18 Jun

Student Loan Scandal

We’ve been getting a lot of calls and e-mails lately from families who are concerned about the student loan scandal and how it will affect them. I’ll address that shortly, but first I’ll give you a quick explanation of the issues that have come to light over the past few weeks.

Upon his entrance into office, New York Attorney General Andrew Cuomo took up the investigative work begun by his predecessor Governor Elliot Spitzer: determining the verity of allegations against student loan lenders and financial aid administrators. Student loan companies were suspected of providing kickbacks to financial aid administrators, in exchange for listing their company on the college’s preferred lender list.

Continued exploration has uncovered further improprieties. Investigators discovered that various college officials sit on loan company boards, while others have accepted gifts of loan company stock. Previous news reports indicated that financial aid officers had received luxurious trips, electronics, and revenue-sharing, based on how much students borrowed from lenders.

In April, after months of investigation, six colleges and several lenders such as Sallie Mae, Citibank, and Education Finance Partners, settled with Cuomo’s office. The NY Attorney General’s office has also drafted the College Lending Code of Conduct. Each of these colleges and lenders has agreed to abide by this new code.

Cuomo’s discoveries, as well as complaints received by the Department of Education, have prompted Congress to get involved. Investigations continue, and more unfortunate lending practices are coming to light.

So, how does this affect your family?

The bottom line is, if you already have loans and are not eligible for consolidation, you’re going to have to stick with what you have.

If, however, you are eligible for consolidation, or if you are planning to take out loans in the future, you need to carefully shop around for a reliable lender with low rates. This may mean going outside the college’s preferred lender list. Look for lenders who discount their interest rates–but be careful! Some lenders require a certain number of on-time payments to qualify for discounts. You want to look for lenders who have a discounted rate–but no catch!

As always, my staff and I are here to support you and your family. Please feel free to call us if you have any further questions.

All the best,
Deborah Fox

Fox College Funding

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