Recommended Loan Providers Provide Problems for Borrowers

[tako]

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Raymond McKean, Terre Haute, said he encountered countless problems when trying to get loans throughout his daughter’s four years at Indiana University without going through IU’s preferred provider.
"The very first thing out of anybody’s mouth was, ‘It’s so much easier if you use Sallie Mae,’ " McKean said.
When McKean insisted on going a different route, he said he was constantly told that the forms he’d faxed over hadn’t arrived, even when he had confirmation notices that they’d been sent. He said he was charged late fees he was told wouldn’t appear if he’d used Sallie Mae.

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<p>Seems awfully tricky of Indiana University and Sallie Mae, yes?</p>

<p><a href=“http://www.indystar.com/apps/pbcs.dll/article?AID=/20070611/NATIONWORLD/706110379/-1/LOCAL17[/url]”>http://www.indystar.com/apps/pbcs.dll/article?AID=/20070611/NATIONWORLD/706110379/-1/LOCAL17&lt;/a&gt;&lt;/p&gt;

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An ongoing investigation led by New York Attorney General Andrew Cuomo has uncovered instances of illegal steering of loans to preferred lenders; revenue-sharing agreements between schools and lenders; gifts, trips and stock given from lenders to a school’s financial aid directors; and university call centers staffed by lender employees.

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<p>Luckily, it appears that the federal government may be taking action:</p>

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WASHINGTON – The federal government is considering requiring colleges and universities that use preferred lender lists to recommend more than one lender to student borrowers.

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<p>Anybody else run into problems like this when taking out loans?</p>

[NikkiiL]

<p>I’m gonna comment on two fronts…as a student with loans and as a Financial Aid Administrator.</p>

<p>As a student: I have had personal experience with one school who made it difficult to choose a lender other than their Preferred Lender. The problems were so immense that I was afraid to go with another lender and lose my funding completely. Using my immense knowledge of Federal Regulations, I was unable to convince the “powers that be” that they could not stonewall me in this regard. Later I found out I wasn’t even speaking to the financial aid office but to representatives at the lending agency…who fielded the calls for the school.</p>

<p>As an FAA: I can say without hesitation that the problems are not as wide-spread as Cuomo and these articles make it sound. Many schools which offer Recommended or Preferred Lenders lists make it easy to choose any approved Title IV lender. Typically, depending on the lender chosen, it may require some delay in the processing of funds…if, for example, the chosen lender and the school don’t have an EFT agreement (I those types of cases, the lender has to send a paper check to the school. The school then has to either send it to the student/parent or track down the student and get them to sign the check. Then the check is taken to the business office to be deposited in the bank. Sometimes, this can mean an additional 2-4 weeks before the funds are actually available on the student’s account.)</p>

<p>I think the worst thing is that these articles are making ALL FAA’s look like crooks…and that is simply not the case. Are there problems? Absolutely…but not to the extend Cuomo makes it out to be.</p>