2008 Woodie Awards
Families deserve reimbursement in loan scandal
Issue date: 4/18/07 Section: Opinion
The following editorial appeared in the Dallas Morning News on Friday, April 13:
Financial aid officials are hired to help college students _ not to help themselves to cash, trips, consulting fees and stock options. But this Ethics 101 lesson has been overlooked at many institutions of higher learning across the country.
Securities and Exchange Commission documents reveal that a number of financial aid directors, and at least one senior official at the U.S. Education Department, have been profiting from private student-loan companies. New York Attorney General Andrew Cuomo said last week that deceptive, unethical and perhaps even illegal practices appear to be the rule not the exception in the $85 billion industry.
This scandal extends to an untold number of colleges and universities. But it's already hit close to home. The University of Texas at Austin has placed its financial aid director on paid leave amid charges that a loan company gave him stock in exchange for inclusion on the school's preferred-lender list.
In the ultra-competitive student loan industry, some lenders have been willing to cross ethical and perhaps even legal lines to earn the preferred-lender designation, as they've provided school officials trips, stocks and consulting fees.
In Texas and elsewhere, parents and students deserve answers. And when schools are found to have inflated loan prices, families deserve to be reimbursed. At least six schools already. plan to refund millions they pocketed through revenue-sharing agreements with private lenders.
The student loan industry exploded as college costs soared, and regulations simply never kept pace. Now, Congress must put rules in place that state the obvious: Universities, financial aid officers and federal officials should not profit from needy students' loans. Preferred lenders should be selected in an open process that evaluates which companies offer students the best deal. Lending corporations should not be permitted to offer schools or individuals stock options, junkets or profit-sharing plans.
Congress also should consider expanding direct lending programs, which provide loans from the federal government. Critics contend that private lenders provide better service, but this kickback scheme suggests that it was greedy financial aid officers, not students, who were best served by the current arrangement.
Financial aid officials are hired to help college students _ not to help themselves to cash, trips, consulting fees and stock options. But this Ethics 101 lesson has been overlooked at many institutions of higher learning across the country.
Securities and Exchange Commission documents reveal that a number of financial aid directors, and at least one senior official at the U.S. Education Department, have been profiting from private student-loan companies. New York Attorney General Andrew Cuomo said last week that deceptive, unethical and perhaps even illegal practices appear to be the rule not the exception in the $85 billion industry.
This scandal extends to an untold number of colleges and universities. But it's already hit close to home. The University of Texas at Austin has placed its financial aid director on paid leave amid charges that a loan company gave him stock in exchange for inclusion on the school's preferred-lender list.
In the ultra-competitive student loan industry, some lenders have been willing to cross ethical and perhaps even legal lines to earn the preferred-lender designation, as they've provided school officials trips, stocks and consulting fees.
In Texas and elsewhere, parents and students deserve answers. And when schools are found to have inflated loan prices, families deserve to be reimbursed. At least six schools already. plan to refund millions they pocketed through revenue-sharing agreements with private lenders.
The student loan industry exploded as college costs soared, and regulations simply never kept pace. Now, Congress must put rules in place that state the obvious: Universities, financial aid officers and federal officials should not profit from needy students' loans. Preferred lenders should be selected in an open process that evaluates which companies offer students the best deal. Lending corporations should not be permitted to offer schools or individuals stock options, junkets or profit-sharing plans.
Congress also should consider expanding direct lending programs, which provide loans from the federal government. Critics contend that private lenders provide better service, but this kickback scheme suggests that it was greedy financial aid officers, not students, who were best served by the current arrangement.
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