College Board Stops Student Lending Program

On August 22, The College Board, a nonprofit organization based in New York that is known for its SAT and Advanced Placement exams, announced that it is ending its role as a lender in the Federal Family Education Loan Program (FFELP) and will not accept new loan applications after October 15, 2007. The College Board began offering student loans in the early '90s, partnering with companies that included Sallie Mae and Citibank. The lenders extended the money, while the College Board received a fee from them for serving as a gateway for borrowers.

In explaining its decision to leave the business, the College Board cited new legislation and regulations that have been enacted since the revelation of numerous cases where lenders were paying colleges commissions or bonuses in exchange for student loan business. "While the legislation and codes are well-intentioned, they have had the unintended consequence of limiting the College Board's ability to fulfill its mission and obligations as a membership association while continuing as a student lender," the College Board said in a release explaining its decision. A major limitation cited in the release included restrictions on meeting structures for educational professionals. "The College Board is unique among student lenders in that it is a membership association," said Michael Bartini, senior VP for enrollment at the College Board. "Our membership meetings are critical to our mission, and it is essential that all our members–regardless of their financial resources or location–feel comfortable attending without concern that they are violating new laws or code provisions."

More recently, it was announced that three Connecticut schools–Fairfield University, Trinity College, and Sacred Heart University–will pay a combined $75,000 to various scholarship funds under agreements reached with the state's attorney general, Richard Blumenthal, after an investigation into relationships the institutions had with the College Board. The three schools all denied any wrongdoing, but agreed to abide by a code of conduct that would no longer permit the kind of arrangement they had with the College Board, which included receiving discounts on computer software in return for placing the agency on their list of preferred lenders. The arrangement had not been disclosed to student borrowers and "potentially violated consumer protection laws," Blumenthal said.