University: No kickbacks from lenders
Kaitlynn Riely | Wednesday, April 4, 2007
Suspicions about improper relationships between colleges and student loan companies have fueled an investigation by the New York State attorney general, and more recently a congressional inquiry, but at Notre Dame there are no kickbacks, a University representative in the Financial Aid office said.
Joseph Russo, the director of Student Financial Strategies, said Notre Dame has not been contacted regarding the investigations.
“I think we have a pretty good reputation,” he said. “Anyone’s welcome to come and investigate.”
Anthony M. Cuomo, New York’s attorney general, questioned the relationship between student loan companies and colleges, the New York Times reported Tuesday. Colleges frequently created preferred lender lists so their students can contact them for loans to pay for school. Cuomo believed these loan companies were giving universities payment in exchange for any increases in the company’s number of student loans at the institutions.
Russo said Notre Dame does not accept any form of kickbacks from the lenders on its preferred lender list.
“The University of Notre Dame stands for quality and integrity, and to suggest that we would be putting a lender on the list because they give us donuts on Friday morning – come on, this is Notre Dame,” Russo said.
How Notre Dame selects its lenders and why they are on the list is made public, Russo said.
The New York Times reported Tuesday that Citibank and five universities agreed Monday to pay a combined $5.2 million to students and the New York attorney general to resolve the investigation into the relationship between student loan companies and colleges.
Citibank, a preferred lender at Notre Dame, will pay $2 million into a fund to educate students and their parents about college loans. New York University, Syracuse, St. John’s, Fordham and the University of Pennsylvania will pay $3.2 million to student borrowers who received loans from companies that provided money as incentive for the institutions to encourage the students to use the lenders, the Times reported.
Neither Citibank nor the universities admitted any wrongful actions but nonetheless all will adopt a code of conduct regarding relationships between lenders and the institution.
Citibank is one of six preferred lenders for Notre Dame. Russo called Citibank a “quality lender.”
“We have nothing but the highest respect for them,” he said.
And Notre Dame does not receive kickbacks for putting Citibank or any other lending company on their preferred lender list, he said.
History of the list
The University has a preferred lender list that it developed in the early 1980s, Russo said. This list can be found on the Office of Student Financial Services’ Web site and is available to students and their parents in a booklet entitled “Affording a Notre Dame Education.”
The lenders on the list are Citibank Student Loans, College Board Education Loans, Chase, Nellie Mae, Notre Dame Federal Credit Union and Wells Fargo.
Russo said he worked to develop a list of preferred lenders before creating such lists were common at colleges.
Notre Dame was on the forefront of the movement to recommend lenders to students because the University draws students from around the country, and the wide variety of loaning companies that students were using proved to be “a real challenge” for the Financial Aid office at Notre Dame, Russo said.
“[We] wanted to look for some standardization, simplification, efficiencies and of course wanted the best lenders who had the best products and services,” he said.
So Russo identified about 25 of the best lenders and sent out a questionnaire about each company’s products and services.
Each company returned their answers to the surveys, and Russo then picked the seven best lenders who met every criteria. Over four years, the University phased in this preferred lender list, “which didn’t demand, but encouraged students to consider these lenders who we have evaluated have the best products and services,” Russo said.
Russo said students are not limited to just these lenders, and said the Financial Aid office can, and does, process applications from lenders that are not on the list.
For the 25 years since the list was created, the lenders have remained the same for the most part, although two of the original seven merged, one was removed from the list and the College Board was added to the list in the 1990s.
The lenders were chosen based on several factors of excellence, Russo said, including their commitment historically, their reputation for holding onto a loan instead of selling it, their rates and their service to customers.
These lenders were not just evaluated once, but are continually evaluated to make sure they measure up to high standards, Russo said.
Russo said the University once took a lender off the list because it failed to show the commitment they had promised after leadership of the company changed hands.
Most lenders want to get on Notre Dame’s preferred lender list, Russo said, because the University’s credentials attract them. The lenders are impressed by Notre Dame’s statistics, Russo said, including its retention rate, graduation rate and alumni satisfaction with their college experience.
Lenders know that Notre Dame students also borrow a lot of money, Russo said, and they know they are responsible about paying it back.
“I could probably go to lunch every day of the week with a bank that wants to tell me about their products and services,” he said. “They want to get on this list.”
Just how much lenders want to get on a university’s list is an issue that has Cuomo and now Congress concerned.
Russo called Notre Dame a “national leader” in creating the preferred lender lists.
“We were one of the first schools in the country to do this – only because we had no choice,” he said. “It was overwhelming to deal with fifty different ways of doing business from thousands of lenders.”
Russo said 85 percent of Notre Dame students now receive loans from one of the six preferred lenders, taking out tens of millions of dollars a year in total.