June 1, 2007
The Selling of Student Loans
How 20 years of lenders' marketing strategies, from free toasters to kickbacks, gave birth to a scandal
Twenty years ago, a U.S. Senate aide walked into a bank in Maine and saw a sign that read "Take out a student loan today, get a toaster."
The aide, concerned that students would be tempted to take out loans they didn't need, drafted legislation barring lenders from offering "inducements" to borrow. That language was added to the Higher Education Act in 1986, and for the next two decades, the "toaster provision" remained a backwater of student-aid policy.
That all changed in
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