Nine Members of Student Loan Foundation Resign

Monday, June 01, 2009

Nine of the fourteen members of the board of directors for the financially troubled Connecticut Student Loan Foundation, a nonprofit corporation that administers, guarantees, finances and serves student loans within the federal loan program, resigned last week after legislative leaders failed to grant their request for indemnity against lawsuits.

Troubles came into focus in March when state auditors sharply criticized the corporation for running multimillion-dollar deficits, downsizing its workforce and facing foreclosure on its Rocky Hill headquarters, while distributing raises and bonuses to executives and spending exorbitant amounts on perks for some of its members. Extravagant expenses included, but were not limited to, a holiday party for the board of directors and managers in 2006, for which the foundation spent $4,459, and an additional $1,884 to hire four limousines to take certain board members to the party; monthly golf membership dues to the Tournament Players Club golf course in Cromwell; $1,378 toward the cost of a retirement party for the financial aid director at Eastern Connecticut State University; $6,850 for club seats to the UConn football season; and $1,100 to sponsor a foursome in the Notre Dame Golf Open.
In response to the criticism, Governor M. Jodi Rell replaced all six of her appointees on the foundation’s board and instructed them to promptly address the foundation’s problems. She also tried to get a bill passed granting board members legal protection. However, despite the governor’s efforts, some legislators rejected the bill, saying that, if the board had immunity, the state could be sued instead.
On May 26, nine members of the board of directors resigned in response to the legislature’s decision, stating that they could not continue serving on the board without indemnity. The five members who remain are appointed by state statute and are protected from personal liability.
Board members also stated that the foundation will probably run out of money before the year’s end. The Connecticut Student Loan Foundation, and others like it, has been hard hit by federal legislation and President Barack Obama’s proposal to eliminate private student lending agencies. However, the board denied rumors that the foundation is closing.
The corporation has about $700 million to $800 million in outstanding loans, all of which are backed by the federal government. If the foundation closes, it would not affect existing student loans or students’ access to federal loans. Students would still be able to get loans, but they won’t be from the Connecticut Student Loan Foundation.
-Melanie Young
Proposals Would Transform College Aid (by Shailagh Murray, Washington Post)


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