From the New York Times:
. . . .The Senate report shed new light on how lenders sought to curry favor with financial aid offices.
Nelnet, a lender based in Nebraska, created an elaborate point system to reward college officials who advised it. Contributing an idea for a product earned 25 credits. Completing an online survey won another 25. The credits could be redeemed for donations to an “alma mater or college/university of choice.” Each was good for $1.
A spreadsheet from Chase’s student loan unit showed the scope of marketing activities, listing payments of over $1,000 each to produce 405 foldable wallets for Ursuline College, CD replications for Southeastern Louisiana University, 200 T-shirts for Texas Southern University, to name just a few examples.
Bank of America’s activities included $11,414 to sponsor a lunch at the College of William and Mary.
In some cases, colleges themselves demanded contributions from lenders. A Citibank sales report told how Chaminade University in Hawaii had asked the bank to hold receptions for admitted students in exchange for business.
The bank held eight receptions and spent $2,000 on each with the understanding that that would increase the bank’s “guaranteed share” of the college’s loan business. The report added that the deal did not work out in Citibank’s favor and that its loan volume decreased the next year.
Chaminade said yesterday that it “does not endorse any particular student lender and at no time has it entered into a ‘quid pro quo’ arrangement with Citibank.”
The report provided new details of lenders’ dealings with Lawrence W. Burt, the financial aid director at the University of Texas at Austin and Ellen Frishberg, a Johns Hopkins financial aid official. Mr. Burt was fired and Ms. Frishberg resigned after revelations that each had benefited financially from Student Loan Xpress or its parent company, Education Lending Group.
The report quotes a former Bank of America employee’s notes of a conversation with one of Mr. Burt’s assistants about what was expected of lenders recommended to students: “Larry loves tequila and wine — since becoming director at UT Austin, he has not had to buy any tequila or wine — lenders provide this to him on a regular basis.”
The employee complained about what officials in Mr. Burt’s office expected him to do to win business. “I am not going to see Larry 10 times yearly,” he wrote. “I do not golf, I do not have happy hours, I do not provide sports tickets and only once have I bought Larry tequila.”
When Mr. Burt also demanded favors from Citibank, and it refused, he dropped it from the college’s preferred lender list, the report said. It returned after treating him to golf and meals.
In Ms. Frishberg’s case, the report shed light on how she came to receive more than $65,000 in consulting fees and tuition payments from Student Loan Xpress. E-mail obtained by the Senate showed her soliciting tuition reimbursement.
She wrote to an officer of Education Lending that she had been accepted to a doctoral program. “I am searching for ½ tuition support — know any good scholarship programs?? (I already know where to get loans) — or why don’t you put me on retainer to Ed Lending?”
Robert DeRose, the chief executive of Education Lending, replied, “How much is ½ tuition? If we can help you we will.”
William R. Brody, the president of Johns Hopkins, said yesterday, “Although it is clear that one university employee violated university policy in her relationships with student loan companies, Johns Hopkins as an institution has always stood for a financial aid program that meets the highest ethical standards.”
In relation to the agreement with Mr. Cuomo, Johns Hopkins said that it had not violated New York law but was taking steps to comply with Mr. Cuomo’s code of conduct on student loans, and would provide annual training and closer supervision of its financial aid officers.
Lenders and colleges cited in the report offered mixed reactions.
Lawrence Di Rita, a spokesman for Bank of America, said the bank believed that its activities described in the document were “consistent with Department of Education standards and policy.”
Citibank, which was described not only as paying for student receptions for Chaminade but also of taking the college officials on its advisory board to places like San Marco, Fla., and San Diego, said that it was the first lender to voluntarily commit to a new code of conduct.
Ben Kiser, a Nelnet spokesman, said it had used its reward system only for university officials who were members of its Innovation Council. He said the council was discontinued this year, and that Nelnet had never made payments to any universities because of the council’s work.