Time to Crack Down on the Student Loan Cesspool (by Marie Cocco for Truthdig)

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Time to Crack Down on the Student Loan Cesspool

Posted on May 3, 2007
By Marie Cocco

WASHINGTON—The markers of a mushrooming student loan scandal are identical to so many of the rest: The Bush administration, determined to turn the federal government into a favor bank for its corporate cronies, ignored every indicator that the $85 billion-a-year student loan industry was rife with corruption.

Who is surprised to learn, as The Washington Post has reported, that just months after President Bush took office, his minions killed a Clinton-era proposal to crack down on the provision of goodies—sports tickets, trips, donations to favored foundations, lucrative consulting deals for university officials—by lending banks to colleges and their financial aid officers? The Clinton folks were worried that these so-called “inducements” given to win designation as a college’s “preferred lender” fostered unethical collaboration between the industry and schools. Preferred lenders rake in as much as 90 percent of a college’s loan business.

Never mind, the Bush people said. The lenders could police themselves.

So the lenders voluntarily heaped ever more lavish perquisites on colleges and financial aid officers, including “revenue sharing” arrangements under which institutions of higher education got a percentage of each loan taken out by students who, in innocence, had signed on with the preferred lender. New York Attorney General Andrew M. Cuomo calls it “a form of kickback scheme.” That Cuomo has uncovered this cesspool—not the federal Department of Education or Congress, when it was run by Republicans—is part of the pattern. For the first six years of the Bush administration, only a few congressional Democrats and the most intrepid outside investigators followed the stink.

Now that Democrats control Capitol Hill, investigators will likely expose more unsavory collusion. The probes and new regulations are necessary to end these sweetheart deals, which resemble nothing so much as those garbage-collection contracts that keep Tony Soprano in silk suits.

But deception and self-dealing in the student loan program aren’t the core of the problem. The real trouble is that private-lender student loans are nothing more than corporate welfare. .....(more)

The complete piece is at: http://www.truthdig.com/report/item/time_to_crack_down_on_the_student_loan_cesspool/