The student-loan probe: An aid expert's viewpoint

Every day at colleges across the country, financial-aid administrators help students navigate a complicated maze of grants and loans to finance their educations.

The administrators consider it noble work - and many took exception when New York Attorney General Andrew Cuomo started an investigation into the field's practices.

But during the last few weeks, the landscape has changed.

Cuomo's office, and separate research from the Washington-based New America Foundation, have uncovered troubling ties between companies that lend students money and college financial-aid officers, who are supposed to give students unbiased advice on borrowing options.

No evidence has emerged that colleges have lowered their standards to let certain lenders on their lists, but the arrangements raise questions about conflicts of interest.

The Associated Press spoke with Dallas Martin, president of the National Association of Student Financial Aid Administrators, which represents 12,000 financial-aid professionals at 3,000 schools nationwide. His group is concerned about the widening scandal, and has followed the investigation closely.

Associated Press: When Attorney General Cuomo's investigation was getting started, your group was critical, saying it was causing distrust and sullying the reputations of aid officers. But hasn't it uncovered some things the public should know about?

Martin: Part of the way it was described in the initial announcement talked about an 'unholy alliance' between administrators and lenders. It kind of painted everybody with the same brush. That's why we responded by saying these people are hardworking, have a lot of integrity - the vast majority of them.

But I would be the first to say - given these situations where it appears some people have profited for personal gain, either through stock or fairly lucrative consulting fees - I think it raises real questions about these kinds of arrangements. I think it's inappropriate for these lenders to be offering such, and I also think the individuals, if this is what they've accepted, I think it's a real lapse of judgment, and I cannot condone that behavior. It's a serious breach of public trust.

AP: Given the potential for apparent conflicts, are preferred-lender lists still worthwhile?

Martin: If done properly, I think preferred-lender lists can be useful to students and families. Often you will find students, parents - they go through this process, it's a confusing thing. There's about 3,000 lenders across the country who provide student loans. A lot of times, they'll talk to the financial-aid administrators and say: "Who do you recommend?"

Schools go out and say "we're going to have a recommended-lender list, and we want to know what rates of interest you're going to charge, what benefits are you going to provide, will you have 24-7 customer service?"

I don't think there's anything wrong with [lists], provided they're done in an objective, reasonable fashion, but it's also important they remind families that, even though we've made this list, you're still free to [borrow from] any place you want.

AP: What about the practice of lenders offering colleges a slice of the loan revenue they generate from their campuses?

Martin: My personal feeling has always been, I think revenue-sharing arrangements often leave the appearance of a conflict of interest. There may not be one. But it almost makes it appear the institution may be trying to encourage you to take out loans because they'll make some money back on it.

If you have such an arrangement, I think it's very important that it be clearly disclosed.

AP: What assurance can you give students and families that they're getting unbiased advice from the financial-aid advisers they work with on campus?

Martin: We have over 3,000 postsecondary-education institutions that are members of our organization. We continue to believe the vast majority carry out their responsibilities in a very ethical and straightforward manner. Unfortunately over the last few weeks, there have been brought to our attention some practices that some financial-aid administrators or some institutions have engaged in that raise questions about whether they're acting in the best interests of students. And we regret that.