Feds Investigating Rampant Fraud In Student Loan Industry
Posted on May 6, 2007
Filed Under Student Loan News |
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Now there’s proof. The Feds are half assed poking around the Student Loan Industry and the stink is rising to the top.
Federal education officials as well as several financial aid directors at schools around the country are being suspended or let go in light of initial findings.
Back in April, Columbia University, The University of Texas-Austin and the University of Southern California, suspended thier financial aid directors for owning company stocks in student loan providers.
A common practice that was uncovered was a revenue sharing agreement. Most of us know this as another name - kick-backs. Where the school would get back a huge amount of money for placing the lender on a “preferred lender list”. The lender would kick back a percentage of the net value of all student loans the college or university steered its way.
The financial aid directors at some college and universities would get stock awards, vacations, gifts and other valued considerations for steering students to the loan providers.
Some of these directors were knocking down over 100k a pop on stock awards alone. Some were buying stocks in the financial aid companies for as little as $1 and then turning around and selling the stock for nearly 10 bucks a share in some instances. Do you smell anything yet?
I doubt the investigation into student loan lending will go much further. The Fed really doesn’t want to dig up all the garbage that is buried deep down. There will be too much pressure from elected officials who rely on the political contributions from large student loan providers. Look for this story to go away shortly as many sacrificial players have already been offered up to the public as a “feel good - look what we’re doing for you” gesture.
The student loan kick back scam will still go on, but everyone will be a lot more careful how they play now!
