Student Loan Scandal

CNN is reporting the play-by-play of the student loan scandal. It is a shame that this happened, students were misled by trusted advisors at major universities.

Thanks to the new New York State Attorney General, Andrew Cuomo. Many of this institutions will be paying students back for the school’s impropriety. In addition, these student lending organizations, like Sallie Mae, will be setting up a $2,000,000 fund to educate people on student finance and lending. It is this item that leads me to some dissonance.

The crux of the investigation is that colleges and universities were getting kickbacks and incentives for steering students into higher loan amounts, etc. It was a way for officials to find a friendly partner in the world of student finance and get paid by outside agencies to do their job in a manner that is both unethical and unprofessional.

Student loan companies paid school officials to sell more/bigger loans.

Now, the same institution is setting up a fund to educate parents, students, and school administrators about the student loan industry and the student finance options (A job that school officials should have been doing and should be doing now).

So, where student loan companies were paying school officials outright to provide information about student lending and finance, now there is a student lending industry underwritten fund to provide monies to do that. This is the rub. Where before it was all hush hush; now it is all out in the open. Is that okay?

Sure, there are promises of ethical practice and assurances of non-repeating. Sure, there are apologies and gray area comments. Sure, people are getting some refunds to help offset the bad practice of trusted advisors. Sure, there have been firings and resignations.

Setting up a fund to educate people about student finance leaves room for more obvious bribery and kickbacks. It seems a little like hide in plain sight to me. Call me a skeptic if you want; but, I foresee student loan companies setting up methods to pay student financial aid offices to host seminars, provide information, answer question and all with the companies’ money. Doesn’t that seem like a different kind of kickback, offsetting a budget line. So instead of the individual person making money, the institution spends less money (read increases margin/profit).

I could be wrong about the intentions, but my Mom always told me a leopard never changes it’s spots.

Rather than summarily punish wrong doer’s, the investigation headed by New York’s Attorney General pandered to corporations that have defied the public good. A much more suitable course of action would be to punish these trusted advisors more severely than complimenting their leadership in the face of scrutiny.

What should happen is that all the overages charged to the borrower be refunded with interest (after all the companies made money on something that was obtained unethically. Or, some zero interest on the remainder of money owed to the lenders. Or, since these company defied the public interest and the trust of the people a revocation of the incorporation status bestowed upon them on behalf of the very people they stole from in this scandal.

As for school officials and schools, a ban on enrollments until monies are repaid, processes fixed, and satisfaction of the people is agreed upon.

Too severe? No way! Corruption is taking a strangle hold on our economy. Media reports on the rise of student loans, the costs of education, and the burden placed on our students. Combine the two, corruption and reported burden, and it is a recipe for disaster.

Too often governments pander to those with deeper pockets, even in the face of ethical violations. You can almost here them say, “Oh well, thanks for the heads up, we’ll be more careful”. Well, tough cookies kids.

These companies stole money.

These schools stole money.

If that were a gunpoint stick-up the perpetrators would be going to jail; but, because the violations involve multiple people and complex systems, not to mention fat pockets, it is viewed as less of a crime.

 

 

Speak up. Demand action. Demand statisfaction.

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