Universities not keeping good track of student loans, audit says

By Chris Butler | Tennessee Watchdog

KNOXVILLE — If you’re a University of Tennessee at Knoxville student on financial aid, it’s possible you could quit going to class outright or even graduate and you would still qualify for that money.

An audit that Tennessee Comptroller Justin Wilson released last week said it will happen if school officials aren’t watching you carefully.

The audit also said it’s possible to attend another school in the University of Tennessee system, UT-Martin, and receive thousands of dollars in student aid even though your grades don’t measure up.

At UT-Knoxville, auditors took a sample of 40 student loan recipients and discovered that five of them likely already had left school. Other students might have started attending less than half the regular time, auditors said.

UT-Knoxville officials didn’t return Tennessee Watchdog’s request for comment Tuesday.

A list of quick facts on the school’s website didn’t say how many students overall accept financial aid.

“Student enrollment information is extremely important, because it is used to determine if the student is still considered in school, must be moved into repayment, or is eligible for an in-school deferment,” auditors wrote.

The website reports the school has a 66 percent graduation rate.

“For students moving into repayment, the out of school status effective date determines when the grace period begins and how soon a student must begin repaying loan funds.”

In a written response to auditors, UT-Knoxville officials said they would implement stronger standards. Auditors wrote they made similar findings at the school the previous academic year.

The samples were taken from the 2012-13 academic year, as were those for UT-Martin.

Auditors at UT-Martin sampled $392,582 in financial aid — out of a total $51.6 million given — and discovered two students received $18,527, even though they didn’t meet the university’s own minimum academic standards.

In a written response, UT-Martin officials said they concur with those findings, will implement stricter procedures and already have returned that money to the U.S. Department of Education.

UT-Martin spokesman Bud Grimes told Tennessee Watchdog the school has a six-year graduation rate of 46.5 percent.

Two individuals are responsible for handling the school’s student loan applications, Grimes said.

Last year, several students at Middle Tennessee State University in Murfreesboro told Tennessee Watchdog that student loans to attend any Tennessee college are extremely easy to acquire and sometimes given to students who aren’t college material.

Those loans don’t just burden students — to a degree, they also burden taxpayers.

University officials hire state employees to process those loans, said Tennessee Higher Education Commission spokesman Russ Deaton. The more student loans given, the more state employees are needed to process those loans.

Russ Deaton also said that if you process student loans at a Tennessee university you likely have the safest job on campus, even when college presidents make drastic cuts elsewhere.

Federal guidelines help see to that, Deaton said.

Such was the case during the most recent recession, when funding for Tennessee’s colleges and universities dropped, and more of higher education’s revenue came from tuition increases, he said.

“The student loan industry, as you can probably guess, has a lot of federal regulations and paperwork attached to it,” Deaton said when asked if these student loan processors, who are state employees, could ever face downsizing when money is tight.

“Most of those financial aid offices are already slammed and understaffed. I doubt that presidents would look there first.”

The U.S. government made $50 billion off student loans in 2012, according to the Congressional Budget Office.

Deaton said campuses generally don’t do independent credit checks or risk analyses on students who apply.

Contact Christopher Butler at chris@tennesseewatchdog.org. or follow him and submit story ideas on his official Facebook page.