News about this student loan settlement was reported yesterday by CBS (click here to read the full article). The report follows a nationwide investigation into an alleged kickback scheme perpetrated by schools and lenders. The investigation was spearheaded by New York State Attorney General Andrew Cuomo. Below, I will highlight some important excerpts from the report. My comments are in italics.
The chief practice that he (Cuomo) hopes to curtail is when lenders pay back schools a portion of the loans steered their way (typically .25 to .50 percent of the net value), payments that tend to grow when a school designates a bank as a “preferred lender,” because 90 percent of students and their families seek loans from those institutions.
Honestly, I had no idea that such a thing existed. So, all this time, students were carrying the extra burden of kickbacks to their own school? I thought the increasing tuition was enough PITA. That’s not good. Raise the tuition from one side…so that more and more students are forced to avail student loans, and then raise the burden on the student loan side too? Aren’t student loans supposed to *encourage* students to study more?
Other provisions in the code are:
The new code requires schools to disclose why it has chosen some lenders to be “preferred” and bans financial aid officers and other school officials from receiving more than nominal gifts from lenders.
“More than nominal gifts” - isn’t that equivalent to bribing? Why was it allowed till now?
No longer can lenders answering telephone queries identify themselves as school representatives when calls made to school loan hotlines are sometimes forwarded to outsourced call centers.
Wow…that’s like the school name is just a proxy and lenders are running the show!
As a part of the settlement, New York University will refund $1.4 million and The University of Pennsylvania will refund $1.6 million towards reimbursement funds. More schools refunding the kickbacks are mentioned in the report. One lender - Citibank is mentioned to be in agreement with the code of conduct.
Well so much for the good part.
The bad part is that the investigation started with about 100 colleges and half a dozen student loan providers. And, the settlement (as reported by CBS) involves only 1 bank and just a third of the schools. Makes me wonder what happened to the rest of the parties involved. Also, there are like 2500 schools in the US (?) (I need a reference here). It’s rather hard to believe they were all clean and *innocent*.
{ 3 comments… read them below or add one }
Oh, we’re good and upset at this. Not living in New York, there’s not a whole lot we can do, but sheeez….Andy is just plain ol’ wrong. http://college-loan-search.blogspot.com/
My guess is this is just the tip of the iceberg…
Can you please check New Jersey institute of technology. I had taken a loan of 4000 and today it is 11500 after paying for 50 dollars a month for 1 year.
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