Some Lenders Are Setting Rates College by College

Andrew M. Cuomo, attorney general of New York, said recently in a letter to Congress that his investigation of the student loan business had found “a significant number of lenders” that determine eligibility for private loans and set interest rates based in large part on the colleges the students attend rather than the borrowers’ credit-worthiness.

“Just as lenders in the mortgage industry once made judgments about credit lending in entire neighborhoods as a whole,” Mr. Cuomo wrote, referring to a practice known as redlining, “so too are lenders making generalized judgments about student and parent risk based on a student’s school neighborhood.” He did not name any lenders that engaged in these practices.

This from the New York Times.

Cuomo Broadens Student Loan Inquiry

Attorney General Andrew M. Cuomo of New York, whose scrutiny of student loans exposed secret ties between universities and lenders, said that he was broadening his investigation to examine the criteria lenders use when making loans and whether they violated civil rights statutes.

Testifying last week at a Senate Banking Committee hearing on private student loans, which do not carry federal guarantees, Mr. Cuomo said he would examine whether lenders were discriminating against students based on the institutions they are attending or other factors not directly related to their credit history.

What criteria are they using in the underwriting of these loans? Mr. Cuomo asked. Parental income? Student income? Student credit worthiness? How about the school you attend? How is that weighted?

While lenders have the right to consider a borrower's credit record in extending a loan, he said, "there are also civil rights and legal ramifications to what criteria they use, and that's what we're looking at."

He suggested that students at historically black colleges and universities were sometimes hit with more onerous interest rates and fees than other students.

This from the New York Times.