Security

Fraud of the Financial Aid Office

Student loan fraud has been investigated in the relationships between universities and large financial banks. The cause for concern is that certain universities have been accused of exclusively directing their students to lenders in exchange for revenue sharing opportunities or extravagent gifts related to their role in giving students higher rate loans. From a review of college arrangements with banks done by the St. Petersburg Times explains the following relationships:

- At Florida State University, the financial aid director sits on the advisory board of preferred lender Student Loan Xpress, which has seen nearly half of its board members suspended by their schools recently for allegedly accepting hefty consulting fees or owning stock.

- With thousands of competing lenders to choose from, Florida A&M University students were, until recently, directed to use one of two lenders based on the spelling of their last name.

- The Stetson University Law School financial aid director sits on the advisory board of a preferred lender that last year controlled 70 percent of the school’s $31-million loan business. Now, officials say they will no longer accept free travel and lodging if the director attends further meetings.

The lenders and campus officials that are recently under the most criticism include:

FSU financial aid director Darryl Marshall has served for five years on that company’s advisory board, and said he has accepted reimbursement for travel and lodging to attend three meetings.

Six other members of that board - including financial aid directors at the University of Texas, Columbia University and Johns Hopkins University - have been suspended by their schools for allegedly holding up to $100, 000 in stock or accepting fees of up to $80, 000 from the company.

Marshall said he was also reimbursed for two trips as an advisory board member for USA Funds, the nation’s largest loan guarantor, and one trip for Elm Resources, a nonprofit run by lenders.

Student Loan Xpress is one of 11 preferred lenders at FSU. Last year, it did more business there - $27-million worth, in the form of more than 9, 000 federally backed loans - than any campus in the nation but one, according to federal reports compiled by the Student Marketmeasure data service.

These student loan fraud schemes seem to be very easy to conceal for these universities because they can claim to be only providing a convenience for their students but they should be held accountable for vouching for the their preferred lender. As the investigations continue it is likely that other fraud schemes will be uncovered.

© 2008 Student Loan Information.