New Jersey’s Investigation of Student Loan Industry’s Dealings With Colleges and Universities

As the student loan scandal widens, it seems that most colleges and universities will have to examine and modify any existing internal policies that outline appropriate conduct between employees and outside service providers.

In both New Jersey and New York, news is unfolding of possible inappropriate practices of college and university employees accepting perks ranging from stock options, the use of vacation homes, trips, as well as cash provided by loan industry representatives in an effort to become one of the institution’s preferred lenders for prospective students.

More than 90% of all students have some form of student loan, and more than 80% utilize the private lenders recommended by the university. Since these loans are for the most part subsidized by the government, there is little risk of non-payment to the lenders, in fact student loans are not even dischargable in bankruptcy.

Colleges and universities must now face the reality that in spite of their enlightened existence, they too are subject to conflicts of interest, as well as possible civil and even criminal liability.