The UI is not part of a U.S. Department of Education probe into Iowa Student Loan’s questionable relationship with the Iowa State University Alumni Association, officials have confirmed.
The federal government recently ordered Iowa Student Loan, a private, nonprofit lender of educational loans, to pay nearly $16 million in penalties for making illegal payments to the ISU Alumni Association from 2003 until 2007.
UI officials said the university has never entered into agreements with Iowa Student Loan or any other private loan company.
The UI Alumni Association received a large number of offers from student loan companies several years ago but never signed any agreements, said Emily Cornish, the association’s director of marketing.
“We have never had an agreement with a private student—loan company, and it’s been years since we’ve received any proposals,” she said.
However, private companies often approach the UI Alumni Association asking for help in marketing products, she said.
Iowa Student Loan’s agreement with the ISU Alumni Association dealt with loan consolidations and targeted alumni, not students, Jeff Johnson, the ISU Alumni Association’s president, wrote in an e-mail.
Iowa Student Loan has since appealed, and officials with the U.S. Department of Education are reviewing additional information.
Gov. Chet Culver signed a law in 2008 to provide oversight of and accountability for student-loan lenders and required a code of conduct for each financial aid office and alumni association at every college and university.
The state Board of Regents hasn’t closely monitored dealings between state university financial-aid offices, alumni associations, and private loan companies.
Before the 2008 legislation, institutions managed their own conduct, said Keith Saunders, the regents’ state relations officer.
When it comes to students finding a private student loan, UI financial-aid counselors do not promote specific companies, said Mark Warner, the director of UI Student Financial Aid.
“The UI does not package private student loans,” he said, and it always encourages students to use federal loans. “We’ve never promoted private educational loans.”
Roughly 1,808 UI students sought private loans in the 2008-09 school year, a dramatic drop from 3,253 the previous year. ISU officials cite a similar decrease in student acquisition of private loans.
Roberta Johnson, the director of the ISU Office of Financial Aid, said the office packaged private loans for students from 1997 to 2005, but she ended the practice when she took over the position.
Few private lenders are still offering the consolidation programs promoted by the school’s alumni association, she said.
The government will continue to review Iowa Student Loan’s appeal. It is not yet clear when it will make a decision.
