New York Attorney General Andrew Cuomo has launched an investigation into deceptive student loan marketing by issuing subpoenas to 33 lenders. The investigation extends the scrutiny of the student loan industry into how lenders communicate directly with students.
As U.S. News reported in April, dozens of lenders use mailings that mimic government documentation. Calling themselves official-sounding names such as "Student Loan Department," some lenders stamp their envelopes and letters with eagle insignia or a book and leaves inside a circle within a circle, which is similar to the federal Education Department's insigne.
Interviewed this spring, Greg Hassell, spokesman for Collegiate Funding Services—part of JPMorgan Chase, which received a subpoena from Cuomo—said its letters were not deceptive and that the insignia and "Student Loan Department" wording did not suggest the letters were from the government.
Cuomo said his review indicated that lenders also use fake checks and rebates and offer students gift cards up to $500 in exchange for testimonials or referrals of friends. He recommended that students watch out for companies presenting themselves as part of the federal government and that students minimize the use of private loans, which are usually more expensive than federal loans.
Cuomo joins Rep. George Miller, chairman of the House Education and Labor Committee, who in May asked the Federal Trade Commission to investigate the confusing and possibly deceptive marketing practices of student loan companies.