John Edwards Statement On Recent Student Lender Scandals

Chapel Hill, North Carolina – In response to recent scandals over colleges' ties to student lenders, Senator John Edwards today called for fundamental reform of the student loan programs:

"The point of guaranteed student loans is to guarantee that students can afford college, not guarantee that banks get immense profits. But it's not working the way it should. Bankers are racking up huge profits, students are facing increasingly large debts, and colleges are stuck in a conflict of interest.

"We need to fix the student loan program to take banks - which are just an expensive middleman - out of the process, and focus on making sure young people aren't crushed by debt by the time they leave college. We should make all loans directly from the Education Department, like a quarter of college loans are already. This one step would free up more than $6 billion a year that could be reinvested in making college more affordable. It would also let students know that college officials have their best interests at heart."

The largest student lender, Sallie Mae, saw its stock go up 1,900 percent between 1995 and 2005, while tuition and fees climbed 63 percent. It paid its CEO $225 million in the five years before he retired in 2005; meanwhile, it charged students rates as high as 28 percent.

Earlier this week, New York State Attorney General Andrew Cuomo announced that Citibank and five universities agreed to pay $5 million to students to resolve an investigation into their student loan practices. Yesterday, the New America Foundation discovered that three college financial aid directors had personal investments in a lender they recommended to their students. The financial aid director at Columbia University has been placed on leave.

Edwards has long supported the Direct Student Loan program, which makes loans from the federal government and serves about a quarter of students today. In 2003, Edwards asked the U.S. Department of Education to enforce federal laws against lenders paying colleges to increase their loan volume. At the time, the department postponed action in deference to an industry attempt at self-regulation."