UNIVERSITY PARK – Media attention has been drawn recently to the practice used by some U.S. colleges and universities of providing students with a list of “preferred lenders” for their student loans. This practice has given rise to questions about possible conflicts of interest at some institutions.
Penn State does not have a preferred lender list, and does not engage in the practices that have come into question at some other institutions. The university has no representatives from student loan organizations resident on campus or appearing to represent Penn State in any way.
“Penn State does not receive any funding or incentives whatsoever from lenders who provide student loans,” said Anna Griswold, assistant vice president for enrollment management and executive director for Student Aid. “All financial records that document this fact are open for public examination.”
It is Penn State’s policy to process loans from any lender that a student selects. Students at Penn State always have a choice in the selection of their lender. This policy is consistent with federal regulations.
“Penn State does have recommended federal student loan programs such as the Federal Stafford Loan, Federal Parent PLUS Loan and Federal Graduate PLUS Loan, as well as private alternative loans that we suggest to students and their families who ask for guidance in selecting lenders,” said Griswold.
Because most students do ask for the University’s help in selecting a lender, the Office of Student Aid recomments the Federal Stafford KeystoneBEST Loan Program, which is offered through the Pennsylvania Higher Education Assistance Agency (PHEAA) in conjunction with nearly 250 lenders in Pennsylvania and other states. The KeystoneBEST Program has no up-front loan fees and offers competitive repayment terms.
“There are two reasons we recommend the KeystoneBEST Loan to students,” said Griswold. “First, this program offers one of the most affordable student loan programs in the country, offering borrowers significant savings over the life of their loans. Second, over the years, Penn State students have shown a preference toward selecting lenders who offer the KeystoneBest Loan.”
Penn State also suggests several of the KeystoneBEST lenders that offer students competitive private alternative loan programs. These loans are processed using the same automated system that PHEAA uses for the KeystoneBEST Federal Stafford Loan. Students who receive both a federal student loan and an alternative loan from PHEAA can make a single monthly payment on both loans after repayment starts.
“In concert with our practices for all of our other loan programs, Penn State receives no remunerations from lenders for recommending their non-federal loan programs to students and their families. We suggest these private alternative loan lenders because students regularly ask for our recommendations. Students always make the decision on who their lender will be for private loans,” Griswold said.
All staff in the Office of Student Aid are informed of, and abide by, relevant conflict-of-interest policies at the university. In addition, the Office of Student Aid has a specific policy regarding staff engagement with lenders. This policy is meant to ensure that conversations and meetings with lenders fall exclusively within the narrow scope of business surrounding the student loan process. Lenders frequently send unsolicited gifts to student aid offices. It is Penn State’s policy not to accept such gifts.