Published on Tuesday, April 17, 2007 by CommonDreams.org
A Student Crisis
by Danny Schechter

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The tragic shooting massacre on the Campus of Virginia Tech is being discussed and debated intensely on every media outlet. At this writing, there are more questions than answers and it seems as if American society is producing these “lone gunmen” with increasing frequency.

For years, students killing students has been a national epidemic at the high school level with inadequate intervention. I did a story for ABC News decades ago on the more than 300 students who died from gun violence in inner city Detroit in one year. Shoulders were shrugged, tears were shed and little was done. They were written off as ghetto victims.

And now this shocking event provoked shock from none other than President Bush whose Iraq War has produced a daily carnival of violence, murder and mayhem. Yes, there is a relationship because killing seems to an approved way of solving problems and expressing anquish.

But that’s not what I am writing about. There will be no shortage of pundits rationalizing the easy availability of guns or trying to minimize the larger implications of this crisis.

Students are being targeted on campuses in other ways that have also been approved of at the highest levels. In the spirit of Roberta Flack’s song “Killing me Softly,” the daily damage is being done with a fountain pen-or computer program-not a weapon.

I am talking about they way students loans have become a noose around the necks of a whole generation of students making our colleges and universities likely sets for the next edition of one of those crime scene shows.

In collision: the quest for higher education and the quest by self-interested lenders in higher profits in an 85 BILLION dollar student loan industry.

What’s coming out now is a nest of corruption in the very institutions that have set themselves up as moral exemplars and educators. An investigation in the State of New York-and where’s the FBI on this with a national probe?-has found lenders dishing out all kinds of cash to self-styled educators in the form of illegal kickbacks, referral fees, gifts, trips and other goodies. As some individuals take pay offs, students have to increase their pay-outs.

You know there is more to this by the way lenders are rushing to settle various complaints to avoid criminal charges. Anya Kamenetz writes on Huffington Post:

“Student lenders pay various kickbacks to financial aid offices to drive business their way, rather than negotiate the best deals for students. With barely a few letters sent, six schools have agreed to repay students $3.27 million on private loans, while Citibank, one of the largest student lenders, is paying $2 million into a financial education fund.

No one is admitting any wrongdoing. But cash speaks louder than words. $5 million, in an $85 billion industry, is a small price to pay to deflect further scrutiny of the obvious conflicts of interest inherent in this system. To take another example, lenders have been involved in marketing “enrollment management” software to help financial aid offices allocate grant aid to the most attractive students, leaving needier students to borrow more.”On the Hill, The Washington Post reports: “Of all the industries under attack on Capitol Hill — and there are plenty of them — the business of providing student loans is perhaps the most threatened.

The private student loan industry and its leading company, Reston-based Sallie Mae, are battling against congressional Democrats and President Bush, both of whom would like to pare back the lenders’ sizable federal benefits.”

As these investigations mount, Sallie Mae is going private to make it harder for investigators to get at the full depths of their role in sleazy practices which has included working overtime to undermine cheaper federal loan programs with bribes and intimidation. Note the words “reduce public scrutiny” in the paragraph that follows.

The Washington Post reports:

“Sallie Mae, the nation’s largest student loan company, announced yesterday that it would be bought by a group of private investors in a $25 billion deal that could reduce public scrutiny of the lender at a time when the student loan industry is under siege.

The enormous deal underscores the potential for profit that Wall Street sees in the $85 billion-a-year student loan industry, even as Congress considers slashing billions of dollars in federal loan subsidies and an expanding nationwide probe reveals fresh conflicts of interest in the student lending world.”

There’s more to these nefarious maneuvers reports the Cato Institute, a libertarian think tank:

“The chairman of the Senate education committee urged the Bush administration to block student loan companies from accessing a national database that holds confidential information on tens of millions of students,” reports The Washington Post. “The request by Sen. Edward M. Kennedy (D-Mass.), came after The Washington Post reported on inappropriate searches of the database that could violate federal rules and raise concerns about data mining and abuses of privacy.”

And so add spying to the list of other charges of practices that menace students and make their lives harder.

Student loans are only part of the problem as I document in my film IN DEBT WE TRUST: America Before the Bubble Bursts. (InDebtWeTrust.com) Students who lack experience in managing their money are easy targets for avaricious credit card companies. Together, the lenders and loan sharks are leaving students with an average of $20-30 THOUSAND dollars debt before they leave school at age 22. This means they cannot volunteer for public interest groups but have to get the best jobs they can top start paying back right away.

Talia Berman offers some reasons for why this is happening in Wire Tap Magazine:

“Student debt is climbing for three reasons: Interest rates have begun to rise, tuition is skyrocketing, and student aid programs are stuck in 2003.

2006 has been the worst in history for government action against student borrowers. In February, President Bush rolled out the Deficit Reduction Act, which cut $12 billion in federal student aid money. Part of the plan includes a hike in interest rates on federal student loans and loans taken out by parents. The interest rate on Stafford Loans to students rose from 5.3 percent to 7.14 percent on existing loans and to 6.8 percent on new loans. Interest rates for Parent Loans for Undergraduate Students (PLUS) loans increased even more dramatically, from 6.1 to 7.4 percent on existing loans and to a whopping 8.5 percent on new loans.”

Students have to start fighting back to end practices that have been subsidized by billions of taxpayer dollars. The Campaign for College Affordability is calling on Congress to ease the debt burden on students and families by cutting student loan interest rates in half. And then to make financial aid more effective by raising the minimum Pell Grant to $5,100.

This is an issue crying out for action while our nation cries for the innocent victims at Virginia Tech. Our campuses have to be physically secure and economically secure. We all have to learn more about this issue and start speaking out. One way might be to join up with other Americans who are crusading for debt relief at stopthesqueeze.org.

News Dissector Danny Schechter edits Mediachannel.org. His new film In Debt We Trust examines student debt. Comments to Dissector@mediachanel.org

Cuomo names local schools in pending suit
By: David Jones
Published: March 22, 2007 - 3:33 pm
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Fordham, St. John’s and Long Island universities are among the schools named in the first pending lawsuit against a lender in New York state Attorney General Andrew Cuomo’s ongoing probe of student lending practices.

Mr. Cuomo, on Thursday, said he had notified the chief executive of San Francisco-based lender Education Finance Partners that his office was planning to sue the firm for allegedly paying kickbacks to more than 60 schools nationwide in return for getting their lending business.

St. John's said it has received about $80,000 in payments from EFP since 2005. Those funds helped defray expenses in its financial aid office, said the school, in a statement. St. John’s also said it is holding ongoing talks with Mr. Cuomo's office.

Fordham said that it pulled out of EFP's revenue sharing program in June 2006, after accepting $14,000 in one year. The money was put into a scholarship fund for students who need financial assistance, Fordham said, in a statement. EFP is still a preferred lender, but the school said there was a "perception that [revenue sharing] was an inappropriate practice."

Long Island University could not immediately be reached for comment.

"This kickback scheme was widespread and took place from coast-to-coast, at colleges, large and small, public and private," said Mr. Cuomo, in a statement. "This lawsuit is just the beginning of an investigation that will show that lenders put market share above fair play."

EFP Chief Executive Tamera Briones was surprised that the AG was planning to sue, especially, she said, because the lender was cooperating with the probe.

"We question whether the Attorney General's office is seriously interested in learning all of the facts and whether there has been an actual violation of law," she said, in an emailed statement.

Gov. Eliot Spitzer began the probe while still working as AG in November 2006. Since Mr. Cuomo took over the probe, his office has requested information from six lenders and 400 schools nationwide.

On Wednesday, Sen. Edward Kennedy, chairman of the Senate Education Committee, asked 16 student loan lenders to submit documents in his own probe.

New York To Sue Student Lender
NEW YORK, March 22, 2007
(CBS) This article was written by CBS News producer Phil Hirschkorn.

Education Finance Partners, a private student loan company based in San Francisco, is the first target of lawsuits to be brought by New York Attorney General Andrew Cuomo alleging "unlawful and deceptive acts and practices" that Cuomo claims hurt students and parents who borrow money to pay for college.

At a news conference in his Lower Manhattan office Thursday afternoon, Cuomo announced his intent to sue and seek restitution from EFP concerning its financial agreements with more than 60 universities around the country.

"EFP has repeatedly and persistently offered to make payments, and has in fact made payments, to colleges, universities, and vocational schools in exchange for these schools steering students to EFP loan products and placing EFP on the schools' 'preferred lender' lists," said a letter sent by Cuomo's office to Tamera Briones, EFP's founder and CEO.

"Such steering and placement on the preferred lenders lists occurred without disclosure to student borrowers and their parents," the letter added. Cuomo gave EFP five business days to furnish information that would dissuade him from filing the civil suit.

Briones said she was "surprised and dismayed" at his move.

"We understood that Mr. Cuomo's investigation was in its early stages, and we were cooperating fully with his office," Briones said in a written statement. "We question whether the Attorney General's office is seriously interested in learning all of the facts and whether there has been an actual violation of law."

Cuomo says universities that have agreements with EFP include: Baylor and Texas Christian, in Texas; Drexel and Duquesne, in Pennsylvania; Clemson, in South Carolina; Pepperdine's business school in California; the University of Mississippi; Washington University, in St. Louis; and Boston University. The New York state schools with such agreements include Fordham, St. John's, Union College, and Long Island University, Cuomo says.

"Fordham no longer participates in revenue-sharing opportunities with EFP or any other student loan firm," said spokesman Bob Howe. "It became apparent that the modest good it accomplished for a small number of students could be outweighed by the perception that it was an inappropriate practice."

In exchange for loan business, according to Cuomo, EFP pays schools a small percentage of the net value of the total loans referred in a given academic year, an arrangement the attorney general calls "kickbacks" that he says can inflate loan rates and cost borrowers more.

Briones rebutted that contention, saying, "The price to the borrower is based on the borrower's risk profile, not whether the student attends a school that participates in the program." She also said EFP does disclose its revenue-sharing deals.

According to Cuomo, Boston University receives .25 percent of the net value of loans referred to EFP totaling $1million to $5 million; .50 percent of the net value of loans totaling $5 million to 10 million; and .75 percent of loans exceeding $10 million.

"We never signed such an agreement," said Colin Riley, BU's Director of Public Relations. "In fact, EFP asked us to sign an agreement to actively promote them, and we refused."

According to Riley, during the past two years, EFP paid the school a $1,500 service fee for helping process $1.5 million in loans, a fraction of the $50 million BU students borrowed in that time, mostly from the federal government. Riley said BU had no preferred private lenders and gave EFP no preferential treatment.

Duquesne's agreement with EFP gives the school .60 percent of the net value of referred loans, confirmed spokeswoman Bridget Fare. After receiving its first query from Cuomo on Thursday, the school posted a "clarification" to its financial aid Web site acknowledging its "limited commission" from loans steered to EFP, PNC Bank, and Citizens Bank. Fare told CBS News, "We take access and affordability to higher education very seriously, which is why any monies collected form these agreements are put right back into need-based grants."

Drexel's agreement, signed last April, according to Cuomo, requires Drexel to designate EFP as its "sole preferred private loan provider" and returns the school .75 percent of the net value of loans up to $25 million a year. Drexel public affairs officials did not return phone messages seeking comment.

"Many colleges and universities use revenue share to fund student aid programs," Briones said of the alleged deals. "Education Finance Partners provides these funds directly to the schools because we believe schools are in the best position to know which students have the greatest unmet financial need."

Indeed, Clemson and Texas Christian told CBS News they did have revenue-sharing agreements with EFP, but said that the money earned went back into financial aid programs.

Marvin Carmichael, Clemson's financial aid director and a former president of the National Association of Student Financial Aid Administrators, said EFP was one of two preferred lenders recommended to students who had exhausted their federal and state government loans and grants.

"We consider that a loan of last resort," Carmichael said. "The revenue-sharing opportunity was secondary."

Carmichael acknowledged its EFP deal, giving Clemson .5 percent of the net value of loans up to $1 million, is not disclosed, but he said, "Without such programs there are students who would not be able to get a Clemson degree."

Mike Scott, TCU's financial aid director, said EFP is the school's only private preferred lender because it has the best combination of low interest rates, high approval rates, and borrower benefits. The school receives .25 percent back on the first $1 million referred, but the deal has amounted to only $12,000 this academic year.

"It's almost like a referral fee that we turn into financial aid," Scott said. "We don't keep that money for anything other than to give to kids."

Washington University told CBS News it provides students information on 90 lenders and did not label any "preferred."

"Do we have any revenue-sharing agreement with any lenders? Absolutely not," said Fred Volkmann, vice chancellor for public affairs. Volkmann said the school had a one-year deal with EFP because the lender offered a "unique benefit" — it would lend money to students without a co-signer. However, only three students borrowed from EFP a total of $25,000, and the university did not renew.

"The New York Attorney General has requested information and we're cooperating fully," Volkmann said.

Pepperdine's public relations director, Jerry Derloshon, said the school's loan policies were undergoing an internal review.

"With the best interests of our students always in mind, Pepperdine is committed to reviewing its practices relating to student loans and advised the New York State Attorney General's office that Pepperdine will work together with the Attorney General concerning these important issues," Derloshon said.

An official from Baylor would not comment. Mississippi did not immediately return phone calls.

The Senate Committee on Health, Education, Labor and Pensions, chaired by Sen. Edward Kennedy, D-Mass., is also moving forward with its own investigation.

This week the committee formally requested documents from 16 financial institutions, including two public companies also probed by the New York Attorney General — Sallie Mae and Nelnet — and one of the private ones, CIT.

The other banks and loan companies queried by the Senate are: Bank One, Bank of America, Citibank, Citizens Bank, JPMorgan Chase, PNC Bank, U.S. Bank, Wachovia, Wells Fargo, Access Group, College Loan Corp, EdAmerica, and Northstar Guarantee.

Sen. Kennedy says he is worried about tactics that lenders may use to secure student loan deals. "These include lenders who have offered school administrators 'educational conferences' at luxury hotels, free entertainment and tickets to sporting events, free staff and printing services, and e-mail services to students on behalf of the financial aid office," Kennedy said. "These practices are inappropriate, and they need to stop."

With reporting from Laura Strickler in Washington.