Ask the DA: Student loan advice

August 30, 2012 By Kings County District Attorney Charles J. Hynes
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By Kings County District Attorney Charles J. Hynes


My nineteen-year-old son has been receiving numerous letters from loan companies.  He is thinking about borrowing money for his remaining college years.  What advice can you offer to college students on safe borrowing?


Your son is not alone in receiving bulk mail from so-called loan companies.  As college attendance rates continue to rise, some loan companies are taking advantage.  With the high cost of tuition, financially dependent college students are the newest target for exploitation.  Low interest rates, long-term payment options and credit cards with no maximum borrowing capacities can make some of these offers look like the perfect solution.  At times, this could not be further from the truth.

In reality, many of the letters students receive are not from loan companies or private banks, but rather from marketing firms who convince students to fill out applications which they in turn sell to the lender offering the highest bid.  These marketing firms act as a liaison between student and actual lenders, and their money is made by selling student information at the highest price offered. These firms are generally not concerned with getting students the best rates or loan security.

Once your son is passed over to the actual lenders, these loan companies make money by charging high interest rates. In order to mask these high rates, the focus becomes getting the students the money they need now.

Students often look to their college financial aid offices for answers.  However, both they and their parents should be aware that it was recently reported that a number of employees from these institutions received kickbacks from student loan companies in return for referring them to students.   Studies suggest that 90 percent of students select lenders from their college’s preferred-lender list.  As a result, the New York State Attorney General has now forbidden colleges and their employees from receiving kickbacks from student loan companies.

The unsolicited letters that your son has been receiving may look like a quick fix to a big problem, but there are other options available to students.  If your son intends to take out a loan, he should research federal programs and reputable banks, and seek out information in person.  Providing personal information via mail applications or telephone can and often does result in identify theft.

If you suspect that you have been the victim of loan fraud, contact my Neighborhood Office hotline at (718) 250-2555.  Ultimately, when it comes to finances, what looks and sounds too good to be true often is.

Further information is also available on my office’s Web site at To have your questions answered in a future column, send them to [email protected].

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