Drawing the line

The Wall Street Journal reports today($) that in 2004 the National Association for Student Financial Aid Administrators (NASFAA), the trade organization for financial aid officers, “considered setting clear rules to curb gifts from lenders—and decided against it”. While NASFAA may have had that choice in 2004, it no longer does—either NASFAA takes action or Congress will.

Currently, the ethical line for financial aid officers is more like a fuzzy bar, with a lot of wiggle room. In the news coverage, I have heard quotes ranging from aid officers who aren’t willing to accept pens or paper from lenders, to aid officers who feel that it’s okay to accept Broadway tickets, a nice dinner, or a fully paid conference trip. I don’t doubt that the majority of aid officers are conscientious about keeping lenders at an arms length. For these aid officers, however, there are no national guidelines to help guide their behavior, or to provide a basis for reporting the unethical behavior of colleagues.

After missing the opportunity in 2004, NASFAA now has a second chance to be proactive about setting industry standards for ethical behavior. But this window is closing quickly.

Senator Kennedy has proposed legislation to regulate relationships between lenders and colleges, and Attorney General Cuomo is leading the charge by compelling schools and lenders to adopt a code of conduct in return for dropping lawsuits against them. Multiple colleges have already signed on to Cuomo’s code of conduct, along with Citibank, and—as of today—Sallie Mae (both banks also agreed to pay $2 million into a fund to educate students about the financial aid industry). I doubt there will be a third opportunity for NASFAA. As the organization responsible for representing financial aid officers, they need to be willing to draw the ethical line on what is, and is not, acceptable behavior in relationships between lenders and colleges.