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Truth in College Lending

The New York Times is running an interesting editorial about potential illegal actions on behalf of colleges and loan companies. Def. worth a read. The costs of college should be a huge issue for candidates looking to connect with young voters.

By rights, a student who calls a college financial aid office should reach one of the college’s aid officers. But that is often not the case, as a front-page article by Jonathan Glater of The Times pointed out last week. Many colleges route student calls to representatives of loan companies who pretend to work for the college but who actually have a vested interest in selling the costliest possible loans.

Colleges portray this as a harmless, cost-saving convenience that allows them to serve students without hiring more staff members. But it is part of a troubling — and possibly illegal — process that finds colleges steering students to “preferred lenders” in exchange for kickbacks based on volume.

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April 1st, 2007 12:55pm
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Looks like NYAG got one to plea bargain

Submitted by Fred Gooltz on Mon, 2007-04-02 12:05.

I would hope Andy Cuomo won't let up when it gets to the big guys.

As punishment for the kickback scheme where seven colleges were suggesting students let Citigroup handle their student loans, Citigroup agreed to pay $2 million into a fund to educate students and parents about the student-loan industry and agree to Cuomo's terms on a Bill of Rights which he's calling a "Code of Conduct".

The universities will reimburse some students a total of $3.3 million for past loans. The University of Pennsylvania will remit the most, agreeing to pay $1.6 million to students who received loans over the past two years.

Cuomo's prosecutions aren't over.

NYAG said March 22 that he planned to sue Education Finance Partners (EFP), accusing it of deceptive business practices for paying schools to steer loans to the company and putting the company on lists of preferred lenders.

EFP released a statement today saying "We will now explicitly require that all schools use these proceeds for the benefit of students."

Cuomo's office considered the statement "an admission of guilt" and that the company needed to do "more than public relations damage control."

The phrase is oh snap. Link

Cuomo will continue toward litigation until the company stops paying kickbacks.

In addition to Education Finance Partners, Cuomo said he is probing SLM Corp., or Sallie Mae; CIT Group Inc.; Nelnet Inc.; EduCap Inc.; and the College Board.

An investigation by Cuomo's office found some schools, such as Drexel University in Philadelphia, received more than $100,000 a year in what Cuomo called kickbacks, the state said.

Under its agreement with Education Finance Partners, Drexel received 0.75 percent of the net value of referred loans from $1 to $24,999,999, Cuomo said. The university received 1 percent of all amounts of $25 million or more, the state said.

Lenders also paid for trips for financial aid officers and their spouses to resorts including Pebble Beach in California, Cuomo said.

Bad ass. Let's hope he keep the heat on for the big guys like Sallie Mae and dones't let corporate slush funds blunt his case.

Can you imagine if we had a Federal Justice Department?! One that cared for citizens more than corporations? Wouldn't that be great?