Student loan kickbacks get kicked back

Students at the Massachusetts Institute of Technology

TEXT OF STORY

MARK AUSTIN THOMAS: Citibank and eight universities have settled an investigation into student loan practices. The New York Attorney General's office has been exploring conflicts of interest in so-called "preferred lender" programs. But Marketplace's Amy Scott tells us the investigation is far from over.


AMY SCOTT: Eight universities in New York and Pennsylvania agreed to reimburse students more than $3 million. The schools allegedly accepted kickbacks for steering students toward certain lenders.

One of the lenders, Citibank, will pay $2 million to educate students and parents on the lending business, but that leaves dozens more schools and a handful of lenders around the country still under investigation.

Mark Kantrowitz publishes the financial aid website FinAid.org. He says revenue-sharing deals can benefit students. Many schools use the money toward financial aid.

MARK KANTROWITZ: If it's properly disclosed to the students and students enter into loans knowing that the school's going to get some revenue share that's going to be used for student aid, I don't see any problem.

A code of conduct adopted in the settlement requires such disclosure. Congress and the Department of Education are also looking into potential abuses.

In New York, I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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