We got the exclusive unconfirmed NSLDS update right here.

First off....the Department of Education axed access to NSLDS to everybody in the industry EXCEPT for institutions of higher education and student borrowers. We did get a tip that 15 schools lost their access during this NSLDS hiatus....don't know which schools those are.

This Tuesday, April 24, we heard that the servicer than exclusively handles the Direct Loan program got their access back. So perfect, the Direct Loan program is up and running.

But this is interesting: we hear that the Department is really focusing on the fully vertically integrated institutions. That's organizations that have an internal marketing front end, an internal financing vehicle, an internal guarantee agency, and an internal servicing function. There's not too many of these...examples include: Sallie Mae, AES/PHEAA, and Great Lakes....probably a few others, but those come to mind initially. But here's what we didn't know. The guarantee agency's get a full dump of NSLDS. The certification of the loan level guarantee requires a 360 view of the database. So, if an organization has a marketing front end in-house and a guarantee agency in-house, there's the opportunity for shennanigans theres. Not many shops are strucutred like this though.

Our snooping and nosing around also yielded that access will be fully up and running in 2-3 weeks. The Department is not notifying people when access is available.....just need to keep checking.

This is all unconfirmed rumor...this is the good stuff we eat up.

Get the popcorn....

....it's gonna be an action packed Wednesday! That's right.....on C-SPAN Wednesday, April 25, we've got Andrew Cuomo, Live In Congress.

We just checked over at C-SPAN and didn't see exactly when the excitement begins, so we're starting watching first thing in the morning. This will be good. We've been at the Capital for these hearings before. This one is to get headlines. Nothing will be decided, no good information will be disseminated, and the reporters will get all the good seats. But you don't have to be in Washington to catch the show....thanks to C-SPAN.org we can get streaming gobley-gook from the Comittee hearing room live all day right from our desk.

CNN has some good quotes from Cuomo today: 'Cuomo said Spellings' move was "too little, too late."' He's talking about Margaret Spellings' creation of a Federal Task Force To Investigate the Relationship Between Lenders and Financial Aid Offices. We surmise that Spellings' is just wrapping up the Federal Task Force to Investigate the Bribes Taken by Federal Employees Who Oversee Those Industry Participants. And the Federal Task Force To Investigate Why The Department of Education Cannot Police Any Of It's Regulations should be delivering it's reccomendations shortly as well.

But our prediction for tomorrow is: 1) Lots of headlines/soundbites/bylines on the topic; 2) No actionable suggestions that will fix all the problems; 3) a variety of pithy responses to the circus that's due in DC tomorrow.

Finally.....

...someone willing to stand up the bullying by Andrew Cuomo -- Drexel University. You see, Drexel had an exclusive arrangement with Education Finance Partners out in the San Fran area. EFP would provide private student loans to Drexel's financial aid office in return, EFP would provide revenue sharing with Drexel University.

Drexel refused to cave into Cuomo's demand for restitution. To avoid too much egg on Cuomo's face, he was forced to file suit against Drexel. To which Drexel responded with the perverbial: "Bring it on!" And there we have it. Drexel will see Cuomo in court over the matter. And we think Drexel has a better than 50-50 shot at winning.

Out in the real world we call this an "affinity marketing" arrangement. There's nothing wrong with this. Open your wallet, take a look at all your credit cards. You probably have 5 or 6. They were probably solicted to you via a group you belong to: your alumni association, NASCAR, your favorite airline, etc. You think those groups just hand over their member list to the credit card company for free? Heck no! They make a bloody fortune off of renting their member list. You can also rest assured that your alumni association, NASCAR, or your favorite airline didn't go out and establish their own credit card program. The cards are probably issued by one of three banks in, you guessed it, an affinity marketing arrangement.

So long as Drexel University officials weren't flown to exotic locations for "conferences", given stock grants, or any other payment otherwise, this exclusive arrangement is just fine. We don't know for sure, but we surmise that Drexel used the money that EFP paid to them to fund scholarship funds, the Unversity general fund, or some other fashion whereupon the University as a whole benefited.

We also cannot confirm this, but if a Drexel student decided not to get their private loan through EFP, then they were free to shop around and do business with whomever they pleased. This is America after all.

So to you, Drexel University, our hat goes off to you and CollegeLoanSearch stands in solidarity with you!

Here's how to fix NSLDS

NSLDS is a credit bureau. The Department of Education may have another view, but in terms of it's function and structure, that's exactly what it is. So let's take the credit bureau model and port it over to NSLDS. It will solve a tremendous amount of problems. Credit bureaus are regulated by the FTC, FCRA, FDCA, and whole host of other acronyms.

Let's start with how access IDs are handled for lenders/servicers/guarantors/etc. Right now each entity has a site administrator. They submit a form to request an individual employee's ID/password. that ID/password is associated with the site making the request. Then when that ID/password makes an inquiry, the inquiry is posted to the borrowers NSLDS record. In otherwords, there is a record of who made an inquiry, when then inquiry was made, and where the inquiry was made from. Furthermore, restrict access from the work site. Right now employees can use their ID/password off work premises to look up any individual.

Now, let's upgrade the web-only interface. Business's in the business of facilitating student loans want the loan data, not a graphical rendering of the data that must be manually reviewed. This will reduce costs for all involved (i.e. lower costs for borrowers as a result of a more efficient workflow).

Costs? Start requiring users to pay for access. That's how credit bureaus make money. Why can't the Dept of Education charge for access? This event alone will put a stop to any (if it exists) prospecting in NSLDS.

Dept of Education? Well, their mission is to see to it that the citizenery is educated. Why are they running a credit bureau? They shouldn't be. Turn this thing over to the experts: the bank regulators, the FTC, and let it be regulated by the Fair Credit Reporting Act, the Fair Debt Collections Act, and all the others. Sure it's a specialized beast dealing with student loan debt, and there's probably some involvement for the Department of Education, but they certainly shouldn't be running the NSLDS operation, regulating the NSLDS operation, or policing the NSLDS operation.

Tomorrow, we'll rant about a much bigger issue: The fact that the Department of Education is regulating a financial intermediary process. We've ranted about this before, but this time instead of just complaining, we'll provide some soluations as well.

...still no NSLDS for lenders....

....this is just a plain old bad decision.

This whole mess is apparently prompted by this Washington Post article from Sunday, April 15, 2007.

So, we've got this financial aid officer quoted as saying: "Our students are being inundated with marketing from consolidation companies," said O'Leary, of Stonehill College. "How else are the consolidation companies getting our students' information?" And Senator Kennedy gets his panties all in a bunch.

Alrighty. . We feel a rant coming on.

First Ms. O'Leary is probably a really good financial aid officer. We're thinking not so good at marketing though. Which probably explains why she's a financial aid officer, and not running a marketing department.

Here's how it works. Yes, NSLDS contains detailed, loan level information on each loan that a borrower from the Direct Loan or FFEL programs has ever had. And this is good. Servicers, lenders, financial aid officers, guarantors, and students all access NSLDS to verify student lending activity for various reasons. However, and this is very important so sit up while reading this, the 3 main credit bureaus in the United States ALSO carry the information. Not generally to the same level of detail, but the fact that you have, or have had a student loan is recorded at Equifax, Experian, and Trans Union. This is a fact.

Now, financial services marketers have permissible purpose to access the credit bureaus to determine loan eligibility when making a pre-screened firm offer of credit. When dealing with the credit bureaus, if an approved and paying client, a financial services company can obtain a list of names, addresses, phone numbers, and sometimes email addresses of people that meet specific criteria to market a specific product, as long as a firm offer of credit is made. It's not as easy as calling up the credit bureau and requesting a list, there's apparently a whole science behind this pre-screening process.

Contrasting this process to NSLDS, you'll see that using NSLDS as a marketing prospect tool is simply ridiculous. NSLDS offers users two views of the data: one for lenders/servicers and one for student borrowers. Both views are allowed only thru web-based screens/views. There is no raw database access -- one MUST use the web browser provided rendering mechanisms. Now couple this with the fact that a borrowers address, phone number, and email address is not made available thru these views. Not only is it a logistical nightmare to access the information on a mass basis, there's no indicative information to be used for marketing purposes. The industry uses NSLDS to verify loan applications, create payoff requests, and facilitate the financing function.

It's just plain old silly to imply that the industry is using NSLDS on a wholesale basis as a prospecting tool. Financial services companies use the credit bureaus to prospect for customers. That being said, there are probably some fairly unsophisticated marketers attempting to use NSLDS as a prospecting source using screen-scraping techniques, and they should be punished for doing so.

Tomorrow, we'll provide a solution to the NSLDS access problems. You'll be amazed at how easy this is to fix.

National Student Loan Database

Well, we spoke too soon.

Today the Department of Education, in their infinite wisdom, shut down access to the National Student Loan Database System (NSLDS) to loan holders, guarantors, and lenders, basically anyone other than a student or financial aid office.

Umm....this is exactly what Heller's article in Inside Higher Ed said NOT to do! This action will hold up millions of dollars of loan transactions. The student borrowing function will completely cease to function as a result of this action.

Apparently, the Dept of Ed, is doing this temporarily as a review is conducted to ascertain any shenanigans in NSLDS by lenders/marketers. We have but two questions: 1) why shut down the entire system to conduct the review?; and 2) Are they really just now looking at the problem?

More on this as the situation unfolds.

Weekend Update

We were out of town for a few days but now back. What have you missed? Here's a summary:

1. Rumors of Sallie Mae being purchased by the Blackstone Group, JP Morgan, and/or possibly others. Our assesement is that such a transaction will not materially impact the industry, Sallie Mae's arrogance, or the earth's rotation. Sallie Mae will merely have a new owner. Blackstone is a private equity firm whose net income is larger than most countries GDP in the world. And Chase bought Collegiate Funding Services not too long ago to compliment their growing student loan business.

2. According to the Dept of Education, student loan companies have been mining the National Student Loan Database. We find this curious, as NSLDS has two interfaces: one for students, and one for student finance participants. In either case, the loan info can only be displayed one record at a time. And even with this severe restriction, no one screen or view details a borrowers entire perspective. It's not easy to mine NSLDS given the interfaces that the Dept of Ed offers. Which leads us to the conclusion that some lenders have been granted access to the raw data. Moreover, the Department of Education is again failing to police their own regulations. So yes, with absolutely no enforcement, there will indeed be rogue lenders that blatantly challenge the system. It certainly doesn't justify the actions of these lenders.

3. Article in Friday April 13, 2007 Wall Street Journal that details the revolving door between student loan industry employment and Department of Education employment. There's a whole slew of folks that have been going back and forth for a number of years. We're very concerned about all this. The damage has most likely already been done, but we don't think we'll see a whole bunch of this continuing.