Department Of Education Sends Warning Letters To 921 Colleges

The Department of Education wants you to know that they’ve sent warning letters to 921colleges and universities warning them not to limit students in their choice of lenders, according to the Chicago Tribune.

Jeff Baker, policy liaison at the Education Department’s federal student aid office, said a search of a student loan database showed that a vast majority of students at each of 921 campuses chose the same lender.

“That was a little flag to us that perhaps the institution isn’t quite being open enough to their students and parents,” Baker told thousands of college financial aid officials gathered for the annual conference of the National Association of Student Financial Aid Administrators.

The letter, dated June 29, marks the first time the department has sent targeted letters to campuses in regards to their use of preferred lender lists.

Baker said that campuses could face fines or be barred from participating in the federal lending program, known as FFELP, if they violate the department’s student loan policies. That also includes a prohibition that bans college administrators from accepting gifts, payments or other perks in exchange for steering student borrowers to a particular company.

We love how this just occurs to them now.

College-loan warnings sent [Chicago Tribune]


Edit Your Comment

  1. protest says:

    um, revoking a university’s ability to participate in FFELP doesn’t hurt the university, only students and their families. what a bunch of idiots. the only reason they are even noticing or giving a crap about this kick back stuff now is because it got out in the open and the dept. of education has to do damage control.

    that this has been going on for YEARS and the dept. of edu is just “noticing” now is disgusting.

  2. sthomas says:

    As a college student, this post would be much more interesting/informative if I could see specifically what colleges are receiving these letters and if mine was affected.

  3. rhombopteryx says:


    Revoking a university’s ability to participate in FFELP sure as hell hurts a university – why go to university A with effectively NO loan aid when you can go to similar university B with full subsidized loan aid…. Students will pass by the university en mass. That is a threat that WILL hurt the university. (Agreed – everything else you said about hurting students too, and this being too little way late is pretty much spot on.)

  4. SBR249 says:

    @protest: Actually, it does also hurt the colleges themselves, particularly those which have very little money for financial aid. By cutting off federal support, the colleges won’t be able to offer attractive financial aid packages, and thus good students would choose other colleges which offer them better packages. This hurts the college’s student body quality in the end.

  5. jeffeb3 says:


    In my “senior check out” they wouldn’t give us the all clear until we had attended an hour or so lecture where the citibank representative told us about all the “options” they had for our loans, such as services involving the equivalent of disability insurance or something on our loan. I didn’t mind, because I’m skeptical, and the more information I get the better, even if it is biased. But they must get more business or they wouldn’t have these seminars.

    And removing FFELP loans from my school would hurt it, it’s small and selective enough that if the pool of collective students got smaller, then their standards would have to fall to keep up.

  6. superlayne says:

    I hope everyone realized that’s Belushi, and not some top chairman or something.

    Yay! Regulation!

  7. protest says:

    sorry for the confusion, i was referring to all the students currently at a university who loses ffelp, who would have to either transfer or scramble to find other funding. they would, essentially, be hung out to dry because the university was being punished.

  8. rmz says:


    Same thing happened to us. My loan was already arranged through Citibank even before all of that propoganda started, so I took it as an opportunity to learn more about the particulars of my existing loan. But for people who weren’t using Citibank, it must have been very frustrating.