Any time a question arises as to whether donated funds can be received from a lender, it is a fact-specific inquiry, meaning that each case must be analyzed individually with regard to the specific facts at hand. Ask "where is the money coming from, where is it going, what is it for, and who has discretion to allocate to whom it goes?" Remember, although the regulations and rules in this area are complex, the overarching principles are to avoid actual conflict of interest as well as the mere appearance of impropriety. You may always contact our office if you have questions regarding a specific donation.
Under the Texas Higher Education Fair Lending Practices Agreement between the Attorney General's Office and UT Austin (the "Agreement"), which the Chancellor has mandated all UT System institutions must follow, TG is exempt from the restrictions on donations and funds received from "lenders." However, the Department of Education ("DOE") regulations governing guaranty agencies generally cover TG. These regulations prohibit guaranty agencies, including TG, from engaging in philanthropic activities, including providing scholarships or grants, in exchange for FFEL loan applications or application referrals, a specified volume or dollar amount of FFEL loans using the agency's loan guarantee, or the placement of a lender that uses the agency's loan guarantee on the institution's lender list. Grants or other funding which is not in exchange for FFEL loan applications or referrals are not prohibited by DOE regulations. Any grant to an institution from TG under the Charley Wootan Grant Program must comply with this provision.
The Agreement allows a lender to make a philanthropic gift to an institution as long as the gift is given outside the Office of Student Financial Aid ("OSFA") and is not given for the purpose of securing a benefit relating to student lending for the lender. The question is thus whether the donation in question would be considered to have been made to the OSFA if an OSFA employee participates in award determinations. Although we believe that such an arrangement generally would not result in a violation of the Agreement, we also believe that the better practice would be to forego such an arrangement by asking that donations be made to a fund with which OSFA has no involvement. However, it is permissible for the OSFA to note that scholarships or grants have been awarded by departments outside the OSFA for purposes of keeping track of a student's entire financial situation, even if those scholarships or grants were donated by lenders.
Yes, this is permissible. Again, TG is exempt from the Agreement, and is not subject to the tighter restrictions applicable to "lenders." Although the DOE regulations do cover TG, in this question, because nobody is charged a registration fee, no fees are waived and thus there is no improper benefit to the institution. The important requirements are that nobody is charged a fee to attend the conference and the conference provides a tangible training or educational benefit to your staff.
There is a clear and mandatory process for the review and approval of lender list criteria. As of June 1, 2008, the Office of General Counsel (OGC) has received only one request for review of lender list criteria. In order to have a lender list, an institution must adopt carefully constructed procedures and objective measurable criteria for including lenders on that list. Those procedures must be included in your Handbook of Operating Procedures (HOP), which also means that they must be adopted according to your institution's policy adoption procedures and then submitted to OGC and the Executive Vice Chancellor for Academic Affairs or Health Affairs, as appropriate, for review and approval before implementation. Those procedures must comply with the AG Agreement as well as the DOE regulations on lender lists adopted in November 2007. Those regulations officially took effect on July 1, 2008, and all procedures should comply with the DOE regulations when you adopt them. In addition, the federal Higher Education Opportunity Act of 2008, which took effect August 14, 2008, contains important provisions related to lender lists, and any lender list must also comply with those requirements. OGC is working on a summary of the lender list requirements imposed by the new federal law, and will post the summary on this webpage in the near future. Again, please consult OGC if you have any doubts about what is required.
The provisions of the AG Agreement and the DOE regulations governing lender lists are described in detail in the memorandum from Barry Burgdorf and Karen Lundquist dated March 25, 2008, and memoranda of February 19, 2008 (Summary; Comparison). It is important to note that the procedures must describe the actual method and criteria used in selecting lenders for the lender list. Proposals sent for OGC approval should be sent to Senior Attorney Karen Lundquist.
At this time, due to the diverse nature of our institutions, a system-wide approach is not appropriate. OGC will continue to monitor current developments and legislative actions in this area, and will recommend such an approach if circumstances warrant it. Again, any lender list criteria must be integrated into the HOP, be submitted to OGC for review and approval, and then be approved by the appropriate Executive Vice-Chancellor (Academic Affairs or Health Affairs).
The line between "promotional' and "informational" brochures is unclear, and the use of any lender-provided materials should be suspect. The definition of "promotional" materials would include anything "designed to encourage the purchase of that service or product," essentially covering any brochure a lender provides to your institution. OGC recommends that lender materials not be used, and that any questions about whether or not a brochure violates the rules should be directed to OGC before any lender materials are used.
The DOE regulations effectively prohibit lenders participating in the FFEL program from offering inducements to a university or other party to secure applications for FFEL loans or to secure FFEL loan volume, including the solicitation of a university employee to serve on the lender's advisory board or committee and the payment of costs incurred on behalf of a university employee for that service. The DOE regulations do not contain a transition provision that addresses whether university employees who were serving on lender advisory boards when the DOE regulations took effect may continue to serve in that capacity. OGC does not plan to issue any communications mandating that university employees step down from any lender advisory board position that they already held on July 1, 2008, but will inform institutions if the DOE issues guidance on this provision.
The Direct Loan Program offers some repayment benefits to students that are not available through FFEL lenders, and conversely, FFEL lenders offer some "borrower benefits" that the Direct Loan program does not. There is significant data showing which types of benefits actually accrue to certain borrowers and which are illusory, as well as what types of students (and in what volume) benefit from the FFEL borrower benefits. Both FFEL lenders and the Direct Loan program offer repayment options for students experiencing difficulty making payments after graduation. The FFEL "income sensitive" repayment options differ from the Direct Loan's "income contingent' repayment options that have a 25-year repayment maximum and forgive the remaining debt for borrowers who qualify. A comprehensive set of materials regarding the Direct Loan program can be found online at the DOE website:
http://www.ed.gov/offices/OSFAP/DirectLoan/professional.html http://www.ed.gov/offices/OSFAP/DirectLoan/qanda.pdf
Additional information can be found here:
http://www.directstudentloancoalition.org/media/pdfs_autogen/benefitsofdlupdated3-08.pdf
Although OGC does not have an opinion or make any recommendations as to participation in the Direct Loan Program, it recommends that UT institutions strongly consider (see Special Investigative Report prepared by Barry Burgdorf, FN 9 at page 3) the potential benefits to the students, your institution, and the State of Texas in evaluating and weighing whether the Direct Loan Program could be added as a complement to your FFEL lenders, or as an alternative.
There is no specific provision or law that bars or restricts the use of students as employees in offices dealing with sensitive information, although there may be situations in which a student should not have access to change or alter data. When a student is employed by your office, they are governed by the same confidentiality and security guidelines as any other employee, and their employment status is contingent upon adherence to those rules. If you receive any indication from an auditor, compliance office, or other administrative entity that the presence of students in your office violates any rules or regulations, please ask for clarification as to what laws, rules, or procedures have been violated, and contact OGC for further review.
OGC maintains an online resource guide of documents, answers to frequently asked questions, memoranda, and other information to help you navigate through the complex processes and regulations in this area: <link>
Please feel free to contact OGC for questions, clarification, or assistance. Inquiries can be sent to OGC Attorneys Kent M. Kostka, or Hannah Huckaby, or Senior Attorney Karen Lundquist, who is the primary contact for lender list questions. You may also direct any questions to Vice Chancellor and General Counsel Barry Burgdorf.
