Attorneys Michael Goldstein and Sheldon Steinbach spoke at the annual NASFAA Leadership Conference on Sunday to help representatives from state and regional associations identify practices that would survive the scrutiny of such entities as the New York Attorney General’s office while meeting ethical codes of conduct and legislation like the New York SLATE Act. Both Goldstein and Steinbach served as NASFAA’s legal counsel while it developed its Code of Conduct in 2007.
The good news, according to Goldstein, is that financial aid administrators are once again viewed in the rightful light - as increasing access to postsecondary education. "All of the talk about financial aid administrators being the bad guys is gone," said Goldstein.
"The spotlight is moving off of us," said Steinbach, who feels that unless something dramatic in our profession occurs, financial aid administrators should be able to continue focusing on students without the scrutiny of last year’s events.
Goldstein said that the SLATE Act swept broad language into legislation that creates enmity between financial aid administrators and lenders and guarantors. The biggest problem is that this separation has the potential to harm the efforts of lenders and guarantors to support positive programs that help students, such as College Goal Sunday (CGS).
"We can't tolerate anything that would prohibit financial support of positive programs and activities because of a vague fear that there’s a benefit somewhere," said Goldstein.
So what is allowable?
Charitable Contributions
"Charitable contributions or donations by a lender is fine," said Goldstein. "But sponsorship of our associations to promote a service or product is going to be suspect."
The Codes of Conduct agreed upon between the New York Attorney General and many institutions and lenders in 2007 resulted in a redefinition of "lending institution" to include any professional association that receives money from a lender or guarantee agency. That includes national, regional, and state financial aid associations. Further, the SLATE legislation passed by the New York General Assembly contains a similar redefinition. That legislation also states, however, that "nothing [in SLATE] shall be construed to affect the private philanthropic activities of banks or other lending institutions that are unrelated to educational loans."
Donations are acceptable. For example, NASFAA allows donations in support of CGS, but ensures that there are no sponsors, and no lenders or guarantors are allowed to promote their lending products at CGS events.
Some state leaders reported that lenders have been told by their own legal and governing boards that they can no longer participate CGS events.
"There is absolutely no reason why a lender can't participate in College Goal Sunday," said Goldstein. "If they can participate in New York, they should be able to do it anywhere!"
Financial aid administrators and state and regional leaders may still find themselves confused about how exactly lenders and associations should interact. Steinbach said those who are confused should consider the "perceptions" of those interactions, not just whether there are real conflicts of interest. For those who still find themselves confused, Steinbach gives this advice: "No one has revoked the laws of common sense."
Association Governance
The perception of lender or guarantor representatives influencing state or regional association governance must be addressed, according to Goldstein.
Association leaders should ask themselves, "Could someone who is ignorant to our organization come to the conclusion that a lender is influencing our association’s governance?" according to Goldstein. If the answer is yes, then association leaders should take appropriate steps to remove that perception.
Goldstein did make the distinction between lenders and guarantors participating as members versus in association governance. Some state associations are now excluding lenders from full membership. But as long as lenders or guarantors are not in a position to influence association decisions, allowing them to be members of an association should meet the necessary requirements, according to Goldstein.
"[Lenders] not being members of governing boards is important," said Goldstein. The issue isn't whether there has actually been any undue influence by lenders on financial aid associations; what is important is the perception or the opportunity that lenders could exert influence on financial aid associations.
"I'm not suggesting that states should cease allowing all members from lenders and guarantors [and have them] ‘voted off the island,’ but we are pointing out to you an area of vulnerability," explained Goldstein.
NASFAA is not suggesting that state or regional associations to change their policies on how lenders or guarantors participate in their governing boards, said Goldstein. But state or regional associations that do not change their governing standards risk seeing SLATE-like legislation in their own states.
"You also need to remember that each of you are accountable to an institution," said Goldstein, who said that college presidents generally would not welcome any negative press and - as has been demonstrated in last year’s investigation - could cut all ties with individuals who generate negative press.
"You all need to make your own decisions to do what is best for your own states and your own associations," said Goldstein.
By Justin Draeger
NASFAA Assistant Director for Communications
Posted 03/10/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
