Report critical of Iowa Student Loan's marketing

DES MOINES, Iowa -

A report from the Iowa attorney general’s office released Friday criticized a nonprofit student loan group, claiming it inaccurately marketed its loans as always being the lowest cost for their customers.

The report was prompted by Gov. Chet Culver’s request of a comprehensive review of Iowa Student Loan Corp., which provides loans to Iowa college students.

According to the report, Iowa Student Loan did not adequately promote federal loans, did not do enough to advise its customers about different types of loans and in some cases marketed its loans as having the lowest cost when that wasn’t the case.

“There is no question that ISL’s private loans were low-cost loans compared to many private lenders,” the report stated. “However, ISL often made claims and marketed its loans as ‘lowest cost loans’ … (T)his was not always the case when comparing ISL’s private loans with other private loans. And, it was almost never the case when comparing ISL’s private loans with federal student loans.”

Steve McCullough, the non-profit organization’s chief executive officer, responded that Iowa Student Loan didn’t produce any marketing materials claiming that its loans were always the lowest cost available to customers. The group told legislators its goal was to offer the lowest-cost loans, but it never claimed in marketing material to be the cheapest in every case, McCullough said.

“In the information we sent to policy makers, we said our goal was to be offering the lowest cost loans but that was different than statements we were making in our advertising,” he said.

McCullough said he largely agreed with the recommendations offered in the report and noted efforts were already under way at Iowa Student Loan to address criticisms in the report.

He also said it was important that the report “emphatically” dismissed any allegations that the group had been mismanaged, had misappropriated funds or engaged in criminal conduct.

“We’re hopeful that these statements about the corporation and its motives and character will help us as people will realize what the corporation is all about,” McCullough said.

Culver called for the report after the nonpartisan Iowa Legislative Services Agency, which researches issues for lawmakers, and others questioned whether Iowa Student Loan’s mission was being achieved. Culver has also raised concerns about openness and possible conflicts of interest with Iowa Student Loan.

Earlier this year, Culver signed a law tightening protections for students who receive college loans and increasing oversight of Iowa Student Loan. While tuition at Iowa public universities tends to run less than comparable institutions in other states, average student debt in Iowa ranks second in the nation.

The legislation requires college financial aid workers to tell students of all the available options for getting assistance, including private, state, local and federal loans. The attorney general also has the authority to oversee Iowa Student Loan and enforce the structures in the new law.

The law places additional oversight on lenders, including requiring that Iowa Student Loan abide by Iowa’s open meetings law. Iowa Student Loan provides about 90,000 college loans to Iowa students each year.

The 75 page report generally absolves Iowa Student Loan of the most serious criticisms leveled against it – including some who said employees received too much compensation. The report also lauds Iowa Student Loan’s mission of providing more access to loans to Iowa students.

Culver said he would soon announce appointments to fill the vacancies on Iowa Student Loan’s Board of Directors.

Source:http://archives.chicagotribune.com/2008