PUBLIC SUBMISSION | As of: November 20, 2009 Tracking No. 80268390 Comments Due: August 13, 2007 |
Docket: ED-2007-OPE-0133
Title IV Loans
Comment On: ED-2007-OPE-0133-0001
Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program
Document: ED-2007-OPE-0133-0013
Comment on FR Doc # E7-10826
East Lansing, MI,
Organization: Michigan State University
July 13, 2007
Ms. Gail McLarnon
US Department of Education
1990 K Street NW, Room 8026
Washington, DC 20006-8542
Response to NPRM
Docket ID: ED-2007-OPE-0133
Dear Ms. McLarnon;
I am responding to this Notice of Proposed Rulemaking on behalf of Michigan
State University?s Office of Financial Aid and wish to comment on Section 682-200
and 682.401 for Prohibited Inducements and Section 682-212 and 682.401 for
Preferred Lender Lists.
These sections together unnecessarily limit market forces in a manner that is
detrimental to students and we believe contrary to intent. Specifically, a lender
who donates scholarship funds to a school and also appears on the school?s
preferred lender list is presumed to have provided the contributions for the purpose
of securing loan volume. This ?rebuttable presumption? limits a lender?s ability to
behave in a philanthropic manner and denies students access to additional gift aid
dollars which reduce their need for borrowing. What we believe to be one
unintended consequence is outlined in the following example.
Michigan State University has an affiliated (but independent) credit union, the MSU
Federal Credit Union (MSUFCU), which currently does not appear on our preferred
lender list. MSUFCU is also an approved FFELP lender, and participated
unsuccessfully in an open bid process to become one of our preferred lenders in
the past. MSUFCU has established a program that awards 20 Study Abroad
scholarships to MSU students each year.
Under the NPRM, MSUFCU would be required to discontinue their scholarship
program if they became one of our preferred lenders in the future or it would be
presumed that they ?bought? a place on the list through the scholarship offerings. It
seems to us that this presumption of guilt is a disincentive to lenders who must
either cease donating money to a university or abandon efforts to offer what may
be low cost loans to students at these schools. Punishing lenders for philanthropy
increases the need for student borrowing. This is contrary to the intent of the
proposed regulations, which is to reduce costs to the borrower.
Many lending institutions and other agencies support higher education through
donations, scholarships, and other philanthropic activities unrelated to financial aid
and this support is not contingent on being a preferred lender. The new rules
should not be written so narrowly as to prevent all forms of support for education
from lending institutions.
The second concern is with the requirement for a minimum of three lenders on a
preferred lender list. Michigan State University has selected its preferred lenders
through an open bid process and we have proof of the low cost of loans through
those we selected in comparison to others. The requirement that three lenders be
listed seems arbitrary and capricious and clearly contrary to the best interest of
students.
While the proposed regulations do not specify that the three lender choices must
be ?competitive? in their borrower benefits, we question what impression we would
give to our borrowers in ?recommending? one excellent program alongside two
mediocre ones. Would not the borrowers, the Department, and other regulatory
entities then assume that we chose the two mediocre ones to ensure that all of
our borrowers would select our preferred program? The point of this is that the
requirement for three lenders on the preferred list does not ensure that borrowers
are given the most competitive choices.
Michigan State University is proud of our open bid process in selecting a preferred
lender. We approve of the requirement that each school make public the process
by which preferred lender(s) are selected, but believe that the requirement for a
minimum of three lenders is ill-considered. We would ask for a provision that
schools which enter into a preferred lender relationship through an open bid
process be offered special consideration in the number of lenders it must
recommend.
We thank you for the opportunity to comment, and for your attention to our
concerns.
Sincerely,
Richard Eddington-Shipman
Director