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One lender dominates at Miami
The school is last to respond to queries.
By TOM MARSHALL, Times Staff Writer
Published August 15, 2007
Four months after Florida Attorney General Bill McCollum asked, the University of Miami provided responses Tuesday to his questions on student lending practices - the last school out of 46 in Florida to do so.
But its responses differed from those the school gave the St. Petersburg Times a day earlier.
On Monday, the university said it had abandoned the much-criticized practice of suggesting some lenders to students over others.
"To clarify, we have checked the graduate portion of our Web site and the only reference to preferred lenders is that we do not maintain a preferred lender list," said Margot Winick, executive director of media relations. "As stated in our Web site, our students are free to utilize the lender of their choice."
But on Tuesday, after the Times pointed out instances to the university in which its law and medical schools continue to recommend the university itself or lending giant Sallie Mae as the preferred choice, the university acknowledged those exceptions in its release to McCollum.
"The medical school's financial aid Web site identifies the university as 'the preferred lender,' but also notes that 'a number of institutions provide these loans' and provides guidance to students on how to pursue loans from other lenders," the university told McCollum.
Preferred or not, it's clear the dominant lender at the University of Miami is Sallie Mae and its wholly owned subsidiary, Nellie Mae. In 2006, 92 percent of loans worth more than $69-million were handled by the lender, according to the Student Marketmeasure data service.
That includes $26.8-million in loans issued by the university but backed by Sallie Mae, and later sold to it under the federal school-as-lender program. Schools in the program typically earn loan revenue and spend a portion of it on need-based aid.
This spring, colleges and universities have been under unprecedented pressure to reform their financial aid practices.
An investigation begun by New York Attorney General Andrew Cuomo has found lenders that gave cash or favors to financial aid officials in exchange for preferential listing in the competitive federal and private loan business.
The University of Miami is also negotiating a settlement with Cuomo's office, according to school and Florida officials.
Under federal law, lenders are prohibited from providing inducements for a share of loan volume.
Both the House and Senate have passed legislation that would bar such practices. So far, 12 of the largest lenders, including Sallie Mae, have reached settlement agreements with Cuomo and contributed $13.7-million toward educating students on financial aid options.
Many schools have defended the practice of recommending lenders, saying students need help in wading through thousands of complex offers. But Cuomo and other critics have found numerous instances in which schools profited from such relationships, and sometimes recommended more expensive loans than students could find elsewhere.
Under new rules proposed by the federal Education Department, schools would be required to list at least three lenders on a preferred list.
In its response to McCollum, the University of Miami said it would be willing to sign an "appropriate" code of conduct governing lending practices in Florida.
It said some officials have accepted free meals, lodging or other perks from lenders in connection with training, and its student loan manager sits on a Sallie Mae advisory board.
But officials said they hadn't taken part in revenue sharing or other illegal arrangements with lenders.
"The University of Miami supports any efforts to promote ethical conduct in the student loan industry, and we intend to be a leader in that area," Winick said.