Harrisburg Happening

Thursday, April 12, 2007

PHEAA/AES Call to Ethics

As my readers can see from a recent post by a self=proclaimed PHEAA employee, the quasi-private, quasi-public entity doesn't like being challenged. However, until PHEAA and its business arms publicly state they are abiding by the new ethics policy proposed by Cuomo for student lenders, their explanations don't have much credibility. So here's the challenge to the poster: Do you and the agency you work for follow these simple, no-nonsense rules?

1. Ban on Financial Ties. Lenders are prohibited from giving anything of value to any college in exchange for any advantage sought by the lender. This severs any inappropriate financial arrangements between lenders and schools and specifically prohibits "revenue sharing" arrangements.
2. Ban on Payments for Preferred Lender Status. Lenders may not pay or give colleges any financial benefits whatsoever to get on a college’s preferred lender list.
3. Gift and Trip Prohibition. Lenders are prohibited from giving college employees anything of more than nominal value. This includes a prohibition on trips for financial aid officers and other college officials paid for by lenders.
4. Advisory Board Rules. Lenders are prohibited from paying college employees anything of value for serving on the advisory boards of the lenders.
5. Call-Center and Staffing Prohibition. Lenders must ensure that employees of lenders never identify themselves to students as employees of the colleges. No employee of a lender may ever work in or providing staffing assistance a college financial aid office.
6. Disclosure of Range of Rates and Defaults. Lenders must disclose to any requesting school the range of rates they charge to students at the school, the number of borrowers at each rate at the school, and the lender’s historic default rate at the school. This will ensure that schools will have the information they need to select preferred lenders who are best for students and parents.
7. Loan Resale Disclosure. Lenders shall fully and prominently disclose to students and their parents any agreements they have to sell loans to any other lender.

Source: Press Release at http://www.oag.state.ny.us/press/2007/apr/apr11a_07.html


Blogger Anniken Davenport, Esquire said...

Funny, PHEAA has been reading this, but no response yet. It's really a pretty straight forward ethics policy . . .

April 12, 2007  
Blogger 4Justice said...

Has the NY Attorney General named PHEAA/AES?

April 12, 2007  
Blogger Anniken Davenport, Esquire said...

I'm not privy to what specific entities Cuomo is investigating. However, that doesn't mean that PHEAA shouldn't adopt the ethics policy Cuomo is pushing. I'm sure lots of students (and the voters who help fund this whole student loan industry) would feel more comfortable with PHEAA if they did. Let's face it, there have been problems and PHEAA wasn't exactly open about their spending practices - as it took litigation to make them open their books.

April 12, 2007  
Anonymous Anonymous said...

Funny you are still tracking.

As far as I know, PHEAA is already following those guidelines.

April 12, 2007  
Blogger Anniken Davenport, Esquire said...

Of course I'm tracking. Hate to tell, you, but just about every blogger does. How else would we know if anybody is reading?

So, if you are using these guidelines, prove it. Share the guidelines with us.

April 12, 2007  
Anonymous Wiggie Smalls said...

AES, which is who we're really talking about here, does follow the disclosure guidelines regarding origination and default fees, loans sales, etc. I could give you specifics, but frankly I just can't be buggered.
As far as the rest of it? The agency's role is more along the lines of a facilitator; an enabler, if you will. They bend over backwards and accommodate any and all loan processing nonsense that certain schools and lenders request.
For example, did you know there's an AES call center in State College, and that Penn State students have their own 800 number? AND that the center is largely staffed by students? AES, in its role as al lender, gets most of PSU's loan volume.
Then there's the matter of the shifty "school-as-lender" program, where colleges act as a lender to their own students. U Penn is a biggie, as is Widener, and Duquesne. The schools push their borrowers to use them for their FFELP loans; AES accommodates this.
AES does guaranty loans for Student Loan Xpress, most of them PLUS loans, but as far as inducements...I've seen SLX sticky pads and pens lying about the office (which are PERFECTLY legal...go ask the USDE), but if anything beyond that occurs, I can't say one way or the other.
Does all this hurt students? I can honestly say I don't really think so. At the end of the day, the interest rates are the same regardlss of the lender that you choose. It's Federally mandated, calculated off the sale of 90-day T Bills plus 2.5% (or something like that). The loans, from application to origination to repayment to default and so one, are all regulated by the HEA, not the individual lenders. So if your school pushes you to use PNC and not your credit union, it really makes no difference. There are programs where you get a miniscule reduction in your interest rate with X on-time payments, but usually the schools will only push lenders that offer this.
AES' loan volume directly translates to profits, and profits drive all the other programs, like the administration of the grant program, and all the loan forgiveness programs, and education programs, etc. Want specifics? Call the press office.
My personal experience is that you'd want to avoid lenders that hire Sallie Mae to service their loans in repayment. They lose payments, misapply payments, and are generally a pain to have to deal with. AES is much better at it.

April 15, 2007  
Blogger Anniken Davenport, Esquire said...

Thanks for the information. Yours is one of the more articulate ones I've received and I thank you for that. You provide some interesting perspectives.

For my part, I look at the whole student loan industry pretty much like I look at the health insurance industry - there seems to be a whole lot of money wasted on administration, profit-taking and other back end processes. Why not offer universal coverage for everybody (that is, free medical care and free education) like every other civilized country does? Why pretend this is all free-market when it's really just adding cost. Show me how any of this lowers overall cost for students (or patients)

April 15, 2007  

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