Dartmouth's financial aid office will require students to find their own student loans beginning the next school year in response to ongoing national controversy about the use of "preferred lender lists" in the student lending industry. Dartmouth's practices have not been implicated in the scandal.
Many schools use preferred lender lists ostensibly to recommend to students those lenders that offer the best loan packages. New York Attorney General Andrew Cuomo's ongoing investigations into the student lending industry, however, have revealed that the personal motives of school officials have determined which lenders appeared on the lists at several institutions.
Cuomo found that some school officials accepted gifts from lenders or engaged in revenue-sharing agreements in which a lending institution would give the school a portion of the profit it made when a student secured a loan through that company, his office reported.
Virginia Hazen, Dartmouth's director of financial aid, said that much of the current controversy surrounding the student lending industry does not apply to the College because Dartmouth has never used a preferred lender list because of the extensive research that would be required to generate one. Nonetheless, the College's policy regarding student loans has changed.
Previously, if a student who wanted to pay tuition using a student loan did not designate a specific lender, Dartmouth would automatically process the loan through New Hampshire Higher Education Loan Corp because of the lending company's low rates and good customer service record, Hazen said. Dartmouth has discontinued this practice and will now require families to secure loans on their own.
While the College does offer advice about where to begin searching for loans, such as giving students the address of a website which lists all federal lenders, Hazen stated that many families have reported feeling overwhelmed. There are over 3,000 federal options listed on the site, not including the myriad of private lending institutions a student could use.
"I don't know if people feel unable to do the research themselves, but they really want you to tell them who to go to," Hazen said. "I don't blame them for not wanting to do the research on it. How do you start?"
In addition to recommending the website, Hazen suggested several additional national and regional lenders, such as Citizens Bank, as places to begin researching loans. She emphasized, however, that these institutions did not constitute a preferred lender list; the College will certify a loan from any lender and families should consider lenders not on the list in making their decisions.
She also stated that the only considerations in choosing suggested lenders were customer service, location, and rates.
"We have no relationship [with the companies] in terms of them offering us any type of special deal with any of them," Hazen said. "I don't even think they know they're on our list of options."
The College further recommends that families begin their search for loans by talking to banks with which they already have a relationship.
Dartmouth offers students several guidelines to help them find the best lender, including searching for low up-front rates and investigating companies' customer service records. Many companies also offer borrower benefits, such as rate reductions for on-time payments, that may reduce the cost of repaying a loan. Hazen said that families must be cautious in accepting a loan because of benefits, however, because few individuals actually qualify for them.
Hazen said that families in need of advice should call the financial aid office. Dartmouth has a "conflict of interest policy" that seeks to ensure the ethical behavior of its financial aid officers. Dartmouth employees must certify annually that they are not engaged in activities that could constitute a conflict of interest. Officials are also careful about what gifts they will accept from lenders, Hazen said, asserting that while it would not be unusual for a lender to send a College official a box of candy for Christmas, officials would never accept anything of substantial value.
