MONTPELIER — Two Vermont colleges, two universities, and the state's only law school are being asked by the federal Department of Education why so many of their students get loans from the nonprofit Vermont Student Assistance Corp.
The Vermont schools — Castleton State College, Champlain College, Vermont Law School, Norwich University and the University of Vermont — are among 55 across the country that had a majority of their student loan business with the same lender.
The Department of Education request comes in the aftermath of federal investigations elsewhere in the country that found that some banks used contributions to schools and gifts to officials to entice those schools to steer student loan business their way.
A spokesman for Gov. Jim Douglas said the questions were routine.
"We were notified the department was looking into VSAC and the colleges in Vermont," said spokesman Jason Gibbs. "The impression we were given is that it's a routine compliance audit and not out of concern for any inappropriate activity."
Officials at the five Vermont schools say they're providing the Department of Education with the information they are seeking. The schools jumped to the defense of VSAC, saying the reason so many students worked with the organization was because of the quality of its programs and its customer service.
"The goal for the financial aid staff is to always find the lowest overall cost loan for our students," Vermont Law School Financial Aid Director Gordon Koff said in a letter sent to the Education Department in response to its request. "We believe that VSAC has one of the best programs... in the nation."
He cited good loan benefits, such as loan rebates, a lack of origination fees for loans and good, readily available customer service.
"These benefits are the reason that a high percentage of our students has historically chosen to borrow from VSAC," Koff said.
In the same letter Koff said he had asked staff members who could have influenced student loan policy if anyone had received anything from a lender.
"Each responded that they have not received any stocks, warrants or other financial interests from a FFEL Program Lender or guaranty agency," Koff wrote. "Likewise, I have not received any stocks, warrants or other financial interests from a FFEL Program lender or guaranty agency."
He was referring to the Federal Family Education Loan Program. The Oct. 24 letter from the Department of Education's Chief Compliance Officer Victoria Edwards to all 55 schools asks for details about the schools' aid programs and of any relationships between the schools and the lenders.
VSAC spokeswoman Irene Racz said the Winooski-based nonprofit was complying with the Education Department request as well.
"Most of the situations that were cause for concern were for-profit lenders operating in the national market," Racz said. "We have a nonprofit mission to do all of this for Vermonters."
VSAC only operates in Vermont or for Vermonters studying out of state.
Racz said that by law, the federal family loans all carried the same interest rate, but the lenders could improve the deal by waiving fees, offering top-notch customer service and offering rebates, practices used regularly by VSAC.
She said that in response to the college lending scandals schools were being advised to provide prospective borrowers lists of three lenders without recommending one.
"VSAC has always taken the position, if a student and a college feel they can get a better deal somewhere else, we don't stand in the way of that," Racz said.
University of Vermont spokesman Enrique Corredera said no one at the school received any special favors from VSAC. And he said the school was complying with the Department of Education request.
"They are very good at what they do. Over time they have demonstrated the ability and have a good record of providing timely, accurate, efficient service to our students and their families," Corredera said
Officials at Castleton, Champlain and Norwich echoed those sentiments.
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