Student Loan Xploited
"Wowas if I'm not paying Columbia enough already, now there's a dude profiting off my financial misery." According to an online poll last week by the university's student newspaper, The Spectator, that's the most common campus reaction to news that Columbia's financial aid director, David Charlow, held $72,000 in stock in Student Loan Xpress from 2002 to 2005, even as his office at Columbia was promoting the student loan company as its top "preferred lender."
For the past few weeks, an ongoing investigation by State Attorney General Andrew Cuomo, as well as muckraking by the nonprofit New America Foundation, has given the general public a peek at the unseemly kickback relationships between college financial aid offices and student lenders. Colleges in New York and Pennsylvania have already agreed to reimburse students $3.27 million.
Now the subpoenas are rolling. At least one official all the way up at the federal Department of Education is also accused of holding Student Loan Xpress stock. Senator Kennedy, presidential candidate John Edwards, and others are weighing in on the need to clean up the student-loan process, perhaps by eliminating subsidized lenders altogether and switching to the Direct Loan Program.
Sean McMorris, a 28-year-old junior at Columbia, says he's "frustrated but not surprised" by the recent revelations. He attended a community college in California for two years before moving to Vietnam, where he studied Vietnamese and worked as a documentary filmmaker. McMorris then enrolled in Columbia's School of General Studies, where as an independent student he's swallowing a heavy dose of private and federal student loansa total of over $100,000 by the time he graduates. All of his federal loans are with Student Loan Xpress.
"The college financial aid office gave me a piece of paper with three different lenders on it. Each had a little spiel promoting themselves," he says. "I wasn't aware that I could go outside these three student-loan lenders. I thought, 'These are the ones that work with Columbia, so I have to choose one of them.' No one told me otherwise."
After the news broke about Charlow's stockholding, Columbia removed Student Loan Xpress from its list of preferred lenders. The company had been, by far, the largest lender at Columbia University. Each year, it handled $14 million of Columbia's federal student loansthe next largest preferred lender, Citibank, handled only $5 million. Meanwhile, Charlow, currently suspended with pay, was sitting on a Student Loan Xpress advisory board and providing endorsements on the lender's Web site.
All of Columbia's "preferred lenders" offered the standard federal loan interest rate, now 6.8 percent, with various discounts and incentives. Of the three, McMorris says, Student Loan Xpress simply seemed like the best deal. This is key to Columbia's current claim that Charlow's relationship with the lender had "no adverse financial consequences" for students. However, the damaged trust between students and their colleges may be more significant in the long term. How can colleges be expected to trim tuition if their aid officers are profiting from student debt? Students like McMorris say they're left without any real source of personal, unbiased information when making one of the most expensive and complicated decisions of their lives.
"Why weren't the students told at the beginning that they have a choice of lenders?" he says. "You're paying people [with your tuition] to advise you, and then they're taking money from someone else. Everything I've had to learn is on my own. You go to your adviser and say, 'How come I wasn't told about this?' and they say, 'You didn't ask.' I say, 'Well how do I know to ask?'
"The only other place I've been [to school] is a community college," he adds, "and it's better than this."
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