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May 24, 2007

questions about relationship with loan-consolidation company

OU alum group answers AG's questions about relationship with loan-consolidation company
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Ohio University's alumni organization is cooperating fully with a probe by Ohio Attorney General Marc Dann into the relationships of college alumni groups with companies that offer loan consolidation.

"We're glad to cooperate and give him the information," said Ralph Amos, executive director of the OU Alumni Association.

On May 8, Dann sent letters to alumni associations at Ohio's public and private colleges, including OU. The letters demanded information detailing any arrangements the groups have with lenders.

Amos readily acknowledged that the OU Alumni Association has a three-year contract with the National Education Loan Network (Nelnet), based in Lincoln, Neb. Under the contract, he said, the lender pays around $39,000 a year to have the Alumni Association promote its debt-consolidation services to Bobcat alums, many of whom have student debt to pay off.

"Our contracts with Nelnet are as straightforward as they can be," Amos said, with payments from the lender used to help fund the group's member services, and no individual group officers getting payoffs of any kind.

"There's no personal gain for any individual" from the contract, Amos said.

Dann's office seems to be suggesting, however, that any payoff by lenders to alumni associations to promote the lender's product should be scrutinized for possible impropriety.

"Marketing arrangements between lenders and alumni associations threaten to undermine the integrity of the alumni groups and the trust of incoming students and graduates," Dann said May 9, when he announced the latest expansion of his probe. "If alumni associations are leveraging the brand and reputation of their respective universities in exchange for compensation or financial gain, then that is a cause for very serious concern."

A pitch for Nelnet is included on the OU alumni group's Web site, which can be linked to directly from OU's front page. When a viewer clicks a link under "alumni services" titled "loan consolidation," he or she is taken to a brief, low-key promotion for Nelnet, which states that "As an industry leader, Nelnet has the experience and resources to help you better manage your student-loan debt." It also urges alums to research their loan consolidation options before making any commitments, and provides a link to an informational page offered by Nelnet, titled "Factors to Consider About your Student Loan Consolidation."

After Dann began showing interest in the issue, according to the Columbus Dispatch, Ohio State University's alumni association recently posted an explanation on its Web site of the relationship it has with another loan-consolidation company, Student Trust. The statement acknowledges, among other points, that the OSU alumni group gets at least $35,000 a year from the lender for steering business its way.

The OU Alumni Association has not to date posted anything similar on its Web site regarding its contract with Nelnet.

A spokesman for the Ohio Attorney General's office said the agency would not comment on the ongoing investigation of alumni associations' connections with lenders.

The letter Dann sent to the universities demands a long list of documents, including an organizational chart of the university financial aid office; a list of lenders included in the school's financial aid awards; copies of loan applications; marketing materials given to prospective students; criteria for a lender getting on or off the school's "preferred lender" list; records of any gift or compensation offers made by lenders to the school or individual employees; and records relating to any service by the school's financial aid employees as board members or consultants to affiliated lenders.

Nelnet, the company that contracts with the OU Alumni Association, has been at the center of a probe by New York Attorney General Andrew Cuomo into alumni association ties to lenders. Earlier this month Cuomo sent 90 subpoenas to alumni groups of various colleges who have relationships with Nelnet, though according to Amos, OU was not one of them.

As with the Ohio investigation, Cuomo wants to know whether the alumni associations got paid for pushing the lender's services, and if so, whether they let their alumni members know this.

In a statement issued May 3, Nelnet promised to cooperate with Cuomo's investigation, but insisted all its relationships with alumni groups are squeaky clean, and similar to those that alumni organizations have with other kinds of businesses that provide services to their members.

"We have been and remain proud of our affinity relationships with alumni associations," the statement declared. "These relationships provide valuable information and opportunities to alumni regarding student-loan consolidation, as well as generating income that helps alumni associations carry out their mission... We believe our agreements are appropriate and completely in accordance with the law."

Amos said his group chose Nelnet as a loan-consolidation company to promote to its members because it seemed to be a solid company, big enough to provide services to a group the size of the OU Alumni Association.

"Our main requirement is that they be strong enough to serve our alumni population. And Nelnet is large enough to handle the volume of our alumni population," he explained. "The customer service piece is essential."

He added that while the loan-consolidation package Nelnet offers OU alums is "competitive," the alums don't get any kind of special deal for signing up through the alumni group.

In its fourth year contracting with Nelnet, Amos said, about 1,500 alums have signed up for the company's loan-consolidation services, and most seem happy with the service provided.

"Alumni feedback we get from the program has been solid," he said.