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Kennedy Wants Lenders Blocked From Data •
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Lenders Misusing Student Database
By Amit R. Paley
The Washington Post
Sunday 15 April 2007
Improper searches raise privacy fears.
Some lending companies with access to a national database that contains confidential
information on tens of millions of student borrowers have repeatedly searched
it in ways that violate federal rules, raising alarms about data mining and
abuse of privacy, government and university officials said.
The improper searching has grown so pervasive that officials said the Education
Department is considering a temporary shutdown of the government-run database
to review access policies and tighten security. Some worry that businesses are
trolling for marketing data they can use to bombard students with mass mailings
or other solicitations.
Students' Social Security numbers, e-mail addresses, phone numbers, birth dates
and sensitive financial information such as loan balances are in the database,
which contains 60 million student records and is covered by federal privacy
laws. "We are just in shock that student data could be compromised like
this," said Nancy Hoover, director of financial aid at Denison University
in Ohio.
Education Department spokeswoman Katherine McLane said the agency has spent
more than $650,000 since 2003 to safeguard the database. The department has
blocked thousands of users that it deemed unqualified for access after security
reviews, McLane said, and it has blocked 246 users from the student loan industry
for inappropriately accessing the data.
In general, the department allows lenders to search records in the database
only if they have a student's permission or a financial relationship with the
student.
The department has been "vigilant in its monitoring for unauthorized uses"
of the database, McLane said.
Concerns about possible abuses of the database are emerging as the student
loan industry is under investigation by congressional Democrats and the New
York attorney general. Critics say the $85 billion-a-year industry has cozied
up to government and university officials who are in a position to help lenders.
This month, a previously obscure Education Department official named Matteo
Fontana was suspended after the revelation that he owned more than $100,000
worth of stock in a student loan company while he worked in a unit that helped
oversee the industry - and the student loan database. The stock holding raised
questions about a possible violation of conflict-of-interest rules.
The database, known as the National Student Loan Data System, was created in
1993 to help determine whether students are eligible for student aid and to
assist in collecting loan payments. About 29,000 university financial aid administrators
and 7,500 loan company employees have access to it.
In a recent meeting with university financial aid directors, Theresa S. Shaw,
chief operating officer of the department's Office of Federal Student Aid, which
manages the database, said lenders have been mining it for student data with
increasing frequency, according to three participants at the meeting. In the
department's hierarchy, Shaw ranks above Fontana.
"She said the data mining had gotten out of co'trol, and they were trying
to tone it down," said Eileen K. O'Leary, director of student aid and finance
at Stonehill College in Massachusetts, who was at the Feb. 26 session. "They'd
seen the mining for a few years, but now they felt it had grown exponentially."
The department first started noticing a problem in mid-2003 when loan consolidation
became more popular, according to an agency official who spoke on condition
of anonymity because of the sensitivity of the matter. As companies began to
aggressively look for low-risk borrowers to target for consolidation plans,
they turned to the database for prospective customers, the official said.
Database users can view only one student record at a time, and the department
can monitor each time they view an entry. "When we see them go in and out
very quickly, that's when it raises flags" about data mining, the official
said. Such abuse would violate department rules.
Officials grew so concerned that in April 2005, the department sent out a letter
to database users warning that inappropriate use of the system - in other words,
looking for information without authorization - could cause their access to
be revoked. The letter said the agency was "specifically troubled"
that lenders were giving unauthorized users - such as marketing firms, collection
agencies and loan brokerage firms - the ability to access the database.
"Information may not be used for any other purpose, including the marketing
of student loans or other products," wrote Fontana, then general manager
of a unit in the department that oversaw the lending industry.
In August 2005, Cathy H. Lewis, the department's assistant inspector general,
echoed those concerns in a memo to Shaw that warned of security problems with
the database and the lack of regular audit trails on the system.
Through a spokeswoman, Shaw declined to comment. Fontana did not return telephone
calls.
After the warnings, inappropriate usage of the system seemed to decline, according
to the department official who requested anonymity. But several months ago,
top managers learned that the practice had resumed - "a pattern that's
very alarming," the official said.
Some senior education officials are advocating a temporary shutdown of access
to the database until tighter security measures can be put in place, the official
said. McLane confirmed that such deliberations are taking place.
It is not certain that the lenders that inappropriately used the database used
information from it to market directly to students. Credit bureaus, for instance,
also hold personal information on borrowers that can be used to solicit customers.
But department officials believe lenders are probably using the database for
marketing, according to three current and former agency employees who spoke
on condition of anonymity for fear of retribution. Some university financial
aid administrators suspect loan companies are probably targeting students in
the database who take out loans directly with the government, known as direct
loans.
"The database is being misused by the industry to raid the direct loan
portfolio," said Craig Munier, director of scholarships and financial aid
at the University of Nebraska at Lincoln, who was at the meeting with Shaw.
"It's certainly a misuse of the intended purpose of the information and
was certainly not what we intended in the higher education community when we
built" the database.
Some financial aid directors say abuse of the database would explain why some
students who have taken out loans only directly with the government are deluged
by up to a half-dozen solicitations a day from private loan companies.
"Our students are being inundated with marketing from consolidation companies,"
said O'Leary, of Stonehill College. "How else are the consolidation companies
getting our students' information?"
Some financial aid administrators hope inquiries into the student loan industry
will extend to the possible abuse of the database.
"We are hoping that a full congressional investigation can happe',"
said Hoover, the Denison aid director, who also met with Shaw. "And maybe
then we will find out what's really happening."
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Kennedy Wants Lenders Blocked From Data
By Amit R. Paley
The Washington Post
Monday 16 April 2007
Request comes amid scramble to protect
student information.
The chairman of the Senate education committee urged the Bush administration
yesterday to block student loan companies from accessing a national database
that holds confidential information on tens of millions of students.
The request by Sen. Edward M. Kennedy (D-Mass.), came after The Washington
Post reported on inappropriate searches of the database that could violate federal
rules and raise concerns about data mining and abuses of privacy.
The problem has so alarmed officials at the U.S. Department of Education that
they are considering a temporary shutdown of the system, which contains 60 million
student records.
"Until the security of the database can be ensured, I urge you to block
the use of the database by private lenders," Kennedy wrote in a letter
to Education Secretary Margaret Spellings.
The database, known as the National Student Loan Data System, contains Social
Security numbers, e-mail addresses, phone numbers, birth dates and other sensitive
financial information covered by federal privacy laws. Some worry that loan
companies are trolling the system for marketing data they can use to bombard
students with mass mailings.
Spokeswoman Katherine McLane said the department has spent more than $650,000
and hired a full-time employee to safeguard the system. She said the agency
has already blocked thousands of users that it deemed unqualified for access
after security reviews.
"The department takes these matters very seriously and invests significant
planning and resources to enhance security and protect the data entrusted to
it," she said in an e-mail.
Both Kennedy and Rep. George Miller (D-Calif.), chairman of the House education
committee, said they would look into the management and security of the database.
Kennedy asked the department to provide documents from the past five years on
security breaches of the system.
"Students have a right to the strictest privacy when they provide their
personal information to the federal government," Miller said in a statement.
"Reports of this privacy being abused raise extremely serious questions
about the Department of Education's efforts to safeguard the privacy of millions
of students."
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