Friday, July 21, 2006

MyRichUncle Backlash

The Chronicle says the nation's financial aid administrators aren't happy that MyRichUncle took out an ad saying they have special relationships with lenders and don't always steer students toward the best deal.

"In its advertisement, MyRichUncle says some financial-aid administrators take "kickbacks" and "payola" from lenders who wish to become exclusive providers of loans on the administrators' campuses. None of these charges is particularly new. Over the past several years, Democratic lawmakers, student-loan watchdog groups, and even some loan-industry officials -- as well as the Education Department's own inspector general's office -- have urged the Education Department to be more aggressive in ensuring that lenders abide by rules that prohibit them from offering colleges inducements to secure applicants for federal loans. Despite these misgivings, department officials have largely refused to regulate in this area, leaving it up to the loan industry to police itself (The Chronicle, October 17, 2003, and November 28, 2003)."

Here's the kicker: Two financial aid advisors go on to say, well, even if MyRichUncle offers the best loan deal going right now, they won't tell students about it--because MRU hasn't established the right relationship.

""I told their representative not to visit me," said David R. Gelinas, who is the financial-aid director at the University of the South and also a member of [NASFAA]s board. "I told him that I found their approach to be offensive."
Walter O'Neill, assistant vice president for financial aid at Roosevelt University, agreed. "There's going to be a backlash against the company because they have shown that they don't have integrity or credibility.""

How is it showing a lack of integrity or credibility to publicize widely known and substantiated charges about an industry where you're trying to do something different? It's like a plumber in an ad saying, "some plumbers will overcharge you. They inflate the bill cause they're getting kickbacks from suppliers. Ask a plumber these questions to find out how independent they are. And trust us, cause we're telling you this."


StudentloanNetworker said...

Integrity or credibility in this case isn't necessarily about what was said so much as how it was said. The reality is that financial aid officers at schools are very often given short shrift. Most of the time, their only interaction with students is a negative one, and MRU's advertising campaign went, in my opinion, after the wrong target. Not the financial aid officer who, for the most part, is doing the best with what they have, but with the lender(s) who employ all sorts of practices to obtain exclusivity agreements with schools as much as possible. Some things they do are illegal, some things they do are shades of grey.

Ultimately, MRU could have presented the same information in a more positive way, and earned more support and trust from the very people who will be examining their loan applications in the financial aid offices. I would say that 99.9% of financial aid officers are honest, good people who will do as the law requires when it comes to approving the loans on behalf of the school, but it wouldn't be a huge surprise to hear that a few MRU applications accidentally got put to the side or in the recycling bin instead of the filing cabinet this year.

Christopher S. Penn
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Anya said...

It's true that most financial aid officers I've met absolutely are in it to help kids, and this ad isn't going to make their lives any easier. However the reality is that there are shady practices in this industry and that financial aid officers are the ones implementing them, simply by steering applicants toward their school's "preferred lenders". They're acting in a dual role--trying to serve both the school and the interest of the students, and those roles aren't always compatible.
A good analogy would be with doctors who take inducements from pharmaceutical companies. Yes they still want to help their patients but they also have incentives to prescribe as much Zantac (or whatever) as possible, and so they're no longer disinterested advocates for patients. You can say, well big Pharma's the real enemy, and yet doctors shouldn't be completely excused either.