Education Department Continues Probe of Student-Loan Practices

The U.S Education Department is continuing its probe into the student-loan practices at American colleges and universities. Despite the success of the earlier investigation, the department has identified 55 colleges that received a second round of letters concerning the investigation "My best guess is that the department is still in an information-gathering phase", said Mark Kantrowitz publisher of FinAid, a Web site that provides student-aid advice.

The Education Department, following months of investigation led by outside groups sent out letters of inquiry to 921 institutions in June. The letters focused on colleges or universities that handle all of their federally guaranteed student-loan business through a single lender. Such volume was thought to be a sign that the colleges were not providing their students with all of the financial aid opportunities they had.

Lenders would usually work with academic institutions and make deals with the colleges to ensure them that students would use their lending institution to pay for their education. This practice was unfair to students, as they were not being given all their options. Instead of giving students all the options, many led the students to take loans from lenders they had relationships with. This was unfair to the students and the government is continuing its pursuit of universities that practice such arrangements.

Jonathan Lekstutis
November 26, 2007