A University student loan program has been shut down after an internal audit by the Oregon University System showed that the University misspent more than one million dollars in gift funds and that borrowers still owe the University several million dollars, which will probably be replaced with tuition revenue.
The UO Student Loan Program, started in 1998, was designed to provide extra assistance to University juniors and seniors who were in danger of dropping out because of financial concerns.
From the program’s start, until a University official’s requested audit conducted in early 2006, $12.3 million in loans were dispersed to students. As of June, $7.8 million of those loans were still unpaid, according to an audit referenced in the Nov. 21 edition of The Register-Guard. Additionally, some of the loans issued were found to have been distributed with disregard to donor’s wishes.
The program was originally funded through gifts given directly to the University, not the private University of Oregon Foundation, University spokesman Phil Weiler said.
Donors who gave this money intended it to be used as financial assistance for students, but attached specific criteria regarding the types of students who would receive the funding. These gifts were part of a larger pool that was used for the loan program without consideration for the criteria attached to the original funds, Weiler said. The University loaned $1.6 million to students who may not have met those criteria.
“The criteria were never brought into play,” he said. “There was never an attempt made, from what we can tell, to connect the criteria with the funding source.”
If it is determined that money needs to be paid back to those funds, the money will come from tuition revenue, not from state dollars.
“If a fund was used to make loans and we can’t demonstrate that the criteria were honored when the funds were made, we are going to pay back that fund,” Weiler said. “The state of Oregon allocates tax dollars to the University of Oregon. We’re not going to be using those state dollars to repay those funds that had been created through gifts to the University of Oregon.”
The loan program was designed to be self-renewing. As borrowers repaid the money, the payments would be used to finance future loans, University Vice President of Finance and Administration Frances Dyke wrote in an e-mail.
Dyke wrote that the loan program was designed to help students pay their tuition. The original funds for the loans came from gifts donated “for the purpose of providing aid to students,” and that when those funds ran out, the University dipped into current tuition resources for more funding. She told The Register-Guard that because some borrowers were not making payments, the program was “no longer sustainable” and that the amount being loaned out was higher than the amount coming back in.
“The intention was that each of the fund sources would be replenished as students paid off their loans,” she wrote to the Emerald. “A well-run loan program would have recovered the amount of the loans plus interest and service charges. This did not happen.”
The University will attempt to collect from those borrowers who still owe on their loans, Dyke wrote. Funds recovered from these collections will replenish the gift funds and then the funds taken from tuition resources.
Dyke wrote that the problems with the loan program were not discovered because there was high turnover at all levels of the office in charge of the loans. She wrote that although “good staff” were hired to replace individuals who left, it takes a significant amount of time to learn a new job and assess how various systems of the job work.
“Obviously, in the case of this program the systems were not functioning properly and new staff did a good job of understanding this problem and bringing it to my attention, but it did take time,” she wrote.
Contact the higher education reporter at [email protected]
Program ends after audit
Daily Emerald
November 28, 2006
0
More to Discover