By: Gaurav Bhola, Managing Editor
Monday, June 18, 2007
Gaurav Bhola, Contributing Editor
The majority of students around the country are enjoying their summer off, while some stay behind to take classes. It seems that New York Attorney General Andrew Cuomo is doing homework this summer on the student loan industry. For those unfamiliar with the epic saga taking place, student loan lenders are having their feet put to the fire by Cuomo and Congress.
Cuomo's office has carried out a far-reaching investigation regarding conflicts of interest in the multi-billion dollar student loan industry. The student loan lenders on innumerable occasions have induced college officials with kickbacks of several hues to navigate students toward preferred lenders. Of course, the students and their parents were in the dark about this alliance. Unfortunately for the students, they were unaware that they had options, as would be expected in a competitive marketplace. Millions of student loans, graduate student loans, and parent student loans pay higher loan interest rates to top private lenders which could have been avoided.
For weeks, Cuomo and Congress scrutinized the links between lenders and schools and have attempted to define the outlines of reform. The attempt to stop the fraudulent practices by lenders is a positive step. However, it is just the first of many steps to reform the industry. The core of the issue would remain unresolved. The bills in Congress would not rein in these companies and their rate abuses, which could rise like credit cards without limits. Also, Congress has a responsibility in helping to create such an environment. By their inaction of not increasing the amount you can borrow on federal loans since 1992, more students have had little alternative but to fund a portion, if not all of their education through private lenders. Also, Congress has allowed this industry to grow unchecked and unregulated. The federal government does not guarantee these student loans and has minimal oversight over them.
This oversight of government in regulating these private lenders must be expanded to protect vulnerable students from predatory practices of “profit at all cost”, violating all norms of ethics. I applaud New York Attorney General Andrew Cuomo and some members of Congress such as Senator Edward Kennedy for their attempts at rectifying these problems that plague the student loan industry and universities. Last week, Senator Kennedy issued a report that reinforced the findings of New York's Attorney General of widespread conflicts of interest in the $85 billion-a-year student loan industry.
Kennedy, chairman of the Senate Health, Education, Labor and Pensions Committee, found many instances of private lenders giving gifts, jobs, monies, salaries, positions on advisory boards, and other similar activities to gain influence with university officials. Even though, Kennedy’s report focused exclusively on unethical practices in the government student loan program; nonetheless, the private unregulated loan practices mirror the above incidents. Unless the investigations delve deeply into the crevices of the private student loan industry program; ultimately, the students will be the ones to PAY.
