Educational Loan Fraud

Education loan fraud is a serious concern, as it not only steals money from taxpayers, but also from students and their parents paying interest on these loans. Essentially, loan companies bribe colleges and universities into recommending their services to students. The schools (or usually individuals working for the school) receive monetary kickbacks to motivate them. The kickbacks are paid from increased interest rates charged to the students, who end up with inflated interest rates on loans already difficult to pay off. Alternately, loan companies with government-backed loans may overstate the amount of their loan when a student defaults. In this way, the lending institution receives substantially more money than they had loaned.

1. By the Department of Education's measures, over 300 colleges and universities have 99% of their loans from one lending agency. This means that only one company controls virtually all of the loans for each particular school. While not necessarily illegal, this fact does invoke suspicion into the reasons behind each company's huge share of the market.

2. Over 100 different schools have at some point been subpoenaed to appear in court to discuss student loan fraud investigations. This has led to several positive outcomes: first, financial aid directors who have been found to take bribes have been removed from their positions. Second, some schools have agreed to reimburse their students in the amount of several million dollars due to inflated loans.

3. Student loan fraud not only represents an illegal financial burden for students and taxpayers, but it also destroys the important aspect of trust between a student and their school. It is the obligation of each college and university to work toward the betterment of their students, personally, mentally and financially. So when schools conspire with lending institutions to raise rates, it breaches all the duties the school owes to the student.