Nebraska lender Nelnet pledged to adopt the Nelnet Student Loan Code of Conduct and commit $1 million to help educate students and families on how to plan and pay for their education.
Nelnet said it would adopt these policies through a voluntary letter of agreement with Nebraska Attorney General Jon Bruning. Bruning characterized any wrongdoing by Nelnet as minimal in a press conference with Nelnet President Jeffrey Noordhoek.
Nelnet posted a summary of its business practices to its Web site, which included a private loan referral agreement with one institution. The agreement provided that Nelnet would pay the school a referral fee of fifty (50) basis points (.5 percent) on the fully disbursed amount of any funded private loan. The total amount of referral fees paid to the school was $4,820.09, which went into a scholarship fund. The agreement with the school has been terminated,
In addition, Nelnet noted that it had provides items of nominal value to school employees, including Nelnet-branded pens, holiday gift baskets, lunches, dinners, and tickets to entertainment events. On one occasion, Nelnet purchased coach-class airline tickets from upstate New York to New York City for two financial aid administrators employed by an educational institution with which Nelnet already had a relationship, in connection with attendance at a theater event.
The lender also disclosed that it provides a customized telephone and e-mail answering service on behalf of the financial aid office of seven educational institutions, in which Nelnet service center employees respond to the same type of financial aid inquiries the financial aid office’s staff would otherwise receive.
New York Attorney General Andrew Cuomo indicated that his investigation of Nelnet is still ongoing.
"We appreciate the attention Attorney General Bruning and others are focusing on education lending practices and, importantly, on efforts to ensure transparency in the relationships between lenders and institutions of higher education," said Mike Dunlap, Nelnet chairman and co-chief executive officer. "For nearly 30 years, Nelnet has established itself as a leader for making available the best terms, benefits and services for students and families. We have accomplished this with the highest ethical standards. To this end, we firmly believe in the integrity of our existing business practices and our relationships with the colleges and universities."
The following is the Nelnet Student Loan Code of Conduct. The lender states that its business practices will be fully in alignment with this code by Aug. 15:
- Prohibition of Certain Remuneration to Institutions of Higher Education / Revenue Sharing Prohibition
Nelnet shall not provide anything of value to an institution of higher education in exchange for any advantage or consideration related to our student loan activity with respect to the financial aid office, including but not limited to placement on any institution preferred FFELP loan lender list.
- Prohibition of Certain Remuneration to Higher Education Employees / Gift and Trip Prohibition
Nelnet shall not provide anything of more than nominal value ($10, or such other amount as may be provided by federal law) to any officer, trustee, director, employee or agent of an institution of higher education who is involved in the student lending process in such institution’s financial aid office.
- Limitations on Lender Advisory Boards / Advisory Board Compensation Rules
Nelnet shall not provide anything of value, including reimbursement of expenses, to any officer, trustee, director, employee or agent of an institution of higher education involved in the student lending process in such institution’s financial aid office.
- Limitations on Staffing of Financial Aid Offices
Nelnet will not provide, without proper disclosure and transparency, staff for an institution of higher education’s financial aid offices at any time where that employee has contact with students other than general debt counseling.
- Prohibition on Use of Opportunity Loans
Nelnet shall not arrange with an institution of higher education to provide any private loans to borrowers who would otherwise not satisfy Nelnet’s credit criteria (so-called "Opportunity Loans") in exchange for other specified loan volume from the institution of higher education or placement on the institution’s preferred FFELP loan lender list.
- Maintenance of Borrower Benefits
Nelnet shall take all commercially reasonable steps to ensure that all benefits originally available on a loan remain in force (or offer other benefits substantially identical or better during the repayment phase of the loan) if that loan is transferred or the servicer is changed as long as the original loan is outstanding.
- Full Disclosure of Sales of Loans to Another Lender
Nelnet will disclose to borrowers any agreement between Nelnet and any unaffiliated entity to sell loans if the sale results in Nelnet no longer servicing such loan.
- Disclosure at the Request of Institutions of Higher Education
Upon the request of any institution of higher education, Nelnet shall disclose information concerning the historic default rates of borrowers from said institution, and the rates of interest charged to borrowers from the institution.
- Private Education loans
If a borrower comes through Nelnet’s direct-to-consumer channel and Nelnet has a relationship with the school the borrower is attending, Nelnet will offer the borrower the lower of the rate available directly from Nelnet or the rate available if the borrower had gone through the financial aid office to receive their private loan.
- Preferred Lender Lists
In connection with recently proposed legislation, Nelnet wants to address choice and competition within the education finance process. Nelnet believes competition and choice on lender lists are critical at both FFELP and Direct Lending schools, and Nelnet supports the proposed requirement of having a minimum of three lenders on each preferred FFELP loan lender list, with at least two being unaffiliated lenders.
Additional Media Coverage
Nelnet's Press Release
Student Lender Discloses Ties to Colleges That Included Gifts to Officials
(The New York Times)
Updates on the Loan Scandal (Inside Higher Ed)
Nelnet Agrees to Pay $1 Million (The Wall Street Journal) A paid subscription is required
Nelnet Signs Voluntary Agreement With Nebraska Attorney General but Remains Under Scrutiny in New York (The Chronicle of Higher Education) A paid subscription may be required
By Haley Chitty
NASFAA Assistant Director for Communications
