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Credit Card Nation, Chapter the Third: In Which An Agreement Is Reached

June 1, 2007, 1:57 pm

The National Association of Student Financial Aid Administrators (NASFAA) has settled with Andrew Cuomo, the New York State Attorney General, over the financial aid scandal. So has Columbia University, which will pay either $1.1 million (so says the New York Times) or $1.125 million (so says Inside Higher Ed) into a national fund that will “educate student borrowers” about their options in the student loan market. You can read about it here. Part of the agreement with Columbia clearly includes the university being allowed to say that no one did anything wrong, since their lawyers are adamant that the sum they have paid does not constitute a “fine.” Which is technically true, as no one has gone so far as to say that the marketing practices the university collaborated in, and individuals were paid under the table for, were more than unethical. In other words, part of the scam was to identify a grey area in the law and exploit it. Who says the Sopranos are going off the air?

This is the kind of thing that makes me hate the law, even though I know so many lawyers who do good in the world, and who love the law for what it can accomplish in making the world more just. As far as I am concerned, this settlement falls into the category of the “voluntary contributions” that large, wealthy universities pay to the often impoverished towns where they occupy prime space “in lieu of” taxes, space that often includes commercial and residential properties from which they get substantial income. But whatever: it’s probably good that the state did not have to spend all that money and time prosecuting Columbia too.

But here’s my question: doesn’t this outcome suggest that we are supposed to believe that the students and their parents are partly to blame for having become victims of what were essentially predatory lending practices? Because no one I have read so far (except an anonymous writer named Linda who commented on the Inside Higher Ed piece) has suggested that the universities might have any responsibility for re-negotiating loans that the students have actually taken out and will be paying back for the next twenty or thirty years. Or reimbursing former students for fees and interest already paid that they were tricked into taking responsibility for in the first place.

I understand Cuomo may have a reason not to want to go there (like years of litigation and a conservative Supreme Court) but how about hitting the lenders with an anti-trust suit, or a class action lawsuit that goes after them for conspiracy to defraud, and settling with them on behalf of the students? Because yes, a few financial aid directors have fallen, but as usual, the bankers have made off with the money, and will continue to do so for the life of loans taken out under these deceptive conditions.

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