Colleges Caught Red Handed Taking Kickbacks from Banks

November 12, 2007 By Matthew Paulson

If you want to market a product to college students, it only makes sense that you go to a college to do it. There are many perfectly legitimate opportunities to market to college students, but many banks and colleges have had backdoor deals in which the college would only tell students about student loans from a particular bank and then in turn the bank would rip-off students by charging them exorbitant amount of interest rates and fees.

In response to this fiasco, the Department of Education has come down hard. New rules in place prevent financial aid offices from taking any gifts greater than $10.00 from banks or other financial institutions. These include things such as gifts, cash, prizes, trips and the like. Financial aid offices will also have to put at least 3 preferred lenders on their student loan marketing material and tell their students why those preferred lenders were chosen.

A number of different colleges have taken individual actions to clean up their financial aid offices. For example, the financial aid directors of Columbia University and Johns Hopkins University have both been fired. Since colleges are under very close watch right now, chances are the financial aid offices will treat you a little bit better and make sure that you’re getting a good deal.

If you’re going to apply for a Federal Stafford Loan, make sure to research the banks you’re choosing from thoroughly. Don’t just look at the 3 options your financial aid office will give you, look around online and see if you can’t get a better deal. Find one that won’t charge you an origination fee and one that will give you a discount for paying on your loan on time after you graduate. Make sure you’re going with a reputable bank that hasn’t had any string of complaints about how they treat their student loan holders. Do your due diligence to make sure you’re getting a high-quality and low-fee student loan.

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