Home > Insight

Corrupt lending
By David Pollan
dpollan@mscd.edu

Between classes, textbooks and tuition, college students have more to worry about than wondering whether or not their student loan lender is corrupt.

Most students select a loan company based on recommendations provided by their school.

These companies are often represented as preferred lenders, and students rarely take the time to comparison shop; they are more concerned with getting their money than who gives it to them.
But maybe not for long.

New York Attorney General Andrew M. Cuomo has discovered evidence that financial aid directors at several major universities – and at least one official in the U.S. Department of Education – all profited from the sale of stock in a loan company that many of them spent time promoting.

According to the New York Times, Cuomo’s investigation has learned that “the founders of Student Loan Xpress had an explicit plan for corralling a bigger share of the lucrative student loan business: ‘market to the financial aid offices of schools.’”

It is apparently unclear whether or not the company or any of the school officials involved have done anything illegal, but it is clear this complicity between business and academia is highly unethical, an obvious conflict of interest and should be made illegal – if it isn’t already.

At the very least, Cuomo’s investigation – which will undoubtedly end up implicating other schools, lenders and officials – points to the need for more federal oversight and stricter regulations.

A university or college has a direct responsibility to their students to provide access to lenders with the best rates and the fairest policies. Students often don’t know any better, and tend to rely on what they believe to be unbiased financial advice.

In order to offer this advice, school officials need to objectively evaluate lenders’ practices – not just be wooed by company PR flacks whose only concern is how the bottom line affects their stock options.

Mahatma Gandhi once said, “Corruption and hypocrisy ought not to be inevitable products of democracy, as they undoubtedly are today.”

For loan lenders, profit will always be their first concern. School officials should know better and make students’ interests theirs.