Hintz on Financial Aid Loan Issue

Below is a letter sent by Rep Hintz to the chair of the Assembly Committee on Colleges and Universities:

Dear Representative Nass,

Recently a number of colleges and universities across the country have had their student loan operations fall under a cloud of suspicion due to a wide range of apparent conflicts of interest. Unfortunately, several schools in our own University of Wisconsin system are now facing similar scrutiny. I am writing to request that the Assembly Committee on Colleges and Universities convene a hearing to investigate this matter further and to ensure that hardworking Wisconsin students and their families are receiving fair student aid guidance from the schools they attend.

According to numerous published reports, student lending companies have employed a variety of methods to promote their services, including:
· Offering university administrators lucrative “consulting” fees in return for nebulous services.
· Giving schools money in exchange for leaving the federal government’s loan program.
· Supplying financial aide officers with lender-funded training.
· Paying universities an annual fee for being granted “preferred lender” status.

While the first two of these examples have yet to be reported in Wisconsin, evidence of their existence elsewhere should lead us to inquire if they are practiced here. The second pair of examples has occurred within the UW system; and while neither are perhaps technically violations of the conflict of interest guidelines in state statutes, each raises ethical questions with regards to lending.

When schools and lenders adopt such practices competition in the lending market is stifled and results in the appearance of collusion against the best financial interests of the student. It is incumbent on the members of our committee to find out which schools in the UW system are using such methods and to assess the impact on the students of our state. With the cost of tuition increasing and more Americans carrying debt, we owe it to the students of Wisconsin to ensure that they have an affordable and fair method to help them provide for their education.

Sincerely,
Gordon Hintz

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The Milwaukee JS also covered the story here, including a breakdown of issues in Wisconsin including:

"• A student loan company called Education Finance Partners paid UW-Oshkosh a cut of its student loan volume in exchange for being placed on the university's preferred lender list for private loans.
• The director of financial aid at UW-Eau Claire owns stock in the parent company of Citibank, one of the university's preferred lenders.
• Wells Fargo, a preferred lender at UW-Green Bay and UW-La Crosse, paid for financial aid officials from those universities to attend out-of-state training.
• The director of financial aid at UW-Milwaukee served on the advisory council of Student Loan Xpress, a company that does more business at UWM than at any other university in the country. She has since resigned from the council."

The Oshkosh Northwestern covered the story here, including the following statement by UWO professor Kevin McGee:

"I would feel the same concern about any financial arrangement where the university is benefiting from any kind of financial transaction involving our students," McGee said. "I think it's appropriate that we have an educational role in when it's smart to borrow money and when it's not, but when the university starts to make a profit out of it, is there a temptation to become morally compromised."