By rights, a student who calls a college financial aid office should reach one of the college’s aid officers. But that is often not the case, as a front-page article by Jonathan Glater of The Times pointed out last week. Many colleges route student calls to representatives of loan companies who pretend to work for the college but who actually have a vested interest in selling the costliest possible loans.
Colleges portray this as a harmless, cost-saving convenience that allows them to serve students without hiring more staff members. But it is part of a troubling — and possibly illegal — process that finds colleges steering students to “preferred lenders” in exchange for kickbacks based on volume.
Some financial aid officers argue that students are getting the best possible loan rates. That seems dubious, given that “preferred lender” agreements uncovered by prosecutors are based on the payments made to the colleges and make no mention of the interest rates the students will be charged. Deceptive packaging is also a problem. Some lenders name their loans after colleges and universities and use college mascots and logos on Internet sites and correspondence.
Colleges portray this as a harmless, cost-saving convenience that allows them to serve students without hiring more staff members. But it is part of a troubling — and possibly illegal — process that finds colleges steering students to “preferred lenders” in exchange for kickbacks based on volume.
Some financial aid officers argue that students are getting the best possible loan rates. That seems dubious, given that “preferred lender” agreements uncovered by prosecutors are based on the payments made to the colleges and make no mention of the interest rates the students will be charged. Deceptive packaging is also a problem. Some lenders name their loans after colleges and universities and use college mascots and logos on Internet sites and correspondence.
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