1. Nelnet and a related foundation make scholarship donations to students and to various educational institutions, both those with which Nelnet has relationships and those with which it does not, as well as to foundations related to educational institutions. Nelnet has concluded that this activity is not prohibited, and will continue to seek opportunities to provide maximum transparency with respect to scholarship donations (See Section I of the Code of Conduct.)
2. Nelnet's logo appears on the websites of several colleges and universities where Nelnet is a recommended lender. Nelnet has concluded that this activity is not prohibited. (See Section I of the Code of Conduct.)
3. Nelnet's officers have made charitable donations to educational institutions, including those that they previously attended as students. Such donations were not made for the purpose of obtaining placement of Nelnet on a preferred lender list or for FFELP loan volume. Nelnet has concluded that this activity is not prohibited. (See Section I of the Code of Conduct.)
4. Nelnet has not entered into referral fee arrangements with any educational institution relating to federally guaranteed undergraduate or graduate loans. With one minor exception, Nelnet has not entered into referral fee arrangements with any educational institution relating to Nelnet private loans – loans as to which Nelnet has minimal market share nationwide. In 2006, one educational institution selected Nelnet through a competitive bidding process as one of its recommended providers of education loans, including private loans, to its students and their families. Nelnet entered into a private loan referral agreement with that institution, which provided that Nelnet would pay the school a referral fee of fifty (50) basis points (0.50%) on the fully disbursed amount of any funded private loan. The total amount of referral fees paid to the school was $4,820.09, which Nelnet understands was used by the school for a scholarship fund. The agreement with the school has been terminated, and Nelnet has not entered into such an agreement with any other educational institution. Nelnet believes that, at all times, the school and its students have received, and continue to receive, the best combination of terms, benefits and services available in the market.
In early 2002, an educational institution requested that our business partner Union Bank and Trust Company (“Union Bank”), which provided loans at the institution, pursue a marketing relationship with the New Jersey Higher Education Student Assistance Authority (“NJHESAA”) under which NJHESAA would promote Union Bank’s loans. The institution was aware of similar relationships between NJHESAA and other lenders, and was interested in providing its students and families the same benefits. Subsequently, Union Bank entered into a Marketing and Services Agreement with NJHESAA, under which NJHESAA agreed to market Union Bank’s education loan products and services, on a nonexclusive basis, to its school partners. This agreement was subsequently expanded to include marketing of the Nelnet brand. In return, Union Bank and Nelnet agreed to pay NJHESAA a marketing fee equal to one percent (1%) of the loan application amount on any loan applications generated as a result of NJHESAA’s marketing efforts. The total paid by Union Bank and Nelnet to NJHESAA under this agreement was $1,670.33. NJHESAA notified Nelnet by letter on April 20, 2007 of its intent to terminate this agreement and subsequently the parties agreed to such termination effective as of the date of such letter. NJHESAA also advised Nelnet it did not intend to collect any additional amounts otherwise payable under the agreement. Nelnet will not engage in this type of arrangement in the future. (See Section I of the Code of Conduct.)
5. Nelnet has provided to financial aid offices of educational institutions certain free products and services such as Nelnet's proprietary student loan origination and processing software systems and printing of lender lists and similar materials. Nelnet has also provided training budgets to financial aid offices of educational institutions to assist these offices in serving their students and families in connection with processing FFEL Program loan funds and developing the office’s expertise. These budgets are provided for training-related activities, including sponsorships and registration fees for training retreats and industry conferences. In one instance, the funds were used to reimburse school employees for travel to industry conferences, conference give-aways, and entertainment and recreational events organized in conjunction with such conferences. On rare occasions, Nelnet has retained a consultant to assist Nelnet in process-mapping technology and related services associated with transitioning educational institutions from the Federal Direct Loan Program to the FFEL Program, and to improve financial aid office processes. The results of the consultant’s work, including process maps, were utilized by Nelnet and also provided to the schools.
Nelnet intends to continue to provide our useful products and services for the reason that they have been historically recognized as permissible, as they are similar in nature to origination systems, assistance and publications authorized under the Federal Direct Loan Program. However, consistent with Section II of the Code of Conduct, Nelnet will not permit reimbursement of travel or related expenses, nor of sponsorships or registration fees for training retreats or conferences in connection with such services. (See Sections I and II of the Code of Conduct.)
6. Nelnet offers several non-student loan products and services to educational institutions and their students. These products include, among other things: (i) an online student employment job posting and hiring program; (ii) an online student search and match program that can be used as a database of scholarships and as a tool to search, match, and review scholarships; (iii) a web-based software program that manages the collection, approval and processing of student time sheets for work-study students; (iv) an actively managed tuition payment plan that provides online payment processing and real-time account information to students and their families; and (v) recruiting and admission services. Nelnet sells these products to educational institutions for the benefit of their students. Like other industries, when multiple products are bundled, they may be offered to the educational institution at a discount. These products are not directly related to student loans, but rather are offered to schools to assist them in gaining efficiencies in a variety of campus offices. As such, Nelnet will continue to offer and provide non-student loan products and services to educational institutions and their students. Nelnet has concluded that these non-student loan activities are not prohibited for the reason that they are not done in exchange for any advantage related to Nelnet's student loan activity with respect to a school's financial aid office. (See Section I of the Code of Conduct.)
7. Over the past several years, in order to assist in Nelnet's generalized marketing activity undertaken for its consolidation loan products, Nelnet entered into affinity agreements and license agreements (like many financial services firms) with various organizations including approximately one hundred twenty (120) college and university alumni associations. Nelnet also entered into similar arrangements with entities other than alumni associations. Under these agreements, alumni associations granted Nelnet licenses to use certain intellectual property, including (i) member lists in order to market Nelnet's consolidation loan products to the association's members, and (ii) the alumni association's logo for use in Nelnet's marketing correspondence. The correspondence described Nelnet's consolidation products and asked the borrower to direct any inquiries to Nelnet. In consideration of these rights, Nelnet typically paid the alumni association an annual fee, as well as, in some cases, a fixed fee for each loan consolidation application ready for guarantee that was received by Nelnet from a borrower on a member list. Nelnet markets its consolidation product only to borrowers who become eligible for consolidation loans only after they have separated from school under the Higher Education Act, as identified on the association's member list. It is Nelnet's understanding that these alumni associations have no role in the selection of lenders for placement on any school's preferred lender list. The alumni associations are not involved in contacting prospective applicants or handling applications in any way. Similar to direct marketing arrangements between alumni associations and, for example, insurance companies, car rental agencies and hotels, in these agreements the alumni associations receive a fee in exchange for providing access to their member lists. In addition, Nelnet had an agreement, which was terminated in July 2006, with an individual associated with one of its alumni association customers. The individual was permitted under his agreement with the association to independently consult with other associations and non-associations related to alumni and alumni affinity issues. This individual was not involved in any way with financial aid office activities at any school, nor was he an employee or officer of any school. The individual entered into this agreement with Nelnet separately from and subsequently to Nelnet’s agreement with the association, and the association by which he is employed, and its executive committee, were aware of the separate agreement. Nelnet compensated the individual for providing marketing services consisting primarily of introducing Nelnet and its services to other alumni associations.
Although Nelnet has concluded that these affinity and license agreements do not constitute prohibited remuneration and are permitted under current federal law, to eliminate any potentially perceived conflict of interest, and in light of the likelihood that pending federal legislation will not permit such relationships, Nelnet notified its clients on July 16, 2007 that it is discontinuing this business, effective August 14, 2007.
8. As part of its standard business relationship with educational institutions, Nelnet has provided items of nominal value to school employees. These items include, among other things, Nelnet-branded pens, holiday gift baskets, lunches, dinners, and tickets to entertainment events. Nelnet has also provided some items of more than nominal value to such school employees, including tickets to sporting events and amusement parks, travel to marketing events and hotel accommodations associated with these events. On one occasion, for example, Nelnet purchased coach-class airline tickets from upstate New York to New York City for two financial aid officers employed by an educational institution with which Nelnet already had a relationship, in connection with attendance at a theater event, and on rare occasions, similar items of value were provided to members of school employees’ families who attended these events with the employee.
Through an affinity partnership with a non-educational institution organization in the northeast United States, Nelnet has made financial aid, college planning, education loan and education loan consolidation information available to the club’s members. As part of this relationship, Nelnet also arranged for local financial aid professionals to conduct informational seminars on financial aid at branch offices. These individuals were paid $150 per session for their time, plus reimbursement of mileage and tolls. A total of $3,450 in fees and $419.91 in expense reimbursements were paid for twenty-two seminars which occurred between March 2006 and April 2007. Nelnet has discontinued all such payments and reimbursements, and future seminars will be presented only on a volunteer basis.
In conjunction with the adoption of the Code of Conduct, Nelnet is modifying its internal policies such that Nelnet shall not provide anything of more than nominal value (i.e. $10) to any officer, trustee, director, employee or agent who is involved with the decisions relating to student lending in the financial aid office of any institution of higher education. It is not intended that this provision would preclude an officer, trustee, director, employee or agent of any institution of higher education, or any family member thereof, from receiving a loan from Nelnet in the ordinary course of Nelnet's business. The Code of Conduct is not intended to prohibit any officer, trustee, director, employee or agent of an institution of higher education, who has no involvement in the affairs of the institution's financial aid office relating to student lending, from receiving remuneration for services rendered to Nelnet. (See Section II of the Code of Conduct.)
9. Employees of educational institutions that are considering the use of Nelnet products and services may wish to tour Nelnet's service centers, observe its college planning call center and its loan-processing facilities, and/or meet with its senior management staff, as part of their due diligence process. Under those circumstances, Nelnet has previously reimbursed the employees for travel to one of Nelnet's service centers or offices, which are located in Denver, Indianapolis, Jacksonville, Lincoln, and Washington, D.C. On rare occasions, Nelnet has invited and reimbursed school employees for one- or two-day entertainment events in connection with such trips. Nelnet intends to stop making such travel and entertainment reimbursements. (See Section II of the Code of Conduct.)
10. Nelnet has convened advisory boards made up of representatives from financial aid offices. These boards provide a valuable forum for the exchange of views on education financing, delivery of services and improvement of product offerings, ultimately for the benefit of educational institutions and their students. Nelnet provided modest reimbursement of expenses for advisory board members. In one instance, Nelnet paid a speaking fee to a presenter (a university's chancellor) at one advisory board meeting. Nelnet intends to end such reimbursements and payments. (See Section III of the Code of Conduct.)
11. Nelnet provides entrance and exit counseling services, modest staffing assistance at times of peak business for financial aid offices, and minor installation and maintenance service assistance to educational institutions purchasing or using Nelnet products. In one instance, Nelnet retained an independent contractor to assist the financial aid office of an educational institution in connection with technology projects related to the implementation, integration, and technical support of Nelnet products and services and other systems in that office. Nelnet will continue to provide staffing assistance (such as debt counseling) where proper disclosure is given and where such assistance is otherwise in accordance with the Code of Conduct. (See Section IV of the Code of Conduct.)
12. Nelnet currently provides a customized telephone and email answering service on behalf of the financial aid office of seven (7) educational institutions, in which Nelnet service center employees respond to the same type of financial aid inquiries the financial aid office's staff would otherwise receive. Nelnet understands that this customized telephone and email answering service is highly valued by those institutions that participate, allowing them to assign scarce school personnel to other tasks. With the exception of one institution, where Nelnet first tested the pilot program for this service and in return has provided the service at no cost, schools that utilize this service are charged on a per-call basis. Nelnet call center employees did not previously disclose their employer to those who utilize this service. As a matter of policy, Nelnet call center employees are permitted to, and do, offer solutions for education financing needs, including student loans. Although Nelnet is confident these services do not constitute prohibited remuneration and are permitted under current federal law, to eliminate any potentially perceived conflict of interest, and in light of the likelihood that pending federal legislation will not permit such relationships, Nelnet is seeking to transfer this business to an unrelated entity in order that schools may continue to take advantage of the valuable services provided. Nelnet would cease to have any involvement in this business.
Nelnet's adoption of the Code of Conduct shall not prevent Nelnet from promoting or marketing its products or services to borrowers or potential borrowers and/or providing education and information to students and families on the options, obligations and issues related to financing their education, provided that Nelnet does so on its own behalf. (See Section IV of the Code of Conduct.)
13. Nelnet provides additional private loan borrowing opportunities to students at approved schools. These loans have historically been offered to undergraduate, graduate, and medical and health care students who do not otherwise meet the lending requirements of the Nelnet Academic Private Loan programs. By applying less stringent credit requirements, Nelnet provided a necessary financing opportunity to students who might not otherwise be able to afford their education, and it did so without disadvantaging anyone. Over the past three (3) years, these loans have been made available at thirteen institutions of higher education. In very limited circumstances, Nelnet has, on occasion, responded to the unique needs of an individual student who requires additional financial aid, and is unable to obtain such aid from other sources. There were four educational institutions that students attended and received loans of this type. The decision to provide these loans to a school is based on need, Nelnet's overall relationship with the school, and Nelnet's assessment of the school's risk profile with respect to potential loan defaults. These loans represented a component of the scope and breadth of services that Nelnet makes available to educational institutions. Nelnet intends to not make what have come to be known as “opportunity loans" in the industry. However, Nelnet also intends to continue its mission to serve the full spectrum of education seeking families, including those who may be disadvantaged. (See Section V of the Code of Conduct.)
14. Nelnet is both a lender and a secondary market to other lenders. Not unlike most other loan industries, many student loan lenders prefer to sell their loans in order to have capital available to make new loans to additional families seeking access to higher education. Nelnet is a party to arrangements with other lenders to purchase loans from those lenders, and in very limited situations, to sell loans to other lenders. On rare occasions, an educational institution may require lenders making loans at the institution to sell such loans to Nelnet, in order to maintain the institution’s desired service levels and consistency of systems and processes for its students. In general, a condition of the agreement between Nelnet and a selling lender is that the student loans purchased by Nelnet will maintain the same borrower benefits and servicing for the life of the loan. Likewise, in the limited situations where Nelnet sells loans to other lenders, these conditions generally apply. (See Section VI of the Code of Conduct.)
15. In addition to private loans offered through colleges and universities, Nelnet offers private, direct-to-consumer loans to those borrowers who apply directly to Nelnet for a private loan and meet Nelnet's credit requirements. If any of these borrowers is, or will be, attending an educational institution that also offers Nelnet private loans to its students, Nelnet will offer its best interest rate available to a borrower attending that institution under Nelnet's normal underwriting criteria, regardless of how the borrower was referred to Nelnet. (See Section IX of the Code of Conduct.)
16. Out of a total of approximately 1,400 preferred lender lists on which Nelnet appears, less than two dozen list Nelnet as the exclusive preferred lender. Nelnet intends to promote competition and choice on lender lists at both FFELP Schools and Direct Lending Schools. (See Section X of the Code of Conduct.)
17. On one occasion, a Nelnet associate suggested to a school financial aid officer that because Nelnet had made a donation to the school in connection with a campus promotional event, the school should consider including Nelnet as a “preferred lender.” This statement was neither condoned nor authorized, and was inconsistent with Nelnet’s policies against prohibited inducements. When made aware of the associate’s statement, Nelnet advised the financial aid director that the statement was inappropriate, and that Nelnet neither expected nor intended its donation to be consideration for being included on the school’s preferred lender list. The associate is no longer employed by Nelnet.