In April, an investigation into the relationship between university financial aid offices and banks hawking student loan programs came to a head. When the dust cleared, several financial aid administrators were fired, allegations had surfaced about shady stock deals between banks and a U.S. Department of Education official, and universities were forced to take a hard look at their arrangements with the banks that offer loans to their students.
 Yvonne Hubbard, director of student financial services, says that UVA has been ethical in its relations with student loan lenders. “Lenders always did very fancy things that we just never participated in because it makes you feel uncomfortable,” says Hubbard. |
UVA seemed to come out ahead of the storm since, according to Student Financial Services Director Yvonne Hubbard, the University has always had strict rules against accepting gifts from lenders. “We have procurement rules at UVA about what a lender can send you.”
Hubbard recalls, “Lenders always did very fancy things that we just never participated in because it makes you feel uncomfortable. …What was going on was uncomfortable, but not illegal.”
Soon it may be. In May, the U.S. House of Representatives passed the Student Loan Sunshine Act, to prohibit gifts between banks and university officials and put stricter requirements on schools offering government-backed student loans from private lenders. The Senate is expected to pass similar reforms.
Like other schools, UVA must soon comply with the new federal laws. That includes diversifying their student loan offerings beyond their current single provider, Bank of America (BOA).
BOA, a large national bank based in Charlotte, North Carolina, was awarded a five-year contract as UVA’s preferred lender in 2003, after the University issued an open request for proposals. BOA handles 95 percent of UVA’s $70 million in subsidized student loan volume.
Hubbard says UVA carries a single lender because “they had the strongest, best terms.” [A copy of the BOA response to UVa’s request for proposal is available here as a PDF.]
“We’re having some meetings in the next couple of weeks to determine how we’re going to choose another two [lenders], at least,” Hubbard says. UVA could lose interest rates and fees it negotiated with BOA when other lenders get included on the “preferred” list.
UVA may also have to alter some of its co-branding with BOA. New federal laws ban any shared logos that imply a university endorses a bank’s products. Bank of America currently prints Money Matters, a booklet on finances written by UVA staff that gets distributed to UVA students at orientation. The Bank of America logo is printed on the back.
As for the law’s gift ban, UVA officials say it won’t affect them much. Spokesperson Carol Wood says, “Our goal is always to do what’s best for our students. …The University receives absolutely no benefit from [its agreement with Bank of America].”
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