NY Attorney General charges corruption in student loan industry

by Snelgrove Bottomly | March 15, 2007 at 02:39 pm

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This is really annoying - lenders and schools (some of them the Ivy League universities) - are essentially defrauding students through a variety of scams, according to NY attorney general Andrew Cuomo.

It drives me crazy that students - with their crushing loans and difficult job prospects - have to go through this kind of abuse. We pride ourselves in the west that as a democratic society, we really look after our students.

_Lenders pay kickbacks to schools based on a percentage of the loans directed to the lenders.

Lenders foot the bills for all-expense-paid trips for financial aid officers to posh resorts like Pebble Beach and exotic locations. They also provide schools with other benefits like computer systems and put representatives from schools on their advisory boards to curry favor.

Loan companies set up funds and credit lines for schools to use in exchange for putting the lenders on their preferred lender lists and offer large payments to schools to drop out of the direct federal loan program so that the lenders get more business.