Senate Report Questions Student Lender’s Old Rewards SystemJune 16, 2007 |
Student lender Nelnet used a points system to reward members of an advisory board with donations to universities in exchange for attending meetings and providing ideas, according to a U.S. Senate report.
The Nelnet Innovation Council was discontinued in April, less than a year after its formation, according to the company, amid an investigation by the New York attorney general of the $85 billion-a-year student loan industry.
The report, released Thursday by Sen. Edward Kennedy, D-Mass., found many instances in which banks gave student aid officials trips, tickets to sporting events and other gifts.
Other student lenders, including Citizens Bank, Chase, Citibank and Northstar, hosted expensive outings for advisory councils, including a Citizens board meeting at Disney World in February 2006 estimated to cost more than $41,000.
“Providing donations in exchange for attendance at advisory board meetings … raises an unacceptable appearance of conflict of interest …” the report said of the Nelnet council.
But Nelnet spokesman Ben Kiser said Friday that the council was a small strategic research and development group designed to bring new ideas and help the Lincoln-based company improve its products.
“It provided a lot of valuable feedback,” Kiser said. “Their actions were completely ethical and legal.”
The report also said that a University of Texas financial aid officer who was fired last month sat on a Nelnet advisory board, along with those of other lenders.
Lawrence Burt, the former director of financial aid services at the university, expected meals and parties from lenders who did business with students at the school, according to the report.
He demanded favors from Citibank, and when the bank refused he dropped Citibank from the school’s preferred list, the report found. Citibank then invited Burt to serve on an advisory board, treated him to golf outings and expensive meals eventually getting back on the preferred list, the report stated.
The university fired Burt last month after determining his ownership of stock in a loan company violated university rules.
Kiser said Friday afternoon he could not comment about Burt’s role at Nelnet without further research.
Nelnet disclosed in April that it paid about $4,800 to Western Illinois University for successfully referring students to the company for private loans, and gave two financial aid officers at a school in Albany, N.Y., plane tickets to travel to New York City for a theater event.
Nebraska Attorney General Jon Bruning said the company’s mistakes were “very small” as he and Nelnet announced the company’s adoption of a code of conduct devised for dealings between lenders and schools.
The company said it would change its policy on gifts, would not provide anything worth more than $10 to any financial aid office employee involved with decisions related to student lending, and would stop paying for them to visit Nelnet service centers.
Nelnet serves students in 50 states, has about 4,000 employees and $23.8 billion in net student loan assets, according to the company’s Web site. It originates more than $6 billion a year in loans for itself and clients.
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