By Bryan O'Keefe
The scandal surrounding financial aid administrators and the student lenders themselves continues to make headlines in the media. Just when we think the final damaging news has been discovered, more damning revelations are found. As I am sure many of you already saw, the NY Attorney General’s office has now unearthed evidence that some administrators were being paid directly as “consultants” to the lenders, and one person even had part of her graduate school education paid for by a student loan company. A financial aid administrator at an online university also became embroiled in the hoopla this week with evidence coming out that he too accepted payments as a consultant for the student lender in question.
What I think is unfortunate from this whole mess is that private student lenders and, with the latest round of news, an online university, behaved so badly. People who have followed CCAP for awhile know that we have advocated for some alternative higher education models which, if correctly implemented, could lower costs. For example, We have supported the expansion of more private lending in higher education, with the premise that if we can finance million dollar homes, yachts, cars, and everything else on the planet through private loans, why not higher education too? It’s an idea that still needs to be studied more, but we thought it was an interesting proposition none the less. The same goes with online courses and universities. There is no illusion that students who want to go to Harvard are suddenly going to enroll in the University of Phoenix, but for non-traditional students, low-income students, etc. online classes might make great financial sense.
But what’s critical is that both private lenders and online universities have to gain the public’s trust and have unquestionable integrity. The process can’t seem rigged in any way, shape, or form. And unfortunately if you read all of the news stories, it seems like the process was, in fact, being rigged, or, at, the very least, the process was not entirely transparent. Columbia, the University of Texas, and the other schools implicated might take a PR hit, but they will survive. Thousands and thousands of students will still submit applications. That’s because they have a historic track record as being good universities and one bad episode – albeit on a major scale – will not suddenly change all of that.
But private lenders and online universities are the new kids on the block and have to be held to different standards. I would even venture to guess that this scandal is the first time that some people have even heard of the student lending company involved – and any parent or student would be justified in not wanting to do business with them.
There is a very good chance that the Democrats in Congress could use this episode as ammunition for even greater regulations on the private student lending industry – and as evidence that government loans are the only way to go. That would be bad public policy, but private student lenders would only have themselves to blame.