At the end of May, incoming UVA law school students got word that the student-loan ground was shifting beneath their very feet. An e-mail from Cynthia Burns, the director of financial aid for the law school, informed incoming first-years that the University had ended its relationship with Bank of America.
“Recent changes in the borrower benefits offered…has created a new environment that has caused us to end our relationship with Bank of America,” said Burns in the e-mail. “We recently received information from Bank of America that it has rescinded the borrower benefits being offered to University of Virginia students on Stafford and Graduate PLUS Loans for 2008-09.” Those benefits included a 2.5 percent interest rate reduction in repayment with certain transactions, the payment of the origination fee on the Stafford Loan, and a principal reduction in some cases. “Bank officials have informed us that they have no intention of honoring these benefits on loans currently certified for the 2008-09 academic year, even though these benefits continued to be advertised on their website for UVa students until May 16, 2008.”
For four years, Bank of America was a preferred lender, meaning that the bank provided Hoos with enhanced benefits and services and that the University listed BOA as the lender it preferred incoming students to use.
For the last four years, Bank of America has enjoyed a preferred-lender status at UVA, which meant that the bank provided University students with better-than-normal benefits and services and that the University listed BOA as the lender it preferred incoming students to use. But federal legislation helped put an end to the relationship. After a dust-up that involved some shady dealings between banks and university financial aid administrators—UVA was not among the schools found to have a problem—the federal government now requires schools to offer at least three lending options for incoming students.
Burns says that the federal actions “indirectly” influenced the ending of the relationship between the University and Bank of America. The five-year agreement that started in 2003 ended this year and will not be renewed.
“We were operating under a single, preferred-lender relationship, and the new legislation requires us to have three,” Burns says. “In going through the process this past year to determine whether we are going to expand our list to comply with federal regulations or go to a lender-neutral situation, we opted to go to lender neutral.”
As a lender-neutral university, UVA won’t recommend any lenders to incoming students. And that means students will have to do their homework on student loans.
“Their ability to obtain federal loans has not changed,” Burns says. “It just means they have to do a little more research. Our role has changed, in that we must now educate students more about what the range of benefits are and what to look for in selecting a lender.”
Bank of America says that it “continues to have a relationship with UVA,” according to Diane Wagner, a Bank of America spokesperson. “Bank of America will continue to honor all borrow benefits it has advertised to UVA students,” says Wagner via e-mail.
Jeff Hanna, a UVA spokesperson, says that the University and Bank of America are in “ongoing discussions,” but couldn’t comment further.
“We’re in a really volatile situation for student loans all around the country,” says Hanna. “Our goal is to assist students and parents in securing funds that they need.”
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