The Student Loan Scam by Alan Collinge

Author:Alan Collinge [Collinge, Alan]
Language: eng
Format: epub
ISBN: 978-0-8070-9672-7
Publisher: Beacon Press
Published: 2009-03-18T04:00:00+00:00

CHAPTER SIX

The Corruption of the Universities

As the burden of paying for college was shifted to students and the cost of college tuition exploded, lending agencies, guarantors, and collection companies were not the only entities maneuvering to capitalize on this new source of wealth—colleges and universities were also caught up in the fray. By 2000, it became apparent that some schools had all but abandoned even the pretense of concern for students’ financial well-being and were entering into agreements with lenders for the purpose of making additional money from students, over and above the loan income that was being paid to them for the cost of attendance.

As a general rule, students are highly vulnerable to exploitation in this area. By the time they set foot on campus, they are already on the hook. With unbridled optimism about their futures and innate trust of their universities, students tend to sign nearly anything their universities put in front of them in order to get registered for class. After all, they have already made the decision to attend college, typically years before they get there. They have already gone through the difficult task of applying for and gaining acceptance to the universities. By the time a student must decide from whom to borrow money, or whether to borrow money at all, the groundwork has been laid, and the student will almost certainly accept any recommendations the school gives. Most former students cannot even recall actually making a choice of lenders while they were in college.

This is the reason that it is so important for the universities and their financial aid offices to look out for the best financial interests of the students. Violations of the trust that exists between the universities and their students could have devastating financial consequences down the road and should be taken extremely seriously.

Investigations by the New York State attorney general Eliot Spitzer and his successor, Andrew Cuomo, the U.S. Senate, the public, and the media uncovered a broad and deep assortment of illegal and unethical activities by higher education institutions and lenders. These ranged from the sublime to the obscene and were found across the academic spectrum, from Ivy League universities, such as Columbia and the University of Pennsylvania, to top-tier universities, including the University of Southern California and the University of Texas at Austin, to obscure trade schools.

As shocking as these discoveries were (many were reported on the front pages of major newspapers), the most important truth that these scandals revealed was that the higher education system had become beholden to the lenders. Their interests had become aligned to the point that they were a political force, an “unholy alliance” between lenders and universities (as Attorney General Cuomo characterized it), and they had trampled on the very students they claimed to serve.

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