Lender Scandal Raises Questions for Oberlin
A story published in The New York Times earlier this month rocked the world of higher education with reports of wrongdoing by financial aid officers at three top universities.
Reportedly, employees of Columbia University, the University of Texas and the University of Southern California received stock options from Student Loan Express, a national student lending institution, in exchange for giving the company preferred status among lenders recommended to incoming students.
As the story was picked up by other news sources such as National Public Radio, administrators at Oberlin began talking. Is the College’s own lending system scandal-proof?
Marcia Miller, Oberlin’s chief investment officer, said, “If [financial aid employees] were getting shares in Oberlin College’s name… I would know.” However, she was unable to tell the Review if the College has the ability to monitor whether employees receive kickbacks from lenders.
The conduct of Oberlin employees is governed by Oberlin’s Business Conduct Policy, a booklet delineating the College’s standards of professional ethics. Among these, according to Miller, administrators “are not to take personal gifts of any value. In addition to that, upper management has to sign a conflict of interest policy to avoid any kickbacks.”
Oberlin’s Conduct Policies are in place to prevent potentially unethical relationships. However, both Columbia and the University of Texas have similar policies, and these failed to prevent the scandals.
It is common among colleges, Oberlin included, to maintain a list of lenders they recommend to students. These lists, commonly referred to as “preferred lender lists,” are neither novel nor controversial.
Director of Financial Aid Rob Reddy explained, “The idea is that the school goes out into this vast community of people who will lend money and tries to shop around and look for people the institution can work with to facilitate students borrowing in the least cumbersome way possible.”
Students seeking external financial aid at Oberlin are directed to Student Loan Funding, Chase, Citibank and Wells Fargo. However, Reddy stressed that these are merely suggestions based on research conducted by the Office of Financial Aid. Oberlin does not require students to take loans from any of these four institutions.
According to Reddy, before choosing the four lenders currently on Oberlin’s list, the College looked for nationally recognized organizations with significant resources and a commitment to students.
Reddy said that at Oberlin, the process for deciding a preferred lender proceeded as follows: “We went out and we solicited banks and banks solicited us and we went through a process in the aid office to review those folks, see what they could bring to the table so that we could do a better job and we selected... three or four lenders.” Every few years, the list is reviewed.
Reddy is ambivalent on how to judge the actions of his colleagues at the three schools. “I don’t know that they were right or wrong. I think that’s one thing we’ll have to see,” he said. “Potentially, there’s an issue not of the rightness or wrongness of the receipt of payment, but in the disclosure to your employer.”
Oberlin’s financial dealings are reviewed by an external auditor and by the United States Department of Education. However, in the recent scandals at Columbia, the University of Southern California and the University of Texas, it was not the Department of Education but New York State Attorney General Andrew Cuomo who exposed the corruption.
Ultimately, financial oversight at Oberlin comes from the office of the Vice President for Finance Ron Watts. Watts was unavailable for comment by press time, and the Review was not allowed to peruse the Business Conduct Policy. The fallout of the recent scandals remains to be seen, but student loan policies across the nation may be subject to review.