Paying for Free Money
Updated on 1/9/08
My husband received a letter in the mail yesterday with a $300 debit card enclosed. "Congratulations," it read. "You have been pre-selected by NCLI to receive $300.00 at NO COST TO YOU."
It was sent from the marketing department of the National Collegiate Lending Institute. To qualify, he simply had to take advantage of NCLI's "free service" and provide a "brief testimonial" about his experience. The letter promised it would take less than 10 minutes and the money would be processed the following business day.
It turns out—surprise, surprise—that the offer is too good to be true. I called the number listed in the letter and learned that the "free service" is student loan consolidation. The $300 would be handed over only if we consolidated our student loans through the company and then provided a testimonial about it—hardly a 10-minute decision, especially when our student loans are already consolidated at decent interest rates.
It turns out that this very practice—and this very company—is being investigated by New York State Attorney General Andrew Cuomo. Cuomo says that offering gift cards in exchange for testimonials violates the anti-inducement provisions of the federal Higher Education Act.
The investigation, however, has not stopped the company from continuing to mail out such offers. Other bloggers have also received them recently. And the dozens of testimonials on the company's website suggest that some recipients have accepted the deal. (The company did not return repeated calls for comment.)
The lesson: Mail offering free money usually belongs in the trash.
• Readers: Have you ever fallen for an offer that turned out to be too good to be true?
Update:
After this blog was published, I got a call from David Tominus, sales manager and part owner of National Collegiate Lending Institute. He says my story is misleading, because the company is not paying students to consolidate their loans but rather for the testimonials that students provide after they have consolidated their loans through the company. To support his point, he says NCLI has paid out $20,000 to students who initiated the consolidation process, provided a testimonial, and then backed out after receiving their $300.
Tominus says that if people who received the letter read the small print on the back of it, they would not be confused. (The small print states that the offer is "contingent upon the completion of a testimonial and application, not a consolidation.") "The problem is everybody reads the front of the letter. They don't read the back," he says.
So why doesn't the company include the information on the front of the letter? "That's why we say, 'Call for details,' " Tominus says. The goal of the letter, he explains, is to encourage potential customers to call the company.
As for New York State Attorney General Andrew Cuomo's investigation into the company and others like it, Tominus says, "He is cleaning up an industry that doesn't need much cleaning up." Tominus suggests that Cuomo is simply trying to garner campaign contributions. "My real question for Cuomo is: Is he out there to clean up industry or to pocket [money] for himself?"
Tominus says NCLI, which processes 70 to 80 student loan consolidations a week, is simply trying to help student borrowers. "We're trying to run an honest business and provide a decent service," he says, adding, "If giving away free money is a crime, then I'm guilty."
Tags: student loans | fraud
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Reader Comments
Free Money
Very cool article! Thanks for the link! I didn't realize that about the Attorney General investigation.
offer is real....
lets all get one thing straight.. federal studentloan consolidation
is regualated by the department of education, so interest rates
are the same , wether you choose ncli or department of education,
there are no fees , its against the law! and $300 has nothing to due
with the repayment of your loan....... so this offer is for real.... we cannot pay you for consolidation , but we can pay you for advertising
and take your comment and post ot on our website, all we ask is
if your eligiable you orginate an application for consolidation , you
get a discloser letter telling you the exact figures of your consolidation
and you have the wright to cancell , so if you wanted to you could defraud the company, now who is herting who.......???
This is a good offer!
Wow, what a bunch of misinformation. This company is giving $300 and that's a bad deal? How? The rate is the same if you consolidate federal loans so why not take advantage? Talk about bashing the little guy. The government doesn't give you anything, that's why they have these stupid anti-consumer "inducement" laws. Already costs my college-age son plenty!
watch out ... grammar ahead
I'm going to repeat something that has often been noted by my blog readers when they see comments like this (and there have been many) from people who seem to be connected with a loan consolidation company.
Why would I want to consolidate my college loans with people who can't construct a sentence using proper grammar, spelling, and word choice?
That's about all I have to say about that.
Better deal vs. better grammar.
OK, so Jedijawa from west Virginia wants good grammar from his lender. I just want the best deal, which usually comes from smaller companies like this willing to give back a little of there profit for my business.
To each their own!
Re: Offer is real:
Although consolidation rates are regulated by the federal government, the rate on a federal consolidation loan is fixed--set at the time of loan disbursement. If the offer receipient consolidated, say, three years ago when student loan interest rates were at an all time low, the rate on the new consolidation loan would be definitely be higher today.
And while providing $300 for a comment upon originating a consolidation loan is technically not an inducement under the terms of the Higher Education Act, let's face it--it is. The debit card is a carrot to choose to apply via NCLI vs. other companys, which (by the way) are much, much more likely to offer better borrower benefits saving customers alot more than $300 over the life of the average federal consolidation loan.
NCLI and other consolidation aggregators will have no luck convincing NYAG Cuomo that they're doing anything other than offering inducements--and other business engaging in these decpetive business practicess will have to pay huge attorney's fees or settle with the NYAG. Either way, they'll lose big.
a good company ncli
to the industry expert. yes the rate would be higer, but again if you
consolidated three years ago and now have new loans , you choose
to consolidate those loans , also thanks to our goverment and ny
lenders donot offer the same reductions they use to as of oct 1st
wich by the way where phantom offers, we use to offer 1.25% reduction for ontime payments with this offer but are unable to due
so since the reduction act of oct1 2007, remember consolidation is good for some bad for others and are company will not consolidate
a loan if its not in the best interest of the borrower.....
customer service vs 4th grade spelling
While I agree that reconsolidating through one of these "free gift card companies" would probably be a bad decision, I can't help but wonder how much worse they could be compared to Sallie Mae's total lack of customer service, despite whether or not NCLI can reliably spell simple words.
NCLI FFELPC
Sure the rate is the same, but NCLI offers no other deductions, which most of the major non-shades of gray lenders do.
Check out www.northstar.org to see what an above-board lender offers people. It's a hell of a lot more than $300.
I would like to point out one more thing in case it wasn't clear. The company says you can initiate the consolidation process, provide a testimonial, and then get your $300 -- and then back out of the consolidation process. That is why the company says it has paid out $20k to people who have done just that. So that is one reason they say that they are not paying for consolidation, but simply for the testimonial, because they will pay even if you only initiate the consolidation but do not complete it.
Look professional !
I agree with the grammar guys! Why should I trust someone to do his or her job well if he or she cannot construct simple sentences without making major spelling and usage mistakes?
Oh Puh leeze.....
This is a legitimate business. My husband is in the same marketing business as this one. What is wrong with offering someone $300.00 gift card in exchange for their testimonials? This is exactly how we have improved business and expedite their loan consolidation. I'm tired of Cuomo and the rest trying to get their greedy hands in the pockets of regular citizens. We employ over 30 individuals that would normally be on welfare or on the streets. When a borrower calls they get a representative right here in the USA. They do not call India and speak to someone named "John."
This is nothing more than old fashioned marketing. I receive tons of "checks" from car dealerships saying someone wants to purchase my vehicle and to bring it in. To me, that is deceptive. What we are doing is not deception. It again, is legitimate and we are only trying to help. The only difference is the government is involved in OUR business. We follow strict guidelines to assure what we are doing is legal and NOT misleading in any way.
Be very careful. If you have college loans, good luck to you. The government is trying to do away with us "little guys" that do the paper work to consolidate your loans. Pretty soon Direct Loans will have the monopoly and you will be stuck paying whatever they decide the interest to be. College costs will not go down anytime soon and will continue to rise.
Please pardon any typos...as I am typing a mile a minute. This upsets me.
Update to my previous post
Regarding my above post, I am in NO WAY affiliated with NCLI. I know Dave Tominus personally and granted, he may not be the best speller but he is EDUCATED on saving college students thousands upon thousands of dollars.
My husband owns Federal Family Education Loan Processing Corp. We have been scrutinized under the microscope thousands of times. I am not afraid of anyone looking into our tactics as a legitimate business. Truthfully, as hard as it seems, there are honest people out there trying to make a dollar. We are one of them. We are not handing out fistfulls of cash to colleges. We do not own jets to take us to exotic places..we pay our bills and our TAXES. We live modestly and make a decent living. Foremost, we take care of our employees and their families. We just recently offered health care which to some, was foreign. They never had such a wonderful thing. I'm proud of our little business...but it's slowly being taken away from us. They have slashed the lenders fees down to almost nothing so no one wants to "buy" student loans any longer. I feel for the student. We have two college age children...not to mention my neices and nephews who are all graduates of USF, UCF, FSU to name just a few.
I just thought I would give you some insight on "who" runs these companies. We are all not greedy jerks. Yes, who isn't in business to make money?! But, slowly the rights of students with HIGH college tuitions that are unable to consolidate are going to be the real sufferers.
Thank you in advance for reading.
Some politicians such as New York State Attorney General Cuomo or Senator Kennedy say that student loan borrowers need “assistance” in navigating the student loan marketplace. My question to you is; what is there to navigate? If someone needs a federal student loan they fill out the forms from financial aid and apply. The rates are the same across the board depending on the “type” of loan they are applying for whether it is a Stafford, Perkins or whatever. These rates are set by the federal govt. It does not matter where they get the loan; the terms and rates are the same.
If someone wishes to consolidate their federal student loans the same still holds true. The rates are still calculated according to the Dept. of Education and the weighted average. The interest rates on the loans to be consolidated are what they are based on the federal government, not the lender. There are no costs to a federal student loan borrower to consolidate and the consolidation is a federal right given to them. This is all explained in the exit interviews that all graduates go through.
Do you feel that federal student loan borrowers are not capable of making their own decisions regarding their finances? I hope that you believe they can. Maybe you feel that the colleges and universities that this country has in place do not give an adequate education in giving them the ability to make good choices. I do not believe that a simple marketing program hurts anyone as student loan borrowers are just as smart as anyone else.
It is the private loan lenders and consolidators that need to be monitored. Those loans have crazy interest rates, higher then some credit cards! They have credit checks that can hurt a borrower, they have fees to consolidate and depending on the credit of an applicant it can be as much as 3 percent of the total loan balance that they are consolidating. To me and thousands of others that is what should be given the “assistance” in navigating.
On Thursday, September 27th, 2007, President Bush signed H.R. 2669: Higher Education Access Act of 2007, into law. This has all but put most student loan lending and marketing companies out of business and has severely hurt the ones that still remain. They (the government) claim this will make college more “accessible” to low income families by increasing the Pell Grant. This makes no sense as the increase is going to compete with the rising costs of tuition. Plus when does a Pell Grant make or break a student’s college education?! Text books are almost as much as a Pell. Another key point to this is this H.R. 2669 ended up taking away approximately 23 billion dollars in subsidies to lenders assisting with FFELP loans. These subsidies helped lenders give interest rate reductions to borrowers; it was these reductions which did the most good by saving a student loan borrower thousands of dollars off the repayment of their loan. Now lenders cannot offer interest rate reductions because they cannot afford to do so. Borrowers can no longer get their loans consolidated except through the federal governments Direct Loan Program. Talk about a monopoly. The devastation that the college cost reduction act has caused is bigger than anyone thought it would be. Just look at Sallie Mae the biggest lender in the country and the list goes on and on all the way down to the marketing companies that were doing good things.
Those companies were helping federal student loan borrowers with consolidations, deferment and forbearance questions and assisting them with paperwork to help with payments. If these companies misrepresented anything then consolidations were reversed, and more importantly were “cut off” from receiving the marketing fees for business they conducted. Lenders do not want to have bad consolidation loans and many lenders if not all have stringent requirements in order to offer consolidation loans. This was done for the borrower’s protection as well as the lenders.
Again it is the “private loan companies” that need attention; not the federal student loan lenders and marketers. But with the fall of the FFELP program 65percent of students in 2008-2009 will be taking a private student loan. So again I ask; who is hurting who? I believe the answer is clear.
FREE MONEY
THE fed gets free money all the time any comment on that?
yet another card ... contrasting the changes
Odd as it may seem ... I received another of these gift card offers from the same company that I received the original one from 18 months ago (PCFS). So I did another blog post comparing and contrasting the original letter that first caught my attention with the most recent one.
Check it out.
http://not-my.blogspot.com/2008/01/blog-that-pcfs-built.html
WAKE UP!
Listen, How do you create prospects? You dangle a carrot in front of them. How does Red Lobster get you into their door? They offer you a coupon for $4 off. If you want to really get ripped off, there are many ways, go to the Bronx with a handfull of cash dangling.
This is America, we are full of Entrepreneurs, who find ways to market.
The sad part is the Government is gaining more and more control of this industry and soon it will be big Government in charge of Federal Student Loans. Private Loans "The Alternative"?. Why don't you take out a credit card and pay for tuition instead.
There are no student benefits reducing percentage rates anymore, because the Government is cracking down and no matter who you are in the Industry, margins are lean now (look at Sallie Mae, Nelnet Goal etc... who no longer offer Consolidations and are in trouble), it will be a controlled industry.
Offering $300 is not a scam, a scam is when you get bent over with no K-Y and you get raked over the coals and get nothing. Comparing us and the big lenders, we sell for the big Lenders and we give back to the Borrower, what do they do?
Jedijawa what is wrong with that? Students sign away thousands of dollars with nobody telling them anything about it at College (this is a scam).
Students will have to pay more and more for their Tuition and take out more high interest Private Loans(this is a scam).
Students don't get educated about loan consolidations and if they don't consolidate within their Grace Period they go into repayment and get .6% additional tacked onto their loans, could this be because the College and the lender are in bed together(this is a scam)?
This is a marketing channel and it works!
Alot of Big Companies in this business, have shady deals worked out with Colleges, so I think you attention Jedijawa is on the wrong people, what everytime you receive a piece of mail you blood psi goes up. The industry recently was created equal by the Government, there are no deals anymore, so my recommendation to everyone that receives these is to take up the offer while you can, especially if the mailer states what the gift card is all about-Your Federal Student Loan Consolidation.
Jedijawa how can you say this is a scam? A scam is where someone gets totally baffled and taken for whatever they can, if you will consolidate your loans you will get $300 with a firm that is above board period. Jedijawa you have been floating around this fact with all of your posts and I hope Capitol One sends you a phoney card just to p*** you off.
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Free Money
"Free" money -- your troubles are over (or just beginning). What's the saying "A sucker and their money are soon parted". IF they are offering you $300 dollars then, it will probably cost you far more in the loan consolidation and fees. Watch out for the fine print!.
Jan 08, 2008 17:23:54 PM [permalink] [report comment]