Lenders Misusing Student Database

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 happen," said Hoover, the Denison aid director, who also met with Shaw. "And maybe then we will find out what's really happening."