College Board Quits the Student Loan Business
The College Board, the powerful testing organization known for its SAT and Advanced Placement exams, announced on Wednesday, Aug. 22 that it was getting out of the student loan business.
The College Board, a nonprofit organization based in New York City that has been expanding into new products like English and math curriculums, began offering student loans in the early 1990s, partnering with companies that included Sallie Mae and Citibank. The lenders extended the money, while the College Board received a fee from them for serving essentially as a gateway for borrowers.
In explaining its decision to abandon the business, the College Board cited new legislation and regulations cracking down on relationships between lenders and colleges that have been enacted in the wake of revelations that numerous lenders were paying colleges commissions or bonuses in exchange for business. College officials have also received free trips, meals and other perks to win spots on the so-called preferred lender lists that students rely on when selecting a loan company.
Edna Johnson, a College Board spokeswoman, said the new rules – designed to prevent conflicts of interest that could lead universities to steer students to particular lenders — would prevent the organization from conducting events it routinely holds with university officials to discuss topics like student writing skills, admissions trends and financial aid.
“We understand and respect the intent of this new legislation and these new codes, but the end result is that we’re not able to reimburse our members for travel and lodging,” Ms. Johnson said. “If we no longer reimburse the educators, then only those educators from schools, colleges and universities with the financial resources to pay for the travel and the accommodations would attend.”
The association also emphasized that its student lending operation had accounted for less than 1 percent of the $618 million in revenue in the year ending June 30, and that shutting it down would affect only 15 employees.
Attorney General Andrew M. Cuomo of New York, who has led the way in looking into the practices of the $85 billion student loan industry, requested information from the College Board in February as part of an investigation that continues. Jeffrey B. Lerner, director of communications for the attorney general’s office, praised the College Board for its decision, calling it “a positive development.”
Ms. Johnson said that the College Board’s decision was not part of an agreement with Mr. Cuomo’s office but an independent move, adding that the organization was cooperating with his investigation.
Mr. Cuomo began looking at the College Board, along with several other loan companies, when his office began investigating various lenders’ practices, including reimbursing college and university officials for travel to meetings at which they were hosts and for other expenses.
Barmak Nassirian, associate executive director at the American Association of Collegiate Registrars and Admissions Officers, said the rules would probably not lead most other lenders to abandon student loans. The College Board was in an unusual position because it was a loan marketer, not a lender, Mr. Nassirian said.
“They have no infrastructure,” he said. “They have nothing but a marketing facade and as they themselves would point out, not a particularly big one anyway.”