Knuckleheads!

We've always said the preferred lender list notion was a bad one. But apparently at some schools it breeds a conflict of interest. But then again....anyone stupid enough to accept a bribe, well, now you have Andrew Cuomo to answer to. Some of these university officials were shortsighted enough to blatantly accept board member seats on student loan company's.

And as Andrew's investigation continues, there will likely be more ugliness. So, what's the likely fallout here? We expect there will be more legislation surrounding the student finance industry. Which is bad, but here's why the problems will be legislated away: Because the Department of Education has a mission to support education, not finance solutions. And because the Dept of Education is notoriously bad at enforcing regulations and laws (which is why the Attorney General of New York is driving the preferred lender list issue).

Our position is that student loans are that: loans. Lending is a function that financial intermediaries excel at. Education policy makers don't neccessarily make good financial service regulators. We would like to see the Dept of Education be solely responsible for the guarantee that the loans carry and let the existing financial service regulators be responsbile for the lending function. Just our two cents though.