New York Takes Deeper Look Into Student Lending

New York Attorney General Andrew Cuomo is taking a closer look at potentially unethical student lending practices. From Yahoo!:

Concerned that guidance offered to students is tainted by conflicts of interests, Cuomo’s office asks schools to disclose if there are financial relationships with lenders and if any favors were offered to individual financial aid officers.

“My office is seeking to ensure that students are being steered toward lenders offering the most competitive rates, not those who offer the best perks to schools or financial aid administrators,” Cuomo said in a statement.

“When making recommendations on how to make tuition more affordable, there must be absolutely no conflict of interest at the expense of students and their families,” he said.

Spokesman for Sallie Mae and Nelnet separately said their companies are cooperating with Cuomo’s office.

Student lending is a shady business. Very shady. Why should a college have a “preferred lender” anyway? Who prefers them, exactly?—MEGHANN MARCO

New York expands student lending probe [Yahoo!]

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  1. Thaddeus says:

    If by perks you mean free pens and the occasional dozen donuts, then yes… perks out the wazoo.

    In theory, preferred lenders are in place because the school has a good relationship with the lender; they can get someone on the phone right away when there is an issue, they work with the same people and develop a good relationship so things go smoothly, and don’t have to deal with red tape. Sadly, there are instances where shady stuff is going on and in the end that can hurt the students. However, it is also the responsibility of the student to pick one. Borrowing money is like buying anything else, shop around!

    Important FYI: You can choose whatever lender you want. If a school says they don’t have them set up in their systems or they can’t work with a specific lender, they are probably lying. You can go with who you want, but if the school is unfamiliar it might take more time, but it can be done.

  2. Kaix says:

    Purdue University certainly loves SallieMae. Ask anyone in the financial aid office for information about alternative student loans and they’ll hand you the SallieMae Signature Student Loan brochure.

    Check out the Purdue financial aid website and note all of the references to SallieMae.

    http://www.purdue.edu/dfa/

    Look under the “Loans” section at the top.

  3. John Stracke says:

    When I was in college (1986-90), I don’t think I was even told I had a choice of lender.

  4. emax4 says:

    I think Mayor Cuomo should be made aware of the situation where Sallie Mae is preventing the one graduate from getting a job.

  5. Preferred lender perks are much more than pens and a 1-800 number. Sallie Mae sets up the entire loan system for the school–from how to educate students about the application process to all of the software needed to track borrowers, checks, and disbursements. Sallie Mae does all this for free; what they get in return is a school’s promise that they will mislead students into thinking Sallie Mae is their only option…the so-called preferred lender.

  6. I should add, there was brilliant but short-lived consultancy in D.C. made up of former Sallie Mae execs (all of whom left Sallie Mae because of the company’s terrible ethics) that taught graduate schools how to lend to their own students–cutting Sallie Mae and other lenders out of the system altogether.

    While it takes some work to convince a school that there’s no conflict of interest in such a system, in practice it works beautifully: schools make the interest on the loans, students get actual customer service because there’s no buffer between them and their lender, and the asshats at Sallie Mae never see a dime.

  7. pestie says:

    Hey, it may have taken me 6 years to get a 2-year degree, but I paid for college without a single loan. It was more circumstance than anything (I couldn’t get loans when I was 17 and living with my parents), but in retrospect I’m really glad it worked out that way.

    Now that I’m older and wi… uh, slightly less stupid, I plan to continue my debt-free lifestyle by never having children!

  8. mad_oak says:

    @pestie 6 years? Holy wha??? What is that, 1 credit hour per semester???

  9. pestie says:

    A few semesters I took a full-time load of courses, but other times I could only afford a single 3-credit course. I was young and not terribly motivated back then. I didn’t work full-time, just part-time at the college itself doing computer-lab consulting and that kind of thing. I lived with my parents. Life was pretty sweet back then. Heh…