The New America Foundation's Higher Ed Watch Project was the first to uncover and publicize illegal payoffs from student loan banks to college financial aid officials. When we discovered that several financial aid directors at major universities and a Department of Education official owned and sold a significant amount of student loan company stock, we became suspicious. Our subsequent investigation and those of others revealed a series of payoffs, kickbacks, and luxury gifts to aid officials, thus compromising college-student relationships. Supposedly impartial intermediaries in the federal financial aid system were operating with substantial personal conflicts of interest.
This page contains information about our investigation and the fallout in the financial aid world, including 10 firings and resignations, hundreds of settlements with state Attorney Generals, and new federal legislation. Below is a chronology of important news articles and opinion pieces, short summaries of valuable investigative stories, and links to some of our sources.
HIGHER ED WATCH NEWS SCOOPS
Loan Company Offers Caribbean Junket to Financial Aid Officers, October 23, 2006
Higher Ed Watch is the first to report that the loan company Loan to Learn offered financial aid administrators a four day, all-expense paid luxury trip to the Caribbean West Indies. Loan to Learn was a private loan company that offered high-cost private loans to students with interest rates as high as 16% per year and origination fees of up to 10%. The company canceled the trip after a flurry of negative media coverage, despite maintaining that the trip was not an advertising ploy for the company's loans.
Stock Options Provided to Financial Aid Officers by Student Loan Provider, April 4, 2007
Higher Ed Watch is the first to report on the Student Loan Xpress stock holdings of three financial aid directors. According to our investigation, financial aid directors at Columbia University, the University of Southern California, and the University of Texas at Austin, were preparing to sell 10,500 "cut-rate insider" shares of stock from the parent company of Student Loan Xpress, which were worth more than $100,000 at the time. The three college aid officials sat on an advisory board that provided strategic advice for Student Loan Xpress.
The investigation prompts the three universities to put the officials on paid leave and draws New York State Attorney General Andrew Cuomo's and Congress' attention to potentially illegal financial compensation by Student Loan Xpress.
Education Department Official Implicated in Widening Student Loan Scandal, April 5, 2007
Higher Ed Watch is the first to report that an Education Department official directly involved with the federal student loan program also held stock in Student Loan Xpress. According to our investigation, the Education Department official, Matteo Fontana, held at least 10,500 shares, worth over $100,000, in Student Loan Xpress as of September 2003. Fontana was in charge of overseeing lenders and guarantee agencies that participate in the Federal Family Education Loan Program (FFELP).
The investigation prompts the Department to place the offical on paid leave and begin a review of its disclosure requirements.
Nelnet's Friend with Benefits, August 7, 2007
Higher Ed Watch is the first to report that Nebraska Attorney General Jon Bruning received campaign contributions from employees at Nelnet, a Nebraska-based student loan company. Bruning had decided to forgive a $1 million settlement that Nelnet had reached with his office in April, after his settlement failed to stop New York Attorney General Andrew Cuomo from pursuing a separate $2 million settlement with the company. Bruning continued to defend Nelnet as an "ethical, decent, and honest company" and attacked Cuomo's student loan investigation as an "embarrassment."
The investigation into his campaign contributions prompts Bruning to reverse his decision and reinstate the $1 million settlement.
October 24-27, 2006
Loan to Learn Offers Caribbean Trip to Financial Aid Officials, Prompts Investigation of Preferred Lender Lists
April 5, 2007
First Investigation of Three Financial Aid Directors
April 6, 2007
Investigation of Department of Education Official
April 7, 2007
Continuing Investigation of Stock Holdings
April 9, 2007
Student Loan Xpress Officials Placed on Leave
April 10, 2007
Three More Financial Aid Administrators Implicated
April 11-12, 2007
Sallie Mae Settles With AG Cuomo
April 13, 2007
Official at the Department of Education Had Disclosed Stock
April 14-15, 2007
More Criticism of Lender Arrangements
April 16, 2007
Education Finance Partners Settles With Cuomo
April 17, 2007
Cuomo's Investigation Expands; Legislation to Bar Lender Perks Introduced in New York
April 18, 2007
Department of Education Blocks Lender Access to Student Loan Database
- New York Times, "U.S. Limits Access to Student Loan Database"
- Washington Post, "U.S. Blocks Lenders From Student Database"
- Washington Post, "Cuomo Moves Quickly to Fill Spitzer's Role"
- Associated Press, "Lenders barred from college-student database"
- Chronicle of Higher Education, "Education Secretary Suspends Access to Student-Loan Database After Reports of Lender Misuse"
- Inside Higher Ed, "U.S. Suspends Lender Access to Borrower Database"
- Associated Press, "California seeks details of student loan deals"
- Associated Press, "NY enlists Illinois, others in investigation of student loans"
- Austin American-Statesman, "UT System orders halt to use of preferred lender lists"
- Milwaukee Journal-Sentinel, "MATC gets perks from top lenders"
April 19, 2007
Rep. Miller Urges Sec. Spellings to Issue Emergency Regulations
April 20, 2007
Cuomo Announces He Will Sue Drexel
April 21-23, 2007
Nelnet Discloses Ties, Signs Agreement with Nebraska AG
- New York Times, "Student Lender Discloses Ties to Colleges That Included Gifts to Officials"
- Associated Press, "Bruning Says Nelnet Mistakes Small"
- Chronicle of Higher Education, "Nelnet Signs Voluntary Agreement With Nebraska Attorney General but Remains Under Scrutiny in New York"
- Chronicle of Higher Education, "Panel's Negotiations Over Preferred-Lender Lists End in Stalemate"
- Inside Higher Ed, "Updates on the Loan Scandal"
- Washington Post, "Federal Overseer Of Student Loans Invested in Lenders"
- Wall Street Journal, "Read the Fine Print on Student Loans" (subscription only)
- Associated Press, "University ends student loan commissions, denies any wrongdoing"
- Philadelphia Inquirer, "Drexel denies conflict on loans"
- Austin American-Statesman, "Student loan investigation a wakeup call for Texas colleges"
April 24, 2007
First Multistate Settlement with Three Colleges
April 25, 2007
Sec. Spellings Announces New Student Loan Task Force; NASFAA Considers Policy Changes
April 26, 2007
Coverage of Cuomo's Testimony at House Hearing
April 27-30, 2007
Kennedy Opens Probe Into Collection Tactics; Local Investigations Continue
May 1, 2007
6 More Colleges Adopt Cuomo's Code of Conduct; ED Announces It Will Restore Access to Student Loan Database
May 2, 2007
Miller Requests Documents from White House on Student Loan Correspondence
May 3, 2007
Enzi Introduces Student Loan Legislation; Miller Requests FTC Investigation; Student Loan Database Reopened
May 4, 2007
Cuomo Expands Investigation to Alumni Associations
- New York Times, "Loan Inquiry Turns to Deals With Alumni Associations"
- Washington Post, "Student Loan Probe Expands to Include Alumni Associations"
- Associated Press, "Cuomo Widens Student Loan Investigation"
- Los Angeles Times, "N.Y. expands student loan investigation"
- Wall Street Journal, "Student Loan Probe Widens to Alumni Groups" (subscription only)
- Inside Higher Ed, "New Targets in Loan Inquiry"
- Chicago Tribune, "Alumni groups targeted for ties to loan firm"
- San Francisco Chronicle, "Alumni groups asked to reveal student loan deals"
- Chronicle of Higher Education, "Rhode Island Treasurer Says Loan Authority Should Quit Letting Nelnet Employees Run Student-Advice Center"
- Providence Journal, "R.I. student loan agency’s ties to private firm under fire"
- Austin American-Statesman, "UT aid director signed ethics rules document"
- Newark Star Ledger, "Records demanded in college loan probe"
- Minneapolis Star Tribune, "Inquiries cast pall over student loan officials' fete"
May 5-7, 2007
IG Begins Inquiry into ED Oversight; New Jersey AG Investigates Guaranty Agency Arrangement with Lender
May 8, 2007
New York Legislature Passes Student Loan Code of Conduct into Law
May 9, 2007
Theresa Shaw Resigns from ED Student Loan Office; Sunshine Bill to be Introduced in House
- New York Times, "Federal Student Loan Official Is Resigning"
- Washington Post, "Federal Student Loan Chief Will Step Down"
- Chronicle of Higher Education, "Theresa Shaw, Head of Education Department's Student-Aid Office, to Step Down"
- Chronicle of Higher Education, "U.S. House to Vote on Bill That Would Set Ethical Guidelines for Colleges"
- Inside Higher Ed, "House to Act Fast on Student Loans"
- Associated Press, "Student loan official at Education Department steps down"
- Des Moines Herald, "Lender asks about reimbursements"
- Columbus Dispatch, "College education foundations to get state scrutiny"
- Miami Herald, "State schools asked about loan practices"
- Cincinnati Enquirer, "Alumni deal with lender scrutinized"
May 10, 2007
Student Loan Sunshine Act Passes House
May 11, 2007
Coverage of Spellings' Testimony at House Hearing; Cuomo Reaches Settlement with Student Loan Xpress
- New York Times, "Spellings Rejects Criticism on Student Loan Scandal"
- Washington Post, "Education Secretary Defends Loans Record"
- Chronicle of Higher Education, "In Congressional Hearing, Spellings Defends Department's Oversight of Loan Programs"
- Chronicle of Higher Education, "Cuomo Settles With Student Loan Xpress, but Investigation Into Lender's Top Executives Continues"
- Insider Higher Ed, "Sparring With the Secretary"
- Associated Press, "Spellings defends oversight of student loan industry"
- Wall Street Journal, "Spellings Defends Loan-Program Oversight" (subscription only)
- Indianapolis Star, "IU caught up in student-loan inquiry"
- Milwaukee Journal Sentinel, "UW System aims at loan conflicts"
- Palm Beach Post, "Attorney general probes student lenders"
May 12-15, 2007
UT Fires Financial Aid Director Larry Burt
May 16, 2007
Cuomo Settles With Two More Universities
- Associated Press, "Two more universities settle student loan cases"
- Chronicle of Higher Education, "2 More Universities Settle With Cuomo in Lender Controversy, Including One That Vowed a Court Fight"
- Inside Higher Ed, "Drexel to Cuomo: Um, Never Mind"
- Wall Street Journal, "Drexel, Capella Universities Settle Allegations Tied to Student Loans" (subscription only)
- Philadelphia Inquirer, "Drexel agrees to loan refunds"
- Minneapolis Star-Tribune, "Capella settles over student loan gifts"
- St. Petersburg Times, "They dine on lender dimes"
May 17-24, 2007
Two More Financial Aid Directors, at Johns Hopkins and Columbia, Forced Out
- New York Times, "Columbia Fires Its Director of Student Aid"
- Washington Post, "Johns Hopkins Aid Official Resigns"
- Chronicle of Higher Education, "2 More University Officials Lose Jobs in Student-Loan Scandal"
- Inside Higher Ed, "2 More Aid Directors Fall"
- Wall Street Journal, "University Officials Ousted Over Deals With Lender" (subscription only)
- Baltimore Sun, "Hopkins aid officer resigns"
- Chronicle of Higher Education, "Colleges Serving as Their Own Lenders Brace for Battle as Congress Cracks Down on Ethics"
- Des Moines Register, "Student loan firm to cease payments"
- Knoxville News Sentinel, "College preferred-lender lists under scrutiny"
- Bloomberg News, "Financial Aid Group Pledges Tougher Student-Loan Code"
- Associated Press, "Cuomo, trade group debate code of conduct for student loan officers"
- Associated Press, "UT-Austin reaches ethics pact with AG over student lenders"
- South Florida Sun-Sentinel, "FAU to cut ties with student loan companies that offered incentives"
- Boston Globe, "Bill would set code for lenders"
- Reuters, "MyRichUncle: Student Lender Leverages Loan Scandal"
- St. Petersburg Times, "Agents raid student loan business"
May 29-30, 2007
Wells Fargo, the Last of the 5 Largest Student Loan Companies, Agrees to Cuomo's Code of Conduct
- New York Times, "Agreeing to Code of Conduct on Student Loans"
- Chronicle of Higher Education, "Another Major Lender, Wells Fargo, Agrees to Observe Cuomo's Code of Conduct"
- Bloomberg News, "N.Y. Reaches Accord With Wells Fargo on Student Loans"
- USA Today, "Reforms? Not for rates on private student loans"
- Chronicle of Higher Education, "The Selling of Student Loans"
- San Antonio Express-News, "UTSA staff got treats from loan companies"
- Gainesville Sun, "UF officials not sweating loans probe"
- The Buffalo News, "An education in college loans"
June 4-5, 2007
Department of Education Releases New Rules for Student Lenders
June 11-12, 2007
Growing Concerns about Students Coping with Private Loan Debt
- New York Times, "Private Loans Deepen a Crisis in Student Debt"
- Chronicle of Higher Education, "Congress May Revisit Bankruptcy Protection for Student Borrowers"
- Chronicle of Higher Education, "Congress Considers Linking Student-Loan Terms to Income"
- Chronicle of Higher Education, "Education Department Whistle-Blower Says Agency Ignored His Report on Private Lending"
June 12-14, 2007
House Education Committee Passes Bill Cutting Lender Subsidies
June 15, 2007
Sen. Kennedy Releases Report on Student Loan Scandals; JHU Settles with Cuomo
June 16-18, 2007
More College Officials Implicated
June 19-22, 2007
Senate Education Committee Passes Higher Ed Reconciliation/Reauthorization Bills; More Investigations into Student Loan "Redlining"; More Lenders Agree to Cuomo's and State-Level Codes of Conduct
- New York Times, "Some Lenders Are Setting Rates College by College"
- Washington Post, "Sen. Kennedy offers Student Loan Reforms"
- Washington Post, "Student Loan Overhaul Advances"
- Wall Street Journal, "Bias Cited in College Lending" (subscription only)
- Wall Street Journal, "Senate Panel Approves Loan Bill Cutting Subsidies to Lenders" (subcription only)
- Wall Street Journal, "Banks to Adopt Code of Conduct For Student-Lending Practices" (subscription only)
- Associated Press, "Cuomo: Lenders ‘Redlining’ Student Loans"
- Associated Press, "Mo. colleges sign student loan code"
- Boston Globe, "Emerson College fires dean with ties to lending company"
- Chronicle of Higher Education, "Senate Reauthorization Bill Would Increase Pell Grants, Federal Oversight"
- Chronicle of Higher Education, "Senate Bill Would Cut Loan Subsidies to Increase Student Aid"
- Chronicle of Higher Education, "Student-Loan Inquiry Expands to Examine Issues of Race"
- Chronicle of Higher Education, "Attorneys General Press Senate for New Student-Lending Rules"
- Chronicle of Higher Education, "Cuomo Settles With 3 More Student-Loan Companies in College-Lender Investigation"
- Chronicle of Higher Education, "Emerson College Fires Dean of Enrollment as Fallout From Student-Loan Investigations Continues"
- Inside Higher Ed, "Students’ Gain, Lenders’ Pain"
June 23-29, 2007
Lenders Fight Subsidy Cuts and Loan Auction Proposals
- Chronicle of Higher Education, "Student-Loan Companies Meet to Fight Planned Cuts in Federal Subsidies"
- Chronicle of Higher Education, "Congress May Radically Change How Student-Loan Subsidies Are Set"
- Chronicle of Higher Education, "Jet Set: Sallie Mae's Plane Was Fine for Senator Kennedy Before Lender Controversy Took the Spotlight"
- Inside Higher Ed, "Should Student Loans Go to Market?"
- Baltimore Sun, "Maryland colleges sign code of conduct"
July 9-10, 2007
Financial Aid Officials Meet at Annual NASFAA Conference and Discuss Loan Scandal
- Chronicle of Higher Education, "Financial-Aid Officials Consider Effects of Loan Scandal and Forgo Perks From Lenders at Annual Meeting"
- Chronicle of Higher Education, "Education Department Describes Warnings to Colleges That Rely on a Single Student Lender"
- Inside Higher Ed, "From Anger to Acceptance"
- Inside Higher Ed, "Informing Students About Private Loans"
- Inside Higher Ed, "Education Department, on the Case"
- Inside Higher Ed, "A Washington Mystery"
- Chicago Tribune, "College-aid officials 'hear outcry'"
- Chicago Tribune, "College-loan warnings sent"
- Reuters, "US flags hundreds of colleges on student loans"
July 11-12, 2007
House Passes College Cost Reduction Act, 273-149
- New York Times, "House Passes Overhaul Plan on Student Aid"
- New York Times, "Lenders Appeal to Democrats on Subsidy Cuts"
- Washington Post, "House Backs Increasing Student Loans"
- Associated Press, "House OKs cuts to student loan rates"
- Chronicle of Higher Education, "U.S. House Passes Bill to Cut Lender Subsidies to Pay for Pell Grant Increase and Other College Aid"
- Chronicle of Higher Education, "Loan-Subsidy Cuts Sought by Congress Would Still Leave Profits for Lenders, Study Finds"
- Inside Higher Ed, "Raucous House Passes Student Aid Bill"
- Inside Higher Ed, "Bush Threatens Veto of Student Aid Bill"
- Gannett, "Petri backs bill on remaking student aid programs"
- U.S News & World Report, "Student Loan Reform Still Faces Obstacles"
July 16-19, 2007
Spending by Nonprofit Lender Educap / Loan to Learn Questioned
July 20, 2007
Senate Passes Budget Reconciliation Legislation, 78-18; Amendment that Would Have Reduced Lender Subsidy Cuts is Defeated; College Loan Corporation Settles with AG Cuomo
- Washington Post, "Senate Approves Overhaul of Student Loan Program"
- New York Times, "Large Student Lender Agrees to Code of Conduct, Settling New York Inquiry"
- Wall Street Journal, "Senate Bid to Cut Subsidy For Student Lenders Fails" (subscription only)
- Wall Street Journal, "Senate Bill to Cut Subsidies For Student Lenders Passes" (subscription only)
- Chronicle of Higher Education, "Senate Set to Debate Amendment to Reduce Cut in Lender Subsidies"
- Chronicle of Higher Education, "Senate Passes Budget-Reconciliation Bill After Rejecting Plan to Scale Back Cuts in Lender Subsidies"
- Inside Higher Ed, "Possible Reprieve for Lenders"
- Inside Higher Ed, "Senators Side With Students"
- Associated Press, "Nelnet to Lobby on Student Loan Bills"
- U.S. News & World Report, "Student Loan Report: Confusion Reigns"
July 23-26, 2007
Senate Passes Higher Education Act Reauthorization, 95-0, with Stricter Regulations on Loan Industry; More Scrutiny of Educap / Loan to Learn
- New York Times, "Senate Adopts Ethics Crackdown on Student Loan Industry"
- Washington Post, "Senate Seeks Student Loan Firm's Data"
- Chronicle of Higher Education, "Senate Debates Higher Education Act, Rejecting Controversial Amendment to Create Federal Loan Program"
- Chronicle of Higher Education, "Senate Passes Sweeping Higher Education Bill, Including a Code of Conduct for College-Lender Relationships"
- Inside Higher Ed, "The Evolving Higher Ed Act Bill"
- Inside Higher Ed, "Unanimity in the Senate"
- Associated Press, "Senate Bill Streamlines Student Loans"
- Austin American-Statesman, "Lenders supplied meals, sweets to A&M financial aid office"
- Detroit Free Press, "Law school named in loan probe"
July 27-August 1, 2007
Nelnet Settles with AG Cuomo for $2 Million and Ends Deals with Alumni Associations; Other Higher Education Relationships Questioned
- New York Times, "Lender Agrees to Contribution of $2 Million to a Student Fund"
- Associated Press, "Nelnet Cuts Ties to Alumni Associations"
- Chicago Tribune, "Student lender severs ties to 3 alumni groups"
- Chronicle of Higher Education, "Nacubo Notebook: Business Officers Lament Toll of Student-Loan Scandal, as One of Them Describes Federal Inquiry"
- Chronicle of Higher Education, "Program for 'Exceptional Performers' on Student Loans Should Be Eliminated, Government Report Concludes"
- Inside Higher Ed, "Inside the Cuomo Probe"
- Inside Higher Ed, "Cuomo Targets Fire Back"
- Dallas Morning News, "Lenders showered perks on UTA, UTD aid officers"
- Dallas Morning News, "UT tightens rules on gifts, trips from student loan companies"
August 2, 2007
GAO Report Criticizes Education Department's Oversight of Student Loans; Educap / Loan to Learn Cuts Jobs, Begins Shutdown; AG Cuomo Starts Investigation into Deals Between Lenders and Athletics Departments; Senate Banking Committee Passes Private Loan "Sunshine" Legislation
- New York Times, "Education Dept. Criticized as Lax in Policing Loans"
- Washington Post, "Top Private Education Lender Cuts Jobs"
- Chronicle of Higher Education, "Education Department's Oversight of Lenders Has Been Lax, Government Report Says"
- Chronicle of Higher Education, "N.Y. Attorney General to Investigate Student-Loan Arrangements in 40 Athletics Departments"
- Chronicle of Higher Education, "Senate Committee to Consider Bill to Increase Openness About Terms of Private Loans"
- Inside Higher Ed, "Student Loan Potpourri"
- Associated Press, "Cuomo investigating whether athletic departments took kickbacks"
- Wall Street Journal, "How One Firm Mined the Student-Loan Mess" (subscription only)
- Chicago Tribune, "Student lender paid university for promotion"
- Detroit Free-Press, "3 Michigan universities subpoenaed"
August 3-10, 2007
Nebraska AG Jon Bruning Forgives Previous Nelnet Settlement, Fires Criticism at AG Cuomo; Sec. Spellings Urges Colleges and Lenders to Adopt Loan Regulations Before They Go into Effect
- Omaha World-Herald, "Bruning's Nelnet action studied"
- Omaha World-Herald, "Bruning rips N.Y. efforts, feels heat in Nebraska"
- New York Times, "Education Dept. Seeks Early Compliance on Loan Rules"
- Chronicle of Higher Education, "Spellings Describes Scrutiny of Colleges in Lending Controversy, Urges Use of Guidelines"
- Chronicle of Higher Education, "Nonprofit Lenders, While Helping Students, Help Themselves"
- Inside Higher Ed, "Embrace Student Loan Reforms, Spellings Urges"
- Dallas Morning News, "UTA alumni association was paid to tout loan company"
- Cleveland Plain Dealer, "4 Ohio colleges' records requested in loan probe"
- North Jersey Record, "Rutgers probed over $15,000 fee from lender"
- The Athens News, "OU officials say they've got nothing to hide in loan investigation"
- Detroit Free-Press, "Colleges defend ties to lender"
- Detroit Free-Press, "Some lender lists look university-approved"
August 11-15, 2007
Nebraska AG Jon Bruning Reinstates Nelnet Settlement
August 23, 2007
College Board Ends its Student Loan Activities
September 1-2, 2007
First Marblehead Comes Under Scrutiny
September 5, 2007
New Report from Sen. Kennedy Details Quid Pro Quos in Student Loan Industry
September 6-7, 2007
Congress Passes Budget Reconciliation Bill; Boosts Pell Grant and Cuts Stafford Interest Rates
September 11-27, 2007
IG Criticizes Ed Department Oversight of Guarantee Agencies; Colleges Look at Broader Conflict of Interest Issues
September 28, 2007
President Bush Signs College Cost Reduction and Access Act into Law
October 1-12, 2007
AG Cuomo Investigates Loan Marketing
Tactics; Senator Hillary Clinton Attacks FFEL
October 15-November 10, 2007
Ed Department Announces New Student Loan Regulations, Begins Investigation of Colleges with One Primary Lender
- Washington Post, "Student Loan Industry Faces New Rules From Education Dept."
- Inside Higher Ed, "The Education Department’s Activist Agenda"
- Chronicle of Higher Education, "Education Department Issues New Student-Loan Regulations"
- Chronicle of Higher Education, "Education Department Seeks More Information From 55 Colleges on Dealings With Student Lenders" (subscription only)
- Wall Street Journal, "Parsing Candidates' Student-Loan Proposals"
- Associated Press, "Should schools warn students about debt?"
- Des Moines Register, "Iowa Student Loan board has conflicts, audit finds"
- Des Moines Register, "E-mails detail student loan firm's drive for profits"
- Des Moines Register, "Student loan deal was illegal, claims fired exec's lawsuit"
- Chronicle of Higher Education, "Web Sites Face Hurdles in Promising Students Unbiased Loan-Rate Comparisons" (subscription only)
- Chronicle of Higher Education, "Iowa Lawmakers Shine Spotlight on Lending Abuses" (subscription only)
November 11-16, 2007
House Ed and Labor Committee Approves Higher Education Act Reauthorization Bill
November 17-December, 2007
Inquiries into Practices of State Non-Profit Lenders Continue; AG Cuomo Issues Code of Conduct for Direct Student Loan Marketing
Student Lenders Deal with Declining Profits and Loss of Political Favor; Colleges Face Conflict of Interest Questions
- Chronicle of Higher Education, "Student-Aid Administrators Try to Repair Their Image" (subscription only)
- Chronicle of Higher Education, "Lenders, After Losing Subsidy Battle, Face More Hurdles in the Details" (subscription only)
- Chronicle of Higher Education, "Student-Loan Companies Sit and Watch as Regulatory Machinery Eats Away at Profits" (subscription only)
- Chronicle of Higher Education, "As Political Power Shifts, Student-Loan Companies See Their Profit-Making Abilities Slipping Away" (subscription only)
- Inside Higher Ed, "Questions, Not Answers, on Conflicts of Interest"
- Chronicle of Higher Education, "Universities' Conflict-of-Interest Policies Are Doomed to Fail, Scholar Says" (subscription only)
House Passes Higher Education Act Reauthorization, Cuomo expands his probe into other areas
- Inside Higher Ed, "Higher Ed Act Gets Hairier"
- Chronicle of Higher Education, "House Bill Retains Controversial Default-Rate Plan but Adds Safeguards" (subscription only)
- Inside Higher Ed, "Today’s the Day for HEA"
- New York Times, "House Passes Bill Aimed at College Costs"
- Washington Post, "House Backs Billions in New College Aid"
- Associated Press, "House approves legislation to help curb college costs, limit student debt"
- Inside Higher Ed, "House, Focusing on Cost, Approves Higher Education Act"
- Chronicle of Higher Education, "House Passes Sweeping Bill to Renew Higher Education Act" (subscription only)
- Associated Press, "Pa. student loan agency told to pay legal fees in access battle"
- New York Times, "Helicopter School Closes, Leaving Students in Lurch"
- California Chronicle, "Students victimized by predatory student lending practices"
- Inside Higher Ed, "Loan Guarantor and Attorney General Settle in N.J."
- PR Newswire, "PA Attorney General Corbett Announces $200,000 Settlement in Lehigh Valley College"
- Chronicle of Higher Education, "Cuomo's Latest Targets Include Universities' Deals With Credit-Card Providers" ($)
Closer looks into colleges' deals with credit card companies, PHEAA tires of scrutiny
- Chronicle of Higher Education, "Cuomo Subpoenas Sallie Mae, Questions Textbook and Snack Deals"
- Wall Street Journal, "Sallie Discloses New York Probe Into a Student-Loan Product"
- USA Today, "Colleges' debit-card deals draw scrutiny"
- Chronicle of Higher Education, "Nelnet Abandons 'School-as-Lender,' One of Last Year's Political Targets"
- Chronicle of Higher Education, "Students Want Limits on Credit-Card Marketing, Survey Finds"
- Inside Higher Ed, "A Swipe at Credit Card Marketing"
- USA Today, "Credit cards go after college students"
- Chronicle of Higher Education, "Pheaa Directors Want Pennsylvania to Wrap Up Probe of the Agency's Spending"
Sallie Mae still keeps ties with college financial aid websites, more concerns about student credit card marketing
Concerns about loan availability lead the ED Dept. to relax previously enacted restrictions on preferred lender lists
More information on private loan borrowing, while the Federal Trade Commission tries to tackle deceptive marketing
More details emerge on Sallie Mae's ties to the country's largest guaranty agency; Congress gets closer to renewing the Higher Education Act
- Chronicle of Higher Education, "Education Dept. Endorses Sallie Mae's Ties to USA Funds but Asks More Questions" (subscription only)
- Chronicle of Higher Education, "Education Dept. Auditor Doesn't See Loan Abuses Retiring With Him" (subscription only)
- Inside Higher Ed, "Lenders’-Eye View of the Credit Crisis"
- Chronicle of Higher Education, "At Student-Aid Conference, Talk of Debt, Ethics, and Salaries" (subscription only)
- Chronicle of Higher Education, "House and Senate Negotiators Approve Compromise Higher Education Act" (subscription only)
- Inside Higher Ed, "7 Years, 1,158 Pages ... and Almost Done"
- Reuters, "Higher education bill moves closer to passage"
State audit is critical of the Pennsylvania Higher Education Assistance Agency
Several lenders agree to a student loan code of conduct put forth by New York State Attorney General Andrew Cuomo
Iowa's state attorney general finds wrongdoing by the Iowa Student Loan Liquidity Corporation
Cuomo settles with another student loan company; investigations into college and university presidents' role on corporate boards
Another loan company settles, while the Department's Inspector General releases another critical audit of the Office of Federal Student Assistance
Iowa Student Loan Company changes board makeup following audit, while an Ohio company is accused of violating a rule banning lenders fom paying for loan volume
This is a collection of editorial and op-eds written on issues relating to the student loan scandals.
- New York Times, "The Widening College Loan Scandal"
- Washington Post, "Student Loans"
- Los Angeles Times, "Insider aid at universities"
- San Francisco Chronicle, "How good is your college loan?"
- Baltimore Sun, "The scandal in student loans"
- New York Daily News, "Schools for scandal"
- New York Post, "Cuomo Smells Blood"
- Austin American-Statesman, "Reminder: Financial aid is for students"
- Boston Globe, "Educated, and legal, borrowing"
- Chicago Tribune, "E-Z Loan U."
- New York Times, "Needless Student Loan Subsidies"
- Miami Herald, "Students easy prey to clever lending tactics"
- Washington Post, "Lender's Paradise"
- USA Today, "Shady practices taint college loan business"
- Christian Science Monitor, "Don't just tweak student loans"
- Milwaukee Journal Sentinel, "Cut out middle man"
- Houston Chronicle, "Not a pretty picture"
- New York Times, "Congress and the Student Loan Scam"
- The Republican, "Student loan program needs to be reworked"
- Macon Telegraph, "Breaking the taxpayers' piggy bank for private gain"
- Atlanta Journal Constitution, "College loan scandal"
- Contra Costa Times, "Loan scams hideous"
- Cherry Hill Courier Post, "Let student loan firms compete for business"
- St. Petersburg Times, "Cozy loan deals deserve scrutiny"
- New York Times, "Educating the Education Secretary"
- Indianapolis Star, "Be sure school loan game doesn't deal out students"
- New York Times, "Fixing the Student Loan Mess"
- Washington Post, "Belated Insight"
- Austin American-Statesman, "Necessary reminder: Financial aid is for the students"
- St. Cloud Times, "Universities, lenders need to follow ethics code"
- Chicago Sun-Times, "Fix law regulating private student loans"
- Kansas City Star, "Protect students and their families from unwieldy loans"
- New York Times, "Fixing the College Loan Mess"
- St. Louis Post-Dispatch, "Students Gain, Lenders Lose"
- Boston Globe, "Financial Aid 101"
- Palm Beach Post, "End gouging of students"
- Cleveland Plain Dealer, "Keeping colleges, lenders honest"
- Detroit Free Press, "As tuitions rise, Congress can help by cutting corruption in student loans and by making more money available"
- USA Today, "Shift the dollars to students and away from lenders"
- Shreveport Times, "College cost reduction act deserves support"
- Washington Post, "A Student Loan Bill"
- Austin American-Statesman, "Student loan system needs major overhaul"
- St. Petersburg Times, "Time to do something for students"
- Cleveland Plain Dealer, "It's about time Congress put students, not banks, first in student loans"
- Boston Globe, "Tuition relief mission"
- Appleton Post Crescent, "Student loan repayment plan worthy"
- Palm Beach Post, "Too weak on college loans"
- Atlanta Journal-Constitution, "Enrich students, not college officials"
- Philadelphia Inquirer, "College-Loan Industry"
- The Hartford Courant, "A Kickback is a Kickback"
- Palm Beach Post, "It's student loan reform that will help students"
- Austin American-Statesman, "Vote for bigger student-loan purse"
- USA Today, "Sweetheart deals let schools cash in at students’ expense"
- Des Moines Register, "Tighten oversight of Iowa Student Loan"
- Stephen Burd, Los Angeles Times, "The student-loan scam"
- Stephen Burd, National Public Radio, "Tracking the money in the student loan industry"
- Stephen Burd, Marketplace, "Student loan deals draw legal interest"
- Jeff Birnbaum, Marketplace, "Lending bipartisan support to student loan changes"
- Robert Reich, Marketplace, "Direct loans only, please"
- Michael Dannenberg, CNBC, Wall Street Journal Report with Maria Bartiromo
- Michael Dannenberg, New York Daily News, "When student lenders compete, N.Y. wins"
- Robert Kuttner, Boston Globe, "Privatizing and profiteering"
- Kit Lively, Dallas Morning News, "College loans must benefit the students"
- Dallas Martin, USA Today, "More transparency needed"
- Froma Harrop, Houston Chronicle, "How to get obscenely rich in today's Washington"
- Robert Maurer, Inside Higher Ed, "Presidents and the Student Loan Mess"
- Marie Cocco, Indianapolis Star, "Student loan shenanigans"
- Barmak Nassirian, Insider Higher Ed, "Maggie ... Yer Doin’ a Heck of a Job!"
- Kate Sabatini & Pedro de la Torre III, Baltimore Sun, "Federal aid fails needy students"
- William Bainbridge, Florida Times-Union, "Thumbs up for whistle-blower; thumbs down for Spellings"
- Michael Lomax, Atlanta Journal-Constitution, "Help students avoid debt trap"
- Mark A. Shiffrin & Avi Silberschatz, Boston Globe, "Regulating the business of education"
- Madeleine May Kunin, New York Times, "A Math Lesson on College Loans"
- Kevin Bruns, Kansas City Star, "Guaranteed loans work"
- Nomi Prins, Newsday, "Put Student Loans in Federal Hands"
- Meyer Eisenberg & Ann H. Franke, Chronicle of Higher Education, "Financial Scandals and Student Loans"
- Robert Murphy, Townhall, "The Student Loan 'Crisis'"
- Lindsey Luebchow, St. Louis Post-Dispatch, "Taxpayers' financial aid should benefit students, not big banks"
- Leslie Carbone, St. Louis Post-Dispatch, "Reforms should include government programs, not just private lenders"
- Joe Belew, USA Today, "Reform might hurt students"
- Frederick M. Hess & Juliet Squire, Inside Higher Ed, "More Than Band-aids"
- David Moss, Forbes, "Leave No Risk Behind"
- Jonathan Brown, Inside Higher Ed, "The Shamrock Principle"
- Robert Murphy, New York Daily News, "Reject Cuomo's bogus student loan fix"
- Arthur M. Hauptman, Inside Higher Ed, "The Wrong Type of Auction"
- Joe Nocera, New York Times, "The Profit and the Pauper"
- Jesse Jackson, Chicago Sun-Times, "Don't let banks prey on college students"
- Leslie Carbone, Springfield News-Leader, "Transparency, not big government, the answer for bad student lending"
- James Surowiecki, The New Yorker, "Rent-Seekers"
- Michael Kinsley, Washington Post, "The Wacky World of Student Loans"
- Frederick M. Hess & Juliet Squire, Chronicle of Higher Education, "The Student-Loan System Needs a Major Overhaul" (subscription only)
- Eileen Ambrose, Baltimore Sun, "Getting it right with student loans"
- Andrew Cuomo, Baltimore Sun, "Restore Trust in Student Loans"
- Allan J. Knepper, Milwaukee Journal Sentinel, "Why the Handouts for College?"
- Jonathan Vogel, Inside Higher Ed, "What’s Ahead on Student Loans in 2008"
- John Walda, USA Today, "Deals Benefit Students"
News stories that went beyond reporting and investigated a particular issue in depth:
Inside Higher Ed, "Scrutiny and Self-Scrutiny on Student Loans," April 6, 2007
Conflicts of interest exist within the National Association of Student Financial Aid Administrators (NASFAA) because of significant financial support from the student loan industry. The laissez-faire attitude of the association toward student lender practices could partially be to blame for the questionable actions of financial aid administrators.
- New York Times, "Student Lender Planned to Woo Officials," April 10, 2007
Student Loan Xpress had specific, calculated strategies to ingratiate the company with colleges and universities. To get on preferred lender lists, three top executives targeted financial aid directors using placement on advisory boards, compensation for consulting, and stock options.
Associated Press, "Cuomo: School Loan Corruption Widespread," April 10, 2007
New York State Attorney General Andrew Cuomo speaks out about the unraveling student loan scandal. Admitting the problem is bigger than he originally thought, Cuomo says these questionable practices are the rule rather than the exception.
New York Times, "Senate Inquiry in Loan Case Is Studying Stock Transfer," April 11, 2007
Senator Edward Kennedy calls for federal regulators to look into stock received from Student Loan Xpress. Fabrizio Balestri, an executive at Student Loan Xpress, may have illegally sold private company stock to financial aid directors and a Department of Education official, calling the transfers "gifts."
Chronicle of Higher Education, "Advisory Boards That Include College Officials Are Common Among Lenders, But Most Offer No Pay," April 11, 2007
Financial aid directors sometimes serve on student loan advisory panels, and often those student loan companies pop up on their preferred lender lists. Directors may not receive pay, but there are still perks to serving on panels – perks that can create a conflict of interest.
Wall Street Journal, "Trade Group Saw Possible Conflicts In Student Loans" (subscription only), April 11, 2007
The National Association of Student Financial Aid Administrators (NASFAA) has some questionable connections to the student loan industry. When NAFSAA's board had the chance to regulate lender gifts, it voted against any regulations, and in the past the association has sided with the loan industry on student loan reform issues.
Chronicle of Higher Education, "Sallie Mae Will Pay Settlement of $2-Million in New York Investigation of Lenders' Practices," April 12, 2007
New York State Attorney General Andrew Cuomo and Sallie Mae may have reached a settlement, but the company has promised colleges that it will continue to operate in the same manner, including providing questionable "opportunity loans." While Cuomo stated that Sallie Mae engaged in "acts, practices, and omissions" that violated several laws, Sallie Mae touted the settlement as affirming its "ethical market practices" and did not admit to any wrongdoing.
Wall Street Journal, "Did Revolving Door Lead To Student Loan Mess?" (subscription only), April 13, 2007
Many Department of Education employees have ties to the student loan industry, either having been employed by student lenders or having worked in a related field. This revolving door may have contributed to the current student loan scandal, as the Department has done little to regulate conflicts of interest and has been lenient with disclosure requirements.
New York Times, "Lenders Sought Edge Against U.S. in Student Loans," April 15, 2007
Student loan companies have successfully prevented the government’s Direct Loan program from competing with the Federal Family Education Loan (FFEL) program by offering potentially illegal financial inducements to colleges to leave the Direct Loan program, including pots of money for "opportunity loans," or high-interest private loans for high-risk borrowers. In conjunction with lax oversight by a friendly administration, private lenders have taken business away from the Direct Loan program, which is cheaper to administer.
Washington Post, "Lenders Misusing Student Database," April 15, 2007
Student lenders may be improperly mining confidential student data from a national database run by the Department of Education. The Department is considering a temporary shutdown of the database, as both college and Department officials have raised concerns that lenders are using the database for consolidation or private loan marketing purposes.
- Wall Street Journal, "Lenders Ply Aid Officials At Schools With Free Stuff" (subscription only), April 17, 2007
Gifts from student loan companies to financial aid officials, such as dinners, gift certificates, and DVD players, have become commonplace in recent years. Attorney General Andrew Cuomo is urging the entire student loan industry to adopt a "Student Loan Code of Conduct," which would include banning gifts worth more than a "nominal" value.
Raleigh News & Observer, "Scandal gets aid officers thinking," April 18, 2007
A local investigation reports on referral deals between alumni associations and student loan consolidation companies. Some alumni associations have entered into contracts with loan companies under which a certain amount of money is "kicked back" to the association for every alumni that consolidates student loans with that company.
New York Times, "Colleges Relying on Lenders to Counsel Students," April 21, 2007
Some universities use private student loan companies to conduct exit counseling sessions for their students, which are mandatory if a student has federal loans. These lenders often do not disclose their affiliations and take advantage of the sessions to market their consolidation loans to students.
The Daily Texan (University of Texas-Austin), "Gifts were factored into UT's ranking of preferred lenders," April 30, 2007
A college newspaper uncovers that the Office of Student Financial Services at UT-Austin accepted and used gifts to decide which lenders were chosen for its preferred lender list. One of the criteria on the office's lender list analyses was "OSFS visibility...based on the number of lunches, breakfasts and extracurricular functions for entire OSFS staff." Gifts included happy hours, steak dinners, birthday cakes, and golf outings, and documents reveal that certain financial aid officers went out of their way to maintain these preferred lender relationships.
Washington Post, "Warnings On Student Lenders Unheeded," May 1, 2007
In 2001, the Bush administration abandoned a proposal drafted by the Department of Education under Clinton to more clearly define which lender practices violate federal prohibitions. In addition, the Department has been aware of allegations of improper behavior since 1999, and industry executives have specifically asked the Department for guidelines on prohibited inducements.
Newark Star-Ledger, "College loan panel drops lender deal," May 1, 2007
New Jersey's state student loan guarantor, the Higher Education Student Assistance Authority, recently terminated a contract with Sallie Mae under which it had received a fee for every student loan it directed to Sallie Mae. The guaranty agency marketed Sallie Mae's loans and offered incentives to colleges that selected Sallie Mae as their preferred lender, without disclosing the fees it was receiving for loan volume.
Chronicle of Higher Education, "Rhode Island Center That Answers Students' Questions About Loans Is Staffed by a Loan Company," May 3, 2007
In addition to operating call centers at colleges, Nelnet helps staff a state non-profit college counseling center in Rhode Island that claims to offer free, independent advice. When asked questions about student loans, employees do not disclose their affiliation with Nelnet and only refer students to Nelnet loans offered through the state's nonprofit student loan agency.
Chronicle of Higher Education, "Critics Question Sallie Mae's Close Ties With Agency That Guarantees Its Loans," May 4, 2007
The loan guarantor in charge of overseeing and evaluating Sallie Mae's loans, USA Funds, is staffed mostly by Sallie Mae employees. This presents a significant conflict of interest, as guarantee agencies are responsible for debt collection, default-aversion payments, performance reports, and ensuring that the lender has performed the necessary "due diligence" on its loans.
New York Times, "Whistle-Blower on Student Aid Is Vindicated," May 7, 2007
Jon Oberg, a retired Department of Education researcher, alerted Department officials to improper 9.5 percent loan subsidy payments in 2003, but was told to stop working on the issue and return to grant research. Oberg's story is another example of the Department's inadequate oversight of the student loan industry, which in the case of 9.5 percent loans cost taxpayers significant amounts of money and allowed lenders to reap the profits.
Chronicle of Higher Education, "Suspended Education Department Official Approved 2004 Conflict Waiver for Former Employer, Sallie Mae," May 7, 2007
Matteo Fontana, the suspended Department of Education official who owned stock in Student Loan Xpress, issued a ruling in 2004 that allowed Sallie Mae to continue providing services for USA Funds, a guaranty agency intended to serve as an independent evaluator of Sallie Mae's loans. Fontana, who previously worked for Sallie Mae, ruled that the relationship did not pose a conflict of interest, in contrast to a report by the Department's Inspector General.
Cleveland Plain Dealer, "Bad debt pays off in loan industry," May 13, 2007
A private lender can earn money off of bad debt by "dumping" the loan onto the Direct Loan default consolidation program and claiming it recovered the debt. These new, consolidated government loans are no longer the private lender's problem, but instead cost taxpayers an estimated $400 milion per year.
- Chronicle of Higher Education, "As Student-Loan Industry Hunkers Down, It Sees Friends in Education Department Disappearing" July 16, 2007
This article investigates the changing relationship between lenders and members of the Education Department, as enhanced scrutiny from investigations into student loan kickbacks and improper billing has led to some personnel changes.
Dallas Morning News, "Lenders Showered Perks on UTA, UTD Aid Officers," July 30, 2007
Student aid officials at the Arlington and Dallas campuses of the University of Texas received numerous perks, including free lunches, tickets to sporting events and happy hours, according to internal documents released by the schools. Officials at these institutions also asked loan companies to underwrite the cost of printing financial aid brochures in exchange for being recommended to students as a preferred lender.
- Chronicle of Higher Education, "Contract Raises New Concern Over Sallie Mae's Ties to Guarantor" June 26, 2008
A contract between the student loan company Sallie Mae and United Student Aid Funds (USAF), the nation's largest guarantor, reveals just how closely related the two entities have become. Sallie Mae pays USAF nearly $250 million each year in exchange for taking on almost all of the guarantor's roles concerning loan oversight and administration.
- Inside Higher Ed, "Did Congress Tame the ‘Wild West’?" Sept. 10, 2008
This article looks back at the effects of New York State Attorney General Andrew Cuomo's investigation into the improper ties between loan companies and postsecondary institutions. It also looks at how Cuomo's scrutiny led several companies and schools to alter their behavior, while also forcing Congressional action.
- Chronicle of Higher Education, "Suit Alleges Fraud in 'Resolving' Troubled Student Loans" October 23, 2008
A lawsuit alleges that Sallie Mae's default prevention tactics consisted of pretending to issue deferments for borrowers who never actually answered the phone, and other underhanded tactics. In addition, it created an overly competitive culture that pretty much necessitated such behahvior to succeed.
Some other resources related to financial arrangements between financial aid officials and student lenders:
- Education Lending Group Securities and Exchange Commission Filing, September 2003
This is the SEC filing that documents the Student Loan Xpress (previously owned by Education Lending Group) stock owned by financial aid directors at Columbia University, the University of Southern California, and the University of Texas at Austin, and by an official at the Department of Education.
See Page 14
David Charlow, Columbia University: 7,500 shares
Lawrence Burt, University of Texas-Austin: 1,500 shares
Catherine Thomas, University of Southern California: 1,500 shares
Matteo Fontana, Financial Partners Services, Department of Education: 10,500 shares
- Student Loan Xpress Advisory Board Members
Here is a list of financial aid officials that were members of Student Loan Xpress' advisory board.
- Breakdown of Undergraduate Lender Volume at Columbia University
Here is a breakdown by lender of Stafford student loan and parent PLUS loan volume at Columbia University.
- Kennedy Report on Marketing Practices in the Federal Family Education Loan Program
This definitive 50-page report from the Health, Education, Labor and Pensions Committee provides an in-depth look at the numerous improper actions and activities used by student loan providers to influence college aid officials and join preferred lender lists.