...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.

This just in.....

....yes folks in the industry and in defense of the industry are taking stock of the situation. Donald Heller has a piece out in Inside Higher Ed that we find pretty good. Basically, Donald is saying there are some folks excercising poor judgement (lenders, financial aid officers, and government officials), but let's not let Andrew Cuomo's investigation be the impetus for stifling regulation to the FFEL program.

An over-recation in the House/Senate will ultimately have an impact on the student borrower. So, let's be rational and reasonable when we consider the consequences. Let's consider the ultimate impact as legislation and regulations are formulated.

Oh look....here he is...

....Christopher Penn....the guy who runs FinancialAidPodcast.com . This is the anti-Collinge.

But first a little background. Penn works for the Student Loan Network. They're a Boston area based student lending organization. They have an iteresting spin. The Student Loan Network focuses all of their advertising/marketing/promotion on educating potential customers on the product, the process, on why....all that good stuff. Of course they always steer you to their services, but hey, it's a great idea. They immediately establish trust by positioning themselves as an advocate of the potential customer.

But they do a pretty good job of keeping their self-promotion to a minimum and the information they disseminate is excellent.

In fact, there has already been a Christopher Penn vs Alan Collinge encounter. Collinge appeared as a guest on Penn's podcast. We haven't listened yet, but will do so once this is posted. But check out today's podcast: it's Penn appealing to lawmakers to be reasonable. Go Chris!

Have you ever checked out this guy:

Alan Collinge? He runs an organization called Student Loan Justice. The short story is that Collinge had an unpleasant encounter with Sallie Mae and now appears to have dedicated his life to being a pain in the ass to Sallie Mae. Check out his web site and you'll get the full flavor of his story and his over the top efforts. It's sort of like a messy version of Michael Moore's "Roger & Me", except with more vengence.

We've never met Collinge, but take all this with a grain of salt, we think there's another version to the injustice.

The point is: Wow. He does have some influence. All the kookyness aside, Collinge doesn't get dissed or stood up by senators and congressmen. People are forced to listen to him as a result of his self-promotion.

We're wondering if the student lending industry has an anti-Collinge that will stand up and take on the issues. I'm sure the industry is taking applications for the anti-Collinge. And look what Student Loan Justice has done: they've created a PAC. That means that Collinge doesn't have to work anymore. He pays himself a salary to drive his bus around the country to crusade for student loan justice. Doesn't sound like a bad gig if you ask us.

And the winner is.....

......JC Flowers - JP Morgan Chase - BankofAmerica! Yup, when the dust settled, that was the winning lineup....offering $25 billion for Sallie Mae. JC Flowers will take a slightly better than 50% share while JP Morgan and BofA will take about 25% apiece.

The one thing that will be interesting here, is what these private equity firms are going to do with Sallie Mae. These companies typically are looking for an exit point to monetize any gain on investment. These gains are usually created by selling off non-core parts of companies. Heaven knows Sallie Mae has a number of non-core business lines: their IRS collections company, their student loan guarantee line, their account servicing line, their financing function, their marketing arm. Whoops, that's pretty much all Sallie Mae does. The point is, it won't be hard to break the company up into functional parts and package them up into attractive investments.

SimpleTuition.com

We think this really interesting. It's likely a function of marketing, but SimpleTuition.com sorts out FFELP Consolidation, and Stafford/PLUS offers from various lenders based on a few criteria. All you have to do is identify which features are most important. And Voila! You've searched thru 20 or so lenders just like that.

But be aware, we think the only reason that a lender shows up here is because they paid for the spot....but still, you get to see a comparison of a bunch of loan offers.

Tsk, Tsk, Tsk.

In an earlier post, we hypothesized that there were a few bad apples in the financial aid office barrel. It turns out that there are probably a quite a few more than a few. But to redeem CollegeLoanSearch, we also predicted that Andrew Cuomo's investigation would find more ugliness.

So far, Coumo seems to be consumed with CIT's Student Loan Xpress unit. In their defense, it seems that CIT cleaned up the act when they bought Education Lending Group (the previous owner of Student Loan Express) in 2005. All the allegations unearthed so far were the result of pre-CIT ownership.

What we find suspicious is that no other student loan company has been identified yet. We think there's a doozy out there that will be unvieled any day now. Time will tell here.

But the industry isn't full of sleezy, back-room hucksters. There are scores of well-managed, highly-ethical student loan firms that continue to operate. The same goes for the university financial aid community. Sure there's some ill-behaved parties out there....but for the most part, everyone is operating in an honest, open manner.

We'd like to see the industry make a statement to such. Most lenders are doing good -- they are enabling people to attain a higher education. The ill-behaved actors need to face consequences, but the industry needs to take responsbility and promote themselves as providing a valuable service. Because Andrew Cuomo surely isn't going to serve as the industry spokes person. And he's far from finished here.