Student Loan Scandal

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Student Loan Scandal

Postby Hungry Ghost » Wed Apr 11, 2007 2:07 pm

It seems that the NY Attorney General is investigating predatory lending practices, payoffs and collusion between loan companies, university financial aid offices and even the US Dept. of Education.

Universities would market particular loans to students as that university's "preferred lenders". Students would sign up, trusting their university to act in their interest and thinking that they were getting special rates. In fact they were being charged higher rates. The university shared the additional revenue, which could run into millions, and money and stock performance bonuses were provided from the lenders to university financial aid officers/salesmen who wrote lots of loans.

http://biz.yahoo.com/ap/070410/student_ ... .html?.v=8

[The AG] said the investigation could lead to criminal charges against high-ranking officials at both lending companies and universities...

"We have demonstrated this is not just the exception," he said. "This is the rule."

Cuomo is investigating alleged kickbacks to school officials who steered students to certain lenders. His investigators say they have found numerous arrangements that benefited schools, financial aid officers and lenders at the expense of students...

So far, six schools -- the University of Pennsylvania, New York University, Syracuse University, Fordham University, Long Island University and St. John's University -- have agreed to reimburse students a total of $3.27 million for inflated loan prices caused by revenue sharing agreements, Cuomo said...

On Monday, a loan company that has been at the center of the investigation, CIT Group Inc., placed three top executives at its Student Loan Xpress division on paid leave following allegations of stock transactions with a high-level U.S. Department of Education official and college financial aid officers...

On Tuesday, Widener University in Pennsylvania placed Walter Cathie, the dean of financial aid at Widener, on leave. Cuomo's office said Cathie was paid $80,000 by Student Loan Xpress since 2005...

Also on Tuesday, Capella University, a Minneapolis-based online school, said it suspended its director of financial aid after he acknowledged accepting consulting fees from Student Loan Xpress...
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Postby Crisper » Wed Apr 11, 2007 10:47 pm

This does look very bad.

I can understand how somebody on the lending side might have seen this as a "win-win" situation (for the bank and the school), but the university officers should have stayed away from this like the plague. It would have been more honest just to bump tuition than to take a cut off an exorbitant rate (with the rest of that rate going to the financial institution).

I hope this proves to be a few bad apples in a couple of student loan offices, and not a systemic issue in many university administrations.

Kudos to the investigators on this one.
Chris
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There is more to it than this

Postby DTechBA » Wed Apr 11, 2007 10:57 pm

There is more to it and it is perfectly legal. Whichever organization facilitates a student is authorized to accept a fee for their services. If a school becomes a direct provider of student loan processing they can pocket this fee themselves, legally. The problem is that sometimes one can get a better deal from an outside agency. This means if, as my daughter's school tried, they force you to use the school processing you have to forgo these better deals. I had to throw a fit with my daughter's financial aid office and remind them in no uncertain terms that it was MY money they were talking about and that it was probably a violation of federal law to restrict trade like that. After that, I got wonderful service..... :D
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Postby North » Wed Apr 18, 2007 3:07 am

It is all very confusing to students and parents. We got lots of strange financial stuff in the mail when our daughter went off to college. I recycled it......

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