HARRISBURG - Pennsylvania's student loan agency has adopted a code of ethics for its lending practices that officials say is another step toward making the agency more accountable to the public.
The ethics code formalizes what both the Pennsylvania Higher Education Assistance Agency and its national business division, American Education Services, already practice, agency spokesman Keith New said yesterday.
Provisions of the code include banning revenue sharing between PHEAA or AES and colleges, prohibiting the lenders from paying for gifts to or trips for university employees, and not paying financial aid officers who serve on student-loan advisory boards.
"Certainly, we understand that the commercial side of the student aid industry needs to evolve and make itself more responsible and accountable where it's appropriate to keep the needs of students first and foremost in business dealings," New said.
PHEAA's decision is not directly related to a nationwide investigation into the $85 billion student loan industry because the agency is not part of that inquiry, New said. New York Attorney General Andrew Cuomo, who is heading the probe, has said the investigation has found numerous arrangements that benefited schools and lenders at the expense of students.
"There's no question that the entire industry has gotten a black eye that the overwhelming majority of lending and school participants don't deserve, and we want to take a leadership role in restoring the public's trust in what we do," PHEAA president and chief executive Richard E. Willey said in a statement.
The adoption of the ethics code comes one month after PHEAA's board unanimously voted to limit travel expenses for board members and employees amid criticism of its spending practices by Gov. Rendell and some legislators.
The spending came to light in records PHEAA was forced to release in March, after losing a 19-month legal battle with the Associated Press, the Patriot-News of Harrisburg and WTAE-TV in Pittsburgh.
The documents detailed how its board members, as well as PHEAA staffers and guests, spent hundreds of thousands of dollars on trips to exclusive resorts as far away as California between 2000 and 2005. The expenditures ranged from transportation and lodging to extravagant banquets, bar bills, golf outings and spa treatments.
The new policy limits board members to per diem reimbursements set by the Internal Revenue Service instead of being reimbursed for the full cost of their lodging and meals. It also prohibits employees from charging the agency for limousines and requires them to use the lowest-priced rental cars available.
Last week, state Auditor General Jack Wagner said his office will conduct a special performance audit of PHEAA, citing news reports about the agency's spending as a major reason.