Lenders that market private loans directly to students are increasingly using state open government laws to demand public colleges turn over personal data on their students.
Late last month, student loan giant Sallie Mae filed a New York Freedom of Information Law request asking community colleges in the State University of New York (SUNY) system to provide the company with the names, telephone numbers, and home mailing and e-mail addresses of "all admitted and enrolled students for academic year 2007-2008." The request, which came from the company's Direct Marketing division, also asked the schools to identify the age, graduating class, and major of each student listed.
Such requests from direct-to-consumer private student loan companies are raising alarms among college financial aid administrators, who worry that the companies are trying to lure their students to take on unnecessarily high levels of debt. They have also caught the attention of the Education Department. In a letter to college officials in September, Diane Auer Jones, the Department's Assistant Secretary for Postsecondary Education, warned them to be extremely careful about the types of information they release.
The Federal Family Education Rights and Privacy Act (FERPA) prohibits colleges from disclosing "personally identifiable information from a student's education records" without that student's written consent, with some limited exceptions. Schools, for instance, do not have to get a student's permission before releasing "directory information," which includes "the student's name, address, telephone listing, e-mail address, major field of study, and other information that generally would not be considered harmful or an invasion of privacy," Jones noted in her letter. Individual students, however, have the right to bar their colleges from releasing that type of information about them.
Some lenders have used open record requests to try to get colleges to provide them with lists of students who are in financial distress. One loan provider, for example, filed a particularly aggressive request with George Fox University in Oregon. In an e-mail message posted on an Internet discussion group for financial aid administrators, Robert A. Clarke, the university's Financial Aid Director, reported that the lender had specifically asked for lists of students and recent graduates with federal loans and those who were delinquent in repaying them. According to Jones' letter, colleges are prohibited from giving out information on "a student's financial aid status" without that student's authorization. In addition, "institutions are not required by FERPA," she wrote, "to actively seek such consent."
Sallie Mae appears to have carefully crafted its New York Freedom of Information Law request to ensure that the information it was seeking -- all of which could be classified as "directory information" -- was FERPA proof.
Nevertheless, SUNY officials are expected to reject Sallie Mae's request, arguing that the New York statute allows state agencies to deny access to lists of names and addresses that have been sought for commercial purposes, as no public purpose is served by such a disclosure. Should the university take this action, Sallie Mae will have 30 days to file an appeal, and if that fails, seek a judicial review of the case.
It is unclear how far Sallie Mae will push the issue. But one thing's for certain -- the loan giant is not one to duck a fight. We at Higher Ed Watch plan to track this battle closely because it could have major implications for students. We believe that if Sallie Mae succeeds in using state open record laws in New York or other states to gain customers, the floodgates will open and students will be sitting ducks, not just for loan providers but all sorts of other commercial enterprises, including credit card companies.
State open record laws were created to provide citizens with access to public records in order to hold government officials accountable for their actions. It is unconscionable that Sallie Mae and other private loan providers are trying to use open government laws to lure students into risky and expensive private loans.
Editor's Note, Oct. 12: A previous version of this post noted that "Sallie Mae and other private loan providers are trying to use open government laws to lure students into risky and expensive private loans before exhausting cheaper and safer federal loans." In fact, one in five private student loan borrowers does assume a private loan before they exhaust safer, cheaper federal loan options. However, we have been reminded that in wake of its original buyout agreement with JC Flowers and Company, Sallie Mae announced it would urge borrowers to exhaust federal loans first. We applaud this policy. How vigorous and successful the strategy has been for Sallie Mae is uncertain. Perhaps they'll tell us. Regardless, not all private loan providers have adopted similar 'encouragement' policies. New America has altered its original post to remove reference to federal loan exhaustion. But it continues to be a topic on which our future work will focus.