US: Investigation exposes extensive corruption in student loan dealings

Last week, investigators found that Matteo Fontana, the Office of Federal Student Aid general manager, a position that makes him responsible for regulating student aid lenders, sold thousands of shares of a student loan company stock in 2003.

At the same time, three senior financial aid officers at three major universities were found to have sold large numbers of shares in the same company, Student Loan Xpress. The actions of these administrators were revealed in an investigation by Higher Ed Watch, part of the government watchdog group New America Foundation. Three other administrators are under investigation by Cuomo for similar relationships with Student Loan Xpress.

“This is like peeling an onion,” Cuomo commented to the Associated Press April 10. “It seems to be getting worse the more we uncover. It’s more widespread than we originally thought.... More schools and more lenders at the top end.”

Cuomo speculated that dozens of other universities would be drawn into the investigation. “No one is even defending the situation anymore,” he said. “When we first started, it was ‘Oh, this is just a few bad apples.’ ”

According to the College Board, university tuition has risen by 35 percent in the last five years. Meanwhile, federal and state grant aid based on financial need has declined. Not surprisingly, as students and their families turned increasingly to private loans, the for-profit student loan industry ballooned into an $85-billion-a-year enterprise.

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http://wsws.org/articles/2007/apr2007/loan-a11.shtml