In an article in the Chronicle of Higher Education (Today's News, March 16, 2007, available by subscription only) I read that the New York State Attorney General, Andrew Cuomo, sent a warning letter to 400 colleges and universities concerning "problematic practices" he office has uncovered in the deals between lenders* and higher-education institutions. He has found evidence of kickbacks and other corrupt practices including colleges which have:
Received referral fees and a percentage of revenue for recommending particular loans to student borrowers.
Steered students to "preferred" lenders that may not offer the best terms and conditions.
Solicited money or other benefits from lenders in exchange for inclusion on their preferred-lender lists.
Delayed the certification of loans from lenders not included on their lists.
But here's the good part, and it's worth quoting at length:
"But some lenders say the attorney general's efforts could hurt the borrowers who depend the most on the advice of their financial-aid offices: low-income and first-generation students. If those students feel they can't trust their colleges' counsel, they may make unwise borrowing decisions based on misleading marketing, the lenders say."
So let me see if I undertand this. Calling attention to corrupt practices can disuade students from trusting the financial aid officials, some of whom deliberately mislead them, thereby allowing the students to fall prey to some other sharks than the ones who paid good money (to the school) to be the sharks who get to lend the students money at usurous rates?!
* On a personal note, I co-signed a student loan for my nephew. The sharks charge 8.5% interest compounded daily with repayment "generously" deffered until he is no longer enrolled as a full-time student. A $10K loan (with a $900 lending fee added) will cost between $30,000 and $40,000 in 4 to 5 years. And people wonder why the middle class has started to buckle under the weight of enormous debt. What did you think would happen?
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