Loan Conversions Require Scrutiny

To the Editor:

In his response (“Story on Conversion of Student-Loan Groups Lacked Balance,” Letters to the Editor, July 15) to your June 17 article “Another Conversion Bonanza?” Nellie Mae Foundation C.E.O. Lawrence W. O’Toole takes pains to shoot the messenger (both The Chronicle’s reporters and Consumers Union) but fails to acknowledge or address the message.

The conversion of non-profit student-loan secondary markets is big business. Over $6-billion in student-loan portfolios is in play, involving nearly three-quarters of a billion dollars in net charitable assets. Consumers Union (publisher of Consumer Reports) and a wide array of local and national organizations that have followed these issues — including 25 that co-signed a letter of concern to Nellie Mae’s Board of Directors — believe that the preservation and use of conversion foundation dollars is the public’s business because it’s the public’s money. After all, the assets involved resulted from tax exemptions and government guarantees and subsidies.

For 15 years, Consumers Union has been involved in reviewing non-profit-to-for-profit conversions. Our goals are straightforward: We seek full and fair valuation of converting charitable assets; preservation of charitable benefits; and public involvement in determining the use to which converted resources will be put.

Nellie Mae’s release of information regarding its conversion does not reflect the industry norm, where secrecy is the rule. Moreover, even Nellie Mae’s release of information is a pale shadow of meaningful public participation in determining how, in Nellie Mae’s case, $395-million of the public’s money will be used to fund greater access to education.

Because Mr. O’Toole uses much of his letter to level unfounded accusations at Consumers Union, we are compelled to set the record straight. First, Consumers Union does not accept consulting fees, period. We never have, as even the most cursory inquiry about us would show. We also aren’t looking for a “niche” in student-loan conversions; quite the contrary, we have been in the business of scrutinizing non-profit-to-for-profit conversions for 15 years. Finally, it strains credulity to think that Consumers Union, with about 4.5 million subscribers and unrivaled name-brand recognition, would take on something like non-profit student-loan secondary markets simply to gain notoriety.

In closing, we commend The Chronicle and its reporters for taking a seemingly esoteric story and making it understandable and relevant. We believe that the issue of non-profit-to-for-profit conversions reverberates throughout the philanthropic sector and poses real challenges for the future.

Kim Comart
Consultant

Patrick Gardner
Attorney
Consumers Union
San Francisco