Maryland colleges are defending their loan practices in the wake of a national investigation of financial aid officers allegedly receiving kickbacks from private lenders.
“I think we are getting a black eye based on a minority,” said Sarah Bauder, director of financial aid for the University of Maryland, College Park.
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A probe of the $85 billion college loan industry by New York Attorney General Andrew Cuomo already has raised questions about one loan provider, Student Loan Xpress Inc., and its connections with financial aid officers at Johns Hopkins University, Columbia University, the University of Texas and the University of Southern California.
Ellen Frishberg, the director of student financial services at Johns Hopkins University, reportedly received about $65,000 from Student Loan Xpress Inc., one of the school?s preferred loan providers. It was also revealed that Frishberg served on an advisory board to the company. Frishberg was placed on administrative leave pending the outcome of a full investigation.
Representatives from University of Maryland, College Park, Goucher College in Towson, Loyola College in Baltimore and Towson University said financial aid officers do not receive any payments or financial incentives from loan providers.
“It is just a blanket policy. We wouldn?t involve ourselves with a private entity,” said Vince Pecora, director of financial aid for Towson University.
Representatives from the colleges also said they pick preferred lenders based on student and family feedback and industry experience.
The University of Maryland typically refreshes its list of preferred lenders every three years, sending out a 30-question survey based on demographic data, pricing information and combining results with qualitative data from students. A committee then comes up with a lender list.
But college officials defended the practice of financial aid officers serving on loan providers? advisory boards, saying it provides officers an opportunity to learn about the industry.
Loyola College?s financial aid director serves on an advisory committee for Sally Mae, but since he has no fiduciary responsibility, the college does not see it as a conflict of interest, said spokesman Mark Kelly.
Like any business, financial aid officers and lenders do build relationships, Bauder said, but lines in the sand are clearly delineated.
“If there is financial benefit to any one individual, there is a clear violation,” Bauder said. “I can?t personally gain off the backs of students.”
The Associated Press contributed to this report.