55 Colleges Under Investigation for Unethical Student Loan Practices
Nov 02, 2007
The Department of Education announced Wednesday that it is seeking more information regarding lending practices from 55 colleges and universities. Although the schools are not accused of doing anything 'illegal' at this time, it is obvious that most of the schools on the list engaged in questionable behavior.
Of the 55 Colleges Who Received Letters
- 48 had a single lender who handled more than 95 percent of the school's student loan volume
- Seven had a single lender who handled more than 80 percent of the school's student loan volume
Did students at these schools pay more than they had to? Nobody knows.
These schools handled more than $10 million in student loans last year, but the Department of Education refused to release the names of the 55 colleges and universities.
(If you are interested in knowing which schools are on the list, you can file a Freedom of Information Act request. Of course, there is no guarantee that your request will not be denied.)
Department of Education officials did make an extra effort to let everyone know that the schools were not accused of any impropriety.
'We're not accusing them of anything illegal at this time,' said Undersecretary of Education Sara Martinez Tucker in a statement.
Tucker added that the Department is merely seeking more information about agreements that may have been made between various institutions and lenders, as well as the choices that schools presented to parents and students.
As reported several months ago, the Department originally requested information from 921 colleges and universities. The schools were singled out because at least 80 percent of the student loan volume at each school was handled by one lender.
So far, the Department has not offered any additional information regarding the outcome of the previous investigation.
New Regulations Announced
U.S. Secretary of Education Margaret Spellings announced new regulations for student loans yesterday. Under these regulations institutions are allowed to use preferred lender lists, but must include at least three lenders on the list along with the criteria for the ranking. The regulations also strictly prohibit lenders from seeking placement on the lists through gifts or other forms of bribery.
Spellings said she was 'pleased' with the new rules and considered them a 'major step forward' in improving transparency in the student loan process.