The payments TCU receives from a lending company under investigation by the New York attorney general’s office are given back to students through grants and scholarships, an administrator said Monday.The university has a one-year-old revenue sharing partnership with Education Finance Partners, the loan company that finances the recommended Private Loan for Horned Frogs, said Michael Scott, director of scholarships and student financial aid.
EFP, one of the companies under investigation by the attorney general, has paid TCU about $12,000 under its arrangement, Scott said.
According to the attorney general’s office, New York Attorney General Andrew Cuomo sent letters to the presidents of colleges and universities across the country announcing the “ongoing investigation of potential conflicts of interest and illegal conduct in the student loan industry.”
Chancellor Victor Boschini said he is confident with the integrity of the financial aid department.
“I think we always do what’s best for our students and, whether the attorney general agrees with that or not, is really not my concern,” Boschini said.
The letter warned against financial agreements, or revenue sharing, as well as the establishment of preferred lender lists.
In his letter, Cuomo said he suggests that schools should fully inform students and parents of how they construct preferred lenders list as well as any financial benefits the schools receive from these private lending companies.
Scott said TCU reviews its preferred lender list every year, taking into account interest rates, number of students approved for loans, payback benefits and how many students are generally eligible for the benefits. TCU does not receive any benefits, such as vacations or donations from any lenders on the preferred lender list.
The Private Loan for Horned Frogs, a revenue sharing loan between TCU and EFP, was established a year ago to direct students and parents unfamiliar with the loaning process to a private loan company that TCU has researched and feels confident recommending, Scott said.
“We felt that it was the best combination of approval rates, interest rates, repayment benefits and all that type of stuff,” Scott said.
He said the revenue sharing aspect of the partnership was not discussed until after they had decided EFP was the company with the most competitive product. The payment made to TCU is a small percentage of the profit EFP receives when a student starts paying back the loan.
Scott said the relationship with EFP can be rearranged if another lending company comes up with a more competitive offer for students.
Scott said TCU has not yet submitted any documents to the attorney general’s office but is in the process of gathering information.
EFP has received inquiries from the attorney general’s office and is cooperating fully with the investigation, Tamera Briones, a chief executive officer at EFP, wrote in a letter to Scott.
She also wrote that EFP responded immediately by launching its own independent review of its programs to ensure that it is in compliance with legal and ethical obligations.
According to a press release from the attorney general’s office on March 15, Cuomo notified more than 400 colleges and universities to end relationships with lending companies that have the potential to mislead students and compromise their ability to obtain the best student loan rates.
Dallas Martin, the president of the National Association of Student Financial Aid Administrators, wrote a letter to Cuomo in response to the investigation defending the financial aid offices his organization represents.
“You have done them a great disservice and have dishonored their good names,” Martin wrote. “What is worse is that you have encouraged students and parents to mistrust the advice and counseling of financial aid administrators and schools, which will only lead to bad decision-making by consumers to their detriment.
