2008 Woodie Awards
College loan scandal raises concerns
Maggie Willis
Issue date: 6/27/07 Section: News
A recent media frenzy uncovered a scandal involving several colleges that have been receiving kickbacks for referring students to certain loan lenders or hosting those lenders on their preferred lender list.
According to Kathleen Pender at the San Francisco Chronicle, six schools agreed to return payments they had received for steering students to lenders after an investigation by New York Attorney General Andrew Cuomo's office. The average refund will be $500 at the University of Pennsylvania and $60 at New York University.
Cuomo also requested information about senior financial aid officers at the University of Southern California, University of Texas and Columbia University who owned stock in the former parent company of Student Loan Xpress. The company was until recently a preferred lender at all three schools. The three officers have been put on leave pending internal investigations, according to the same article.
The Chronicle also said that it was later found that Matteo Fontana, a senior official in the U.S. Department of Education, also owned stock in the former parent of Student Loan Xpress. Fontana oversees private-sector lenders that participate in the government's Federal Family Education Loan Program. He was placed on leave in early April.
With all this scandal, many colleges are becoming increasingly hesitant to even use a preferred lender list.
Mary Jenkins, the assistant director for client services at the SIUE financial aid office, said the SIUE financial aid office does not have a preferred lender list.
"We never have and we never will," Jenkins said.
SIUE does, however, provide an alternative loan lender list on its Web site.
"We don't have a lot of room on our Web page, but we have it broken down as much as possible, with three lenders listed for each list (of loan categories)," Jenkins said.
Categories of loans on the Web site include undergraduate, graduate, parent and alternative. Lenders currently listed on their alternative loan lender list include National Education, Citibank, Key Bank, FinanSure and Wells Fargo.
According to Kathleen Pender at the San Francisco Chronicle, six schools agreed to return payments they had received for steering students to lenders after an investigation by New York Attorney General Andrew Cuomo's office. The average refund will be $500 at the University of Pennsylvania and $60 at New York University.
Cuomo also requested information about senior financial aid officers at the University of Southern California, University of Texas and Columbia University who owned stock in the former parent company of Student Loan Xpress. The company was until recently a preferred lender at all three schools. The three officers have been put on leave pending internal investigations, according to the same article.
The Chronicle also said that it was later found that Matteo Fontana, a senior official in the U.S. Department of Education, also owned stock in the former parent of Student Loan Xpress. Fontana oversees private-sector lenders that participate in the government's Federal Family Education Loan Program. He was placed on leave in early April.
With all this scandal, many colleges are becoming increasingly hesitant to even use a preferred lender list.
Mary Jenkins, the assistant director for client services at the SIUE financial aid office, said the SIUE financial aid office does not have a preferred lender list.
"We never have and we never will," Jenkins said.
SIUE does, however, provide an alternative loan lender list on its Web site.
"We don't have a lot of room on our Web page, but we have it broken down as much as possible, with three lenders listed for each list (of loan categories)," Jenkins said.
Categories of loans on the Web site include undergraduate, graduate, parent and alternative. Lenders currently listed on their alternative loan lender list include National Education, Citibank, Key Bank, FinanSure and Wells Fargo.
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