“There is an unholy alliance between banks and institutions of higher education that may often not be in the students’ best interest,” Cuomo said. “The financial arrangements between lenders and these schools are filled with the potential for conflicts of interest. In some cases they may break the law.”How uncool is that?
Investigators found that many colleges have established questionable “preferred lender” lists and entered into revenue sharing and other financial arrangements with those lenders.
In the process, students have been denied their choice of lender, or faced difficulty using that lender, hurting their chances of getting better loan terms, the attorney general said.
Two-thirds of college students take out loans for college, he said.
According to Cuomo, investigators found:
* Lenders pay kickbacks to schools based on a percentage of the loans directed to the lenders.
* Lenders foot the bills for all-expense-paid trips for financial aid officers to posh resorts and exotic locations. They also provide schools with other benefits like computer systems and put representatives from schools on their advisory boards to curry favor.
* Loan companies set up funds and credit lines for schools to use in exchange for putting the lenders on their preferred lender lists and offer large payments to schools to drop out of the direct federal loan program so that the lenders get more business.