Stark Lessons in Conflict of Interest from the 2007 U.S. Student Loan Scandal Leigh-Anne Walker, Senior Consultant, Ethical Leadership Group, a Global Compliance Company In the spring of 2007 a scandal erupted in the unlikely backwaters of university financial aid offices. An investigation by the NY Attorney General discovered that financial aid officers at a number of large universities had accepted payoffs from lending institutions in return for steering students toward those particular lenders for education related loans. It emerged that in some cases the schools themselves had received “premiums” of 2% - 6% of student loan volume to effectively steer students to certain lenders.The extent of the malfeasance by aid officers and universities was striking. Yet it was also puzzling: people wanting to make large amounts of money typically do not pursue careers in financial aid, an administrative function that typically does not pay well. Rather, the problem developed from a confluence of structural factors in which well meaning people in a small, relationship-driven industry lost sight of obvious conflict of interest issues. Several important parallels can be drawn between the student loan industry and the field of ethics and compliance. This session will explore the useful lessons ethics officers can learn from this scandal. |