NYU's Financial Aid Office has always and will continue to conduct its work in the best interests of our students, maximizing the amount of aid available, using competitive processes to secure the best rates on private (non-government guaranteed) loans, and striving for the highest level of service for students from our staff and our preferred lenders.
A few key facts about our private loan program:
Some 9,000 NYU students take out "private loans" each year. These loans—which are different than "federal" (or government guaranteed) loans—allow students to finance their education by addressing the gap between their aid packages and what their families can afford to pay.
Students and families receive a great deal of information and solicitations from an array of lenders. In selecting a "preferred lender" for private loans through a competition, the University seeks to assist students by recommending a lender who would offer the best rates to the greatest number of students (some lenders advertise a great "top" rate but actually offer it to very few borrowers). Nine lenders competed for NYU's preferred lender spot; Citibank won because it was willing to offer a low rate—prime minus one percent—to over 80 percent of NYU borrowers.
So, what issue caught the Attorney General's attention? After winning the competition—and not as part of its competitive bid—Citibank proposed returning a portion of its profits—0.25% of the value of the loans—to the University. NYU chose to use this share of their profits to offer additional financial aid. For NYU, the question was straightforward: would these funds be better used as Citibank profits, or financial aid for NYU students?
The Attorney General did not see it the same way. While we disagree with his interpretation, we decided to sign an agreement to abide by a code of conduct which ended that arrangement, as we already embraced most of the practices in the code of conduct. As part of our agreement, we agreed to return the Citibank profits we received to Citibank, some $1.39 million, which Citibank will credit in appropriate amounts to the loans of the affected students (this will be done automatically; students do not have to apply). NYU will continue to maintain the same level of financial aid as was the case before the return of the funds to Citibank.
Following is a "Q and A" that may be helpful to you. You should also visit this web site—www.nyu.edu/financial.aid/loans.agreement.html—where there is a longer explanation and links to the agreement and code of conduct we signed.
| — | Barbara Hall |
| Associate Provost for Enrollment Management | |
| March 2007 |
STUDENT LOAN Q & A
Q: Why does NYU select a preferred lender for private loans (i.e.,
loans not guaranteed by the government)?
A: To assist students and families in finding the lender with the best rates.
Q: How was NYU's preferred lender selected?
A: In 2004, NYU held a competitive RFP process asking lenders to submit their best rates over a range of credit scores (see the attached blank spreadsheet that was used for the competition); the winner would be the lender offering the best rate to the greatest number of students. That winner was Citibank.
Q: Was Citibank chosen for any reason other than offering the best
rates to the greatest number of students? Was there any other financial
arrangement or inducement that led to it being named NYU's "preferred
lender" for private loans?
A: No.
Q: When did Citibank propose giving NYU a portion of its profits
"0.25% of the value of the private loans" which was used for additional
financial aid?
A: After it had already been chosen as the preferred lender based on offering the best rates for the greatest number of students.
Q: Why did NYU agree to Citibank's proposal for receiving that
portion of the profits?
A: For NYU, the question was this: would those monies be better used as Citibank profits, or as additional financial aid for NYU students? For us, it was an easy call.
Q: Would NYU students have received a lower rate if Citibank had not
offered to provide that small portion of its profits to NYU?
A: No. The competitive process ensured that Citibank would have to offer its best rates in its bid to be designated the preferred lender. We recently surveyed the rates offered by other New York colleges and universities; the rates Citibank offered over the entire spectrum of student borrowers are better than those offered by lenders at other schools we have surveyed. We also think it's important for our students and families to know that Citibank did not make the proposal to return a share of its profits until after it had been selected the winner.
Q: Does NYU believe it did anything wrong in agreeing to the
arrangement with Citibank? Does the University believe it disadvantaged
any students?
A: No.
Q: Why did NYU sign the agreement with the Attorney General?
A: Because we had no desire to engage in a protracted legal fight with the Attorney General, and because the code of conduct that lies at the heart of the agreement included many practices which NYU is already following.
Q: Does NYU regret having signed the agreement?
A: Given that we used a competitive process and achieved such great rates for our students, we find it frustrating that current media attention to the student loan industry may create a misimpression about NYU's activities.
Q: There's been a lot of coverage about university officials who had
stock deals with preferred lenders. Has any of that involved NYU?
A: No.
See also:
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