Information regarding New York Attorney General inquiry into financial aid practices
You may have read news coverage about an investigation into college financial aid practices nationwide being conducted by the New York State Office of the Attorney General. Following is some information about financial aid practices at the University of Michigan. Please contact the U-M Office of Financial Aid at firstname.lastname@example.org if you have any additional questions. For media inquiries, please contact Deborah Greene at email@example.com or 734.763.4008.
What approach does the University of Michigan take in its financial aid operations?
The U-M Office of Financial Aid is scrupulously ethical in all its dealings with students, families, other constituents, stakeholders, and with lenders. We are confident that we do a very good job and serve our students and their families well. U-M financial aid administrators abide by the strenuous ethical expectations of the University [PDF], as well as the Statement of Ethical Principles of the National Association of Student Financial Aid Administrators. For media inquiries, please contact Deborah Greene at firstname.lastname@example.org or 734.763.4008
Did U-M respond to the inquiry from the New York Attorney General?
Although the New York Attorney General has no authority to compel U-M to participate in its investigation, the University decided to respond to this request for information as part of our commitment to public transparency regarding our business affairs.
What is the nature of the inquiry from the New York Attorney General?
The issues raised by the New York Attorney General relate to possible conflict of interest and institutional or personal gain reaped from six specific lending practices that exist in some sectors of the student-loan industry. The University of Michigan does not engage in any of the practices listed below.
- “Preferred Lender” Lists, in which schools steer, direct or otherwise promote the loan products of certain loan providers over others
- Revenue Sharing, an arrangement whereby a lender pays an institution of higher education a percentage of the principal of each loan directed toward the lender from a borrower at the institution
- Denial of Choice of Lender, i.e., stating or strongly implying that the student and parents are limited to the lender on the “preferred lender list,” or even to a single lender
- Exclusive Consolidation Loan Marketing Agreements, in which the institution encourages former students to consolidate their loans with a particular lender and no other, in exchange for which the institution secures revenue sharing or other benefits that inure directly or indirectly to the institution
- Undisclosed Sales of Loans to Another Lender, wherein all or a number of lenders on a lender list have arranged with each other to sell any loans to one of the lenders immediately after one of the other complicit lenders disburses a loan
- Opportunity Loans, in which the lender agrees to make loans up to a specified aggregate amount to students with poor or no credit history, or to international students in exchange for which the institution may provide concessions or promises to the lender that may prejudice other borrowers.
Does the University of Michigan have a preferred lender list?
U-M does not have a preferred lender list for private loans in which we steer, direct or otherwise promote the loan products of certain loan providers over others. U-M students are encouraged to seek out the best loan products that meet their financial needs. We place no restrictions or barriers to students using the lender of their choice. Likewise, we offer no incentives to students for using a particular loan provider. Neither U-M nor any of its employees receive any benefit from any lender to have access to student borrowers.
The University lists three loan providers on its Ann Arbor campus Office of Financial Aid website. Note: These lenders are not “preferred,” but rather, are listed for the convenience of students and families. They are:
- Federal Direct PLUS Loan, funded directly by the U.S. Department of Education
Listed because the credit requirements are less restrictive than other private loans, thus providing access to families who may not be able to borrow through private loan programs. This source also provides loan fees and interest rates that are comparable with other private lenders.
- Citibank CitiAssist Loan
Listed because they were, at the time of our initial agreement with them (1998), the only domestic lender who would make loans to international students without a U.S. co-signer; also listed because their interest rates are competitive, they do not sell loans, and they provide excellent customer service.
Listed as an additional resource to students in support of this financial initiative by the State of Michigan. And again, loan fees and interest rates are comparable with other private lenders.
Additional information regarding loans and potential lenders is available to students and their families on the U-M/Ann Arbor Office of Financial Aid website.
Do any staff members in the U-M Office of Financial Aid hold stock in or hold any other financial interest in, or serve on boards of directors or advisory boards of Citibank or other student loan providers?
Which lending institutions currently serve U-M students?
In addition to federal and state lenders, the U-M Office of Financial Aid reported student loans received from 27 private lending institutions in 2005–2006, the most recent year available.
Information regarding loans and potential lenders is available to students and their families on the Financial Aid website.