More Corporate Philanthropy Shenanigans

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New York State’s new attorney general, Andrew Cuomo, recently got the nation’s largest student-loan dispenser known, Sallie Mae, to pay a $2 million penalty for providing various incentives to nonprofit colleges for signing up their students as borrowers—Note: Like Fannie, Sallie was established as a GSE in 1972 to facilitate a secondary market in student loans, but it went fully private in 2004, unlike the sort of hybrid existence of for-profit GSEs such as Fannie Mae and Freddie Mac. In some cases uncovered by AG Cuomo, collegiate financial aid directors accepted personal loans, shares of stock, and compensated advisory board positions with other student loan providers; Sallie Mae however said that it only paid college advisory board members for “soda and cookies,” we kid you not.

The latest saga extends the story to college alumni associations which are typically 501(c)(3) tax exempt nonprofits, though some are unincorporated groups. Cuomo has subpoenaed 90 alumni associations, including associations affiliated with Iona College, Julliard, Manhattan College, and City College of New York, because of information that they might have accepted money and benefits for steering students to the Nebraska-based Nelnet student loan packager. The Wall Street Journal reported that the nonprofit alumni associations of City College, the University of Illinois, and James Madison University, among others, had various sorts of fee-based marketing relationships with Nelnet, which one said was “above board” though it wouldn’t reveal what Nelnet was paying. The University of Minnesota Alumni Association did acknowledge getting $100 for each completed loan application it fed to Nelnet.

Ranking second to Sallie Mae in volume, Nelnet defended its relationships with 120 alumni associations as “affinity agreements” and “license arrangements”, which allow Nelnet to use alumni association logos in outreach to their members. In a statement, the Lincoln, NE, company said it has “affinity agreements” and license arrangements with 120 alumni associations. This is the corporate “sponsorship” issue that some nonprofits think of as corporate philanthropy, but in many cases, the direction of the philanthropy seems to benefit the corporate sponsor more than the nonprofit partners, not to mention in these cases the student loan borrowers.