Texas Longhorn Students Uncover Extent of Student Loan Corruption

A bombshell was dropped on the University of Texas' financial aid office Monday when The Daily Texan student newspaper published a damning story on the office's corrupted process of selecting preferred lenders. After obtaining documents from an open records request, the newspaper discovered that one of the criteria used by the college financial aid office to determine preferred lender status was "OSFS visibilitybased on the number of lunches, breakfasts and extracurricular functions for entire OSFS staff."

The University of Texas Office of Student Financial Services (OSFS) maintained a running list of what it called "lender treats" -- perks the office received, on what date and from which lender. University financial aid officials rated each lenders "OSFS visibility" as either poor, average, good, or very good based in part on "treats" offered. And the university financial aid office then used its rating to select preferred lenders to whom the school would steer student borrowers.

The University's lender "treat list" from March 10, 2006 shows that Student Loan Xpress (the loan company implicated in Higher Ed Watchs investigation of stock options) gave a total of nine treats the previous year, while the next most generous lender only gave four treats. Student Loan Xpresss "OSFS visibility" accordingly was rated "very good."

More damning though is an email communication between Lawrence Burt (the financial aid director identified by Higher Ed Watch as owning stock in Student Loan Xpress) and other financial aid officials at the school that sheds light on just how corrupt the process of constructing the University of Texas' preferred lender lists actually was. University financial aid officers werent prioritizing directing students to the cheapest loans. No. They were more concerned about maintaining their relationships with certain lenders. This from an email sent to Mr. Burt:

What would you think about taking off [the preferred lender list] Key Bank. I know they have zero interest loans, but when you take a look at what they did last yearit was 96 loans. We dont "publicize" the zero fees, and it is pretty obvious that student just dont ever get to their site and would not find out about them anywayand we have no relationship with Key Bank to speak of, whereas we do have some very strong historical ties with CFS and Medfunds.

Follow that? Dump a low cost lender for students, because the school has no relationship with the lender to speak of whereas it has very strong historical ties with other lenders (who, cough, are more expensive for students).

We strongly encourage readers to check out the linked shocking documents that were published along with the story on The Daily Texan's website. And we want to commend the great investigative work done by The Daily Texan in uncovering what are some of the most incriminatory documents weve seen on lender inducements.

Go Longhorns.