Nonprofit Lenders Continue to Draw Scrutiny
September 5, 2007 | Read Time: 1 minute
A Congressional report has found new evidence suggesting too-cozy ties between student-loan organizations and colleges, reports The New York Times.
E-mail messages cited in the report, released by Sen. Edward M. Kennedy, Democrat of Massachusetts, indicate that loan companies saw charitable donations to universities as a way to strengthen their business relationships with those institutions. The newspaper gives the example of Citizens Bank, which received a request from Sacred Heart University for $2,500 to support a dinner.
“Sacred Heart is a $6-million school, and this will allow us to maintain our preferred status as well as grow our volume,” said an internal Citizens Bank e-mail message. Sacred Heart students at the time borrowed about $6-million from the lender, reports the newspaper.
Sacred Heart officials say that lenders did not receive preferred status because of donations.
“The findings of the report underscore the urgent need for reform of the student-loan system,” Mr. Kennedy said in a statement.
In related news, the Minneapolis Star Tribune reports that NorthStar Education Finance, one of the nonprofit student lenders that have come under scrutiny by legislators, defends its businesslike practices.
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