Loan lenders used by the university under scrutiny

By Liz O'Brien

Financial aid offices in universities and colleges nationwide have been under scrutiny recently as a result of unethical -- and now illegal -- relations with student loan lenders.

Lenders under investigation include Citigroup and Bank of America, two of Santa Clara's preferred lenders.

But, according to Trista San Agustin, associate director of student loans, there is no monetary relation between the university and its lenders.

"We put lenders on the list purely for the convenience of the parent or the student, whoever the borrower is," said San Agustin.

And while only a handful of banks are listed as preferred lenders, "Santa Clara will certify a loan through any lender," she said. In addition to Citigroup and Bank of America, preferred lenders include All Student Loan, Chela and College Loan Coporation.

A New York Times article from mid-April revealed agreements outlining the exchange of funds or services for loan volume between major universities and colleges all over the country, including Washington University in St. Louis and Loyola Marymount University. Some of these funds are ending up in the pockets of individual financial aid personnel, according to Yahoo! News.

San Agustin said that the financial aid office has never had an inappropriate relationship with any of its lenders.

"We felt really naïve when all of this started to come up because we thought, gosh, this can't really be happening," San Agustin said. "So when it came down the pike and we were reading about lenders offering a percentage of money back to the campus for a certain amount of loan volume, never had we ever heard of anything like that. I would think that would be a huge red flag."

Other concerns are entrance exams, which students are required to take before their loan is dispersed, and exit counseling, which students receive shortly before they graduate.

Earlier this month, students at Loyola Marymount University received mandatory exit counseling, not from their financial aid office, but from Sallie Mae, one of LMU's preferred lenders, according to the New York Times.

"We have never had lenders do the entrance or exit exams for us, even prior to all of this," said San Agustin.

Santa Clara's entrance and exit counseling is done online, and undergraduate service is provided by the Department of Education.

"In the past, when there wasn't all this talk about it, the lenders have always offered to do that for us, but we've always politely declined," said San Agustin.

Most major colleges and universities under investigation have adopted a conduct code to prevent further conflict between financial aid offices and lenders, but some legislators say that a conduct code is not enough.

On May 2, the California State Assembly on Higher Education Committee approved a bill that prohibits public and independent college and university financial aid personnel from accepting gifts worth more than $50 per year from anyone doing financial aid business with the institution.

This legislation will not affect the Santa Clara financial aid office, said San Agustin, because "never has Santa Clara been involved in that, nor have we been propositioned."

The involvement of two lenders on Santa Clara's preferred list will not prompt their removal from the list.

"The only change we've made is updating the verbiage on our Web site to make sure that students know that we will absolutely certify any loans through any lender," said San Agustin.

Contact Liz O'Brien at (408) 554-4546 or eobrien@scu.edu.