities and colleges they do business with. It has nothing to do with the reason we chose (Sallie Mae).” \nMacIntrye said that, for some reason, people think there is a problem with opportunity loans, but he said there is not. \n“It’s just a service that Sallie Mae is providing for colleges they do a lot of business with,” he said. “There is nothing wrong or unethical – it is just ordinary business and we do not understand what they are making a big fuss about.”