Student Lending Investigation Could Lead To Criminal Charges

An investigation into student lending practices by New York Attorney General Andrew Cuomo could lead to criminal charges being filed, he says.

From USAToday:

Cuomo says he believes cozy arrangements between colleges and the companies that lend their students billions of dollars are far more widespread than he expected. He wouldn’t divulge where the burgeoning investigation is headed. But he said his investigation of the $85 billion industry could lead to criminal charges against high-ranking officials at lending companies and universities.

“This is like peeling an onion,” Cuomo said. “It’s more widespread than we originally thought.”

Cuomo is investigating alleged kickbacks to school officials who steered students to certain lenders. His investigators say they’ve found numerous deals that benefited schools, financial aid officers and lenders at the expense of students.

Cuomo says he suspects that dozens of financial aid officers around the country have arrangements that he’s called deceptive, unethical and at times, illegal.

“No one is even defending the situation anymore,” he said. “When we first started, it was, ‘Oh, this is just a few bad apples.’ “

“Ninety percent of the students take the ‘preferred lender,’ ” he said. “Why? Because that’s the nature of the relationship. You trust the school. The school is in a position of authority.”

Financial Aid advisers at some schools sat on the boards of lending companies and received expensive perks such as trips to exotic locations. Naughty.—MEGHANN MARCO

Cuomo: Student Loan Corruption Widespread [USAToday via CL&P]
(Photo: foundphotoslj)

Comments

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  1. Justinh6 says:

    On a personal level, I hope they nail Sallie Mae.

  2. lowllight says:

    having to deal with sallie mae in my past, i completey agree with you.

  3. grkgus says:

    I dont understand why people blame Sallie Mae, most of the post i have read were because people made late payments. If have Sallie Mae loans and never had an issue. I pay everything on time and everything is good.

  4. Bourque77 says:

    You mean such and such college or university is in it for the money and no looking out for my best interest? Say it aint so.

  5. Techguy1138 says:

    I had issues like this and no contact with sally mae.

    I went to a private NYS university for a bs and MS. I always wondered why the aid department spent zero effort educating students about scholarships but had stacks of loan forms ready.

    I also wonder if the rising cost of college is realted to this. If the colleges make money on the tuition and the loans there is incentive to make sure people have to take loans.

    I was lucky to get into a good job. I have some friends buried so deep in college loans that with the interest at this point they will be life time debtors.

    I like Cuomo. I think he will do a a good job.

  6. oldhat says:

    Yeah, how come the nation has to rely on NY to keep these bastards somewhat honest?

    Elliot Spitzer and now this Cuomo…I’d vote for Spitzer for whatever, and I’m west coast. He’s like the new Nader. (seen him on Colbert, good showing)

  7. While I’m definitely for fixing the douchebaggery amongst both lenders and finaid offices, I hate this Cuomo stuff. They’re going after people for something that has been accepted practice for decades–particularly advisory boards, though not so much the high-price perks–and these practices are used in dozens of industries. Predatory lending is the problem; finaid officers lying to students about their options is the problem; what Cuomo is going after is not the problem.

  8. vdragonmpc says:

    I have to say the reason Sallie Mae doesnt get busted is because they selectively screw with customers. Not all just a percentage. Its high profit gamesmanship as they get paid win or lose.

    I dealt with them over a very small loan (1500$) that I just could not seem to get them to maintain a deferment on while I was a student. When I graduated it was even worse. THEN they did something with my loan number where when I entered it into the phone tree it clicked 3 times and hung up. I sat on hold for a rep for 5 nights from 5pm to 8:59pm when the system autodisconnected me. Guess what? It was all my fault and they would not budge. I paid them off and they were gracious enough to charge me an extra 600$ for the month of september. Of course there were constant reminders by phone automation about default.

    What is the recourse when the lender wonteven answer their phone?

    V

  9. IndyJaws says:

    Let’s not forget what got us into this multi-thousand dollar average student loan mess in the first place…schools raising tuition rates far quicker than the rate of inflation. Everyone is so quick to blame the lenders, servicers, etc, but no one is willing to point the blame at the schools who raise their tuition costs 5-10% annually.

  10. mrkarr says:

    My sister-in-law and I are both students at two different local colleges. We both recently received a flier from a check cashing/title loan company wanting our business. It appears that this company got our names from the schools. I’m an older student with a family, but I wonder how many kids that they trapped with their tactics.