Student loan sharks

New York Attorney General Andrew Cuomo is investigating lender-school relations.

Yesterday, one of the largest national providers of private student loans, Sallie Mae, agreed to a settlement that will change the $85 billion industry. New York Attorney General Andrew Cuomo is looking at student loan companies’ practices to help shape a future that is more student-friendly.

Under the settlement, Sallie Mae will pay $2 million to better inform student loan recipients about the loan process, and the company will adhere to new policy regulations set forth by Cuomo.

The New York Attorney General is looking into practices between loan lenders and schools. There is evidence that many loan companies give gifts of money or all-expense-paid vacations to school financial aid officials who in turn recommend the respective companies to students.

This hurts students because their interest is going toward paying for these gifts.

Loan companies are not the only bad guy here. Schools also take part in these agreements by taking preference in certain companies. For this reason, a few schools have agreed to refund students for money that was directed toward these transactions.

Here at the University, there is no preferred list of student loan lenders. The University offers a list of private lenders, but discloses that they do not endorse or accept incentives from the companies. The University will accept and process any private loans from lenders that aren’t included on the list.

It is comforting that the University avoids participating in arrangements with loan providers. With the average graduate leaving the University with over $23,000 in loans to pay back, it is necessary that the University work to keep any costs down that are possible.

However, many private lenders are national companies that are working with schools across the nation. Students at the University might still be sending some money toward these practices.

Massachusetts’ Democratic Sen. Edward Kennedy is encouraging the Securities and Exchange Commission to look further into the student loan industry.