By Bryan O'Keefe
About a year ago, our friend Rick Hess at the American Enterprise Institute conducted a conference on student loans and tuition. It was a very interesting and informative event and Rick brought together a lot of important experts on the topic. What I remember standing out however was the second panel that day. The panel featured a writer from Governing Magazine – Alan Greenblatt – and, if I remember correctly, Mr. Greenblatt was a bit cynical about student financial aid offices and their relationships with student lenders. He was indirectly – or perhaps even directly – questioning their integrity and some of the other panelists jumped all over him, defended these offices and lenders, said everything was on the up and up, etc.
Well, a year later, we now know as a result of the Cuomo investigations that Mr. Greenblatt was right about his assessment and the others were largely wrong (kudos to him). But what I also remembered about that panel was the question and answer period and representatives from a student lender called MyRichUncle. (we will shorten their name and just refer to them as MRU for the rest of this blog). The MRU folks were questioning the relationships between financial aid officers and student lenders. It seemed to me at the time that MRU was upset at being shut out of the student loan industrial complex, which I thought wasn’t right, as long as they offered legal lending products. The marketplace should be open to all, not just the few who bribe.
MRU was in the news again yesterday, with a lengthy and largely positive piece in the Wall Street Journal. In fact, MRU has done what precious few private lenders have been able to do up until this point – generate positive media coverage for a student lender!
The MRU saga as the Journal retells it sounds like some Horatio Alger tale. Two Indian entrepreneurs under the age of 30 started the company. They have tried offering innovative products to grow their business. They were also the new kids on the block and most of the higher education establishment wouldn’t give them the time of day. So, MRU started running newspaper ads calling into question the relationships between lenders and financial aid offices. The financial aid offices initially tried to blackball them even more. But the ads caught the eye of law enforcement, investigations ensued, corruption was uncovered, and, now MRU is perfectly positioned to be the “ethical” player in what is otherwise a very dicey game. Congratulations to them.
This whole story also illustrates another principle that we talked about in yesterday’s blog. The student loan scandal has been terrible, no doubt. But we now have private sector entrepreneurs stepping into the fray and trying to offer untainted products. They realize the business potential and are using capitalism to fulfill a need, which is a good thing. Remembering back to our posts about EduCap, we hope that the same thing happens in the private student loan industry if EduCap’s woes overcome that lender.