We all know higher education is costly, but it turns out that there may be some hidden costs–and unintended and possibly illegal benefits going to folks involved in college financial aid. Directors of financial aid at Columbia University, the University of Texas at Austin, and the University of Southern California apparently held shares in Student Loan Xpress, a student loan company recommended to student borrowers by each university. Because at least two of the individuals made a considerable profit by selling their shares–one more than $100,000– Attorney General Andrew Cuomo of New York has begun an investigation into the relationships between student loan companies and universities.
The officers’ stake in the company was discovered after five other universities agreed to pay back $3.2 million to students after lenders paid kickbacks to the institutions, based on student loan volume. In response, Cuomo, in conjunction with law makers, has recently introduced legislation to establish restrictions on the relationship between colleges and student loan companies. If passed in New York, the bill would ban lenders from sharing revenue from student loans with colleges and forbid lenders from offering gifts to school officials or placing them on corporate advisory boards in exchange for recommending the companies to students seeking financial aid. Also, officials serving on such boards would be banned from receiving payments for doing so. Attorneys general in California, Ohio, Connecticut, and Minnesota have also begun to investigate relationships between lenders and colleges but have yet to propose legislation.
In other education news, the College Board reports that the average cost for college tuition and fees at four-year public universities has increased nearly 51% over the past 10 years, and the average cost of tuition at these institutions is expected to exceed the $100,000 mark by the year 2016. Presently, with room and board, four-year public colleges average $12,796 for in-state residents. With tuition prices escalating so quickly, advisors ought to have education funding down to a science, aware of all possible options.