More than a year after a scandal involving shady deals between universities and lenders, a new federal law should protect students from being put at risk. Conflicts of interests and disclosure provisions, in particular, will help parents and students make more informed decisions. Financing college is one of the biggest financial decisions a student will make in his or her lifetime. Many go into debt trying to pay for a degree. They needed to be protected from unethical and deceptive practices of those looking to profit from their unfamiliarity. The U.S. Department of Education (DOE) must provide better oversight over lenders and financial aid offices.
Student loans are an $85 billion-a-year industry. Some universities were engaged in financial deals with top lenders in which questionable payoffs were made based on student loan referrals. New York University and the University of Pennsylvania were among those that admitted to so-called revenue sharing arrangements. Other universities employed top financial aid officers who held stock in companies/parent companies of those on their preferred lender lists. In some cases, call centers to which students were directed were staffed by loan company workers, supposedly giving unbiased advice.
There is no hard evidence that students got steered away from lenders offering better deals or shortchanged by those they were referred to. But there shouldn't even be the potential for that happening. When these close lender-school relationships exist, it's hard to believe that getting the best deal for the Loan student is the top priority.
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