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Letter to the Membership
by: Sarah Bauder, 2006-2007 TriState Chair
The financial aid industry in the last few weeks has been under significant scrutiny with words such as kickbacks, inducements, scandals and fraud being highlighted in every newspaper nationwide. Granted, there have been a few individuals who have fueled the discussion, but as we all know, they are the exception to the rule. However, the press has strength and politicians are using it to promote a false message to the public putting student aid administrator on edge. I’d like to address the uneasiness most of us are feeling and try to add balance and perspective.
There are two main subjects currently circling around in the press: Advisory boards and lender lists. Participation in advisory boards has been a common business practice among financial aid administrators including both Direct Lending and Federal Family Educational Loan Program (FFELP) institutions for years. I have served on many boards over the last 17 years and because of them have been able to create an efficient operation using the latest in technology while lowering the cost of financing an education for our students and parents. Participation on advisory boards is voluntary. The ones I have served on reimbursed my out-of-pocket business travel and lodging expenses, which again is a common business practice in other industries. No other compensation was ever offered or paid.
The purpose of advisory boards is to create a forum by which financial aid administrators and lenders can meet to discuss the needs of the student. They are a means to inform and educate financial aid administrators on the economics of lending. Advisory boards have played a pivotal role in designing the services we offer our students, including the development of default aversion initiatives. The benefits to students are obvious. At the University of Maryland College Park our default rate has consistently declined over the last four years and is now at 1.2%. Further, we have pushed our lending partners, through advisory forums and site visits to meet the challenge of informing students electronically so that the student can access financial management and budgeting tools on-line in the privacy of their dorm room. Financial management skills are developed for a lifetime. Advisory boards are business relationships formed to better the products provided to students. To eliminate them would be harmful to the student.
Advisory boards and preferred lender lists, contrary to recent press, have no relationship. From a student or parent perspective, applying for financial aid is a complex process. For a new student, paying for college occurs at the same time the student is graduating from high school, so the family has competing priorities. Preferred lender lists simplify the process, provide a starting point for choosing a lender, and help guide the student when evaluating the lending products available in the market place. Financial aid experts do the research for the family to find the best products, services, and technology available. This allows institutions to provide the best services to students and parents.
The press is muddling common business practices with the reprehensible actions of individuals who gained financially. However, those individuals are rare and not at all exemplary of the standard ethical practices all of us unconsciously and habitually exhibit everyday. Not one of us would disagree that the end does not justify the means. Therefore, it is necessary to make sure that your institution has policies and procedures, based on sound principle, to justify your business practices. Once that is established, then do not be swayed by political posturing. We can always improve on procedures and tighten up some of our policies; however, we should not back down on our practices. Lender lists and advisory boards improve our industry. To eliminate either will hurt the student.