Student loan companies under investigation

Responding to a nationwide scandal that revealed a propitious relationship between university officials and student loan companies, California Attorney General Jerry Brown ordered April 18 that two finance companies submit details of their business deals with California colleges and universities to the state.

“Cal Poly students need to know that the Financial Aid Office is not doing this and that the Chancellor’s Office would frown upon this,” said Lois Kelly, director of financial aid. “We have no such program set up, except for what a student would (normally) pay, such as student fees.”

Over the past couple of weeks, university financial aid officers – who are expected to give unbiased advice on students’ financial aid options – and loan companies have been found to be making backdoor deals that benefit themselves financially, leaving students with even higher debt in the process.

Investigators for the state of New York have already started looking into the issue, finding that some loan companies offered vacations and other perks to university personnel. The federal government is also investigating the situation.

The two companies in question in California are Education Finance Partners and Student Loan Xpress.

“The details that have emerged from the national scandal concerning gouging of college students and kickbacks to lenders of student financial aid are just the tip of the iceberg,” said John Travis, president of the California Faculty Association, in a press release.

The California Faculty Association said that one of the loan companies under investigation has a relationship with the California State University system. The CFA, which represents the CSU system, is thankful for the attorney general’s efforts, Travis said.

At Cal Poly, seniors graduating in four years had an average of $14,032 in debt from student loans, according to data compiled in June 2006. That same year, just under $52 million was borrowed by students, with the average loan amount being $3,900 for undergraduates.

Although the financial aid office does compile a “preferred lender list” of 15 well-liked loans companies – all of which have had good track records – students are encouraged to research and choose the lenders that they – not the school – like best, Kelly said.

“It’s really important to know that the financial aid office works with the students. We only put the names out there to help students narrow down the scope of their options,” Kelly said. “If students find something better, then we want them to tell us.” The consensus among Cal Poly students seemed to be the same: Financial aid officers and loan companies should not be benefiting themselves, but students.

“That seems to be common with insurance companies and financial aid groups. It sucks because students already have so many fees to pay,” kinesiology junior Allyce Garcia said. “It’s not fair that (financial aid officers) already get a lot of money and then get perks, too.”

For civil engineering freshman Jose Mederos and others, this scandal hits a little closer to home.

“I am here because of financial aid, so I don’t agree with (the scandal) at all. The students should get all the financial aid they can. I know a lot of students (who are only) here because of financial aid,” Mederos said.

There could be implications for the future, Mederos said.

“I could see people not going to college because of this, not getting the opportunity to pursue their education because of financial need. These officers could be preventing students from going to college.”