Here are some surprising statistics about student loans:

Data from the College Board's Trends in Student Aid report show that the amount of Federal Stafford Subsidized Loans has grown by 75 percent over the past 10 years; Federal Stafford Unsubsidized Loans have grown 253 percent; and nonfederal loans (state, institutional and private loans combined) have jumped 934 percent.

The article also mentions that student loan volume has doubled in the last decade, and that "risky private loans now account for one out of every five student loan dollars."

Meanwhile, New York Attorney General Andrew Cuomo's probe into the $85 billion student loan industry has sparked nationwide controversy.

Cuomo claims there is widespread corruption, citing several concerns including questionable revenue sharing deals, college call center staffed by loan company employees posing as university staff, and conflicts of interest involving preferred lenders and university administrators. Cuomo says that criminal charges may be possible in some of the more serious cases.

Education Secretary Margaret Spellings has formed a federal task force to investigate, and the Senate education committee has launched a probe into collection tactics and conflicts of interest.

Large banks have agreed to settlements as a result of the probe, including Citibank, and J.P. Morgan Chase and Bank of America. Sallie Mae, the largest student loan provider that manages $142 billion in student loans for nearly 10 million customers, agreed to a $2 million settlement without admitting any wrongdoing.

Closer to home, Cuomo subpoenaed the records of a Knoxville based student loan processing company:

John Milgrim, a spokesman for Cuomo, said the subpoena was issued last week and requested information about agreements Edfinancial has with colleges and any records related to practices that Cuomo's office has uncovered during the investigation.

According to the article, a spokesperson for Edfinancial and Edamerica says they have not entered into any revenue-sharing agreements, and that all of the nation's largest student loan providers are being asked for records and the request is not related to any of the company's practices.

The probe has also prompted the University of Tennessee to consider policy changes:

As a national investigation heats up, the University of Tennessee at Knoxville is taking a second look at policies that allowed two employees to serve on the boards of companies that are involved in student financial aid.

[..]

At UT, Dean of Enrollment Services Richard Bayer and Director of Financial Aid Jeff Gerkin have served on boards related to Knoxville firm Edfinancial Services.

While Edfinancial is not a lender, its subsidiary until recently was Edamerica, a lender that is on UT's preferred list. The two companies are now separate entities but have the same chairman.

According to the article, Bayer and Gerkin both say there is no conflict because they were not involved in selecting preferred lenders and Edfinancial is a servicer, not a lender.

Here is a timeline of the student loan probe, and a Q&A about the probe from NPR. And here's some advice for getting the best deal on a student loan.

bizgrrl's picture

The average cost of public

The average cost of public college tuition keeps increasing (from $3,856 to $5,836 in the past 10 years. $5,836 tuition is a pretty good deal. Including room and board the increase was from $9,258 to $12,796. Still a pretty good deal. Tuitions in southern public colleges and universities are generally less than the average.

The majority of people I went to high school with (the old days) went to undergradutate school on a pay as they went plan. If so inclined, debt was reserved for graduate degrees. It may have taken 5 or 6 years, but that was okay.

Why do college students feel the need to go into debt for a 4-year undergraduate degree anyway?

R. Neal's picture

So tuition has gone up ~50%

So tuition has gone up ~50% (which is bad enough), but student loans have increased 74%, 235%, and 934%?????

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