Summary
A growing number of universities are making money a new way. They are lending it to their own students.
While such loans are usually slightly cheaper for students than borrowing from banks, the practice is raising questions among some educators and lawmakers about possible conflicts of interest. Through so-called school-as-lender arrangements, universities originate loans to graduate and professional students, including law and medical students. They eventually sell the debt to a partner bank or other lender for a set "premium." These premiums typically run anywhere from 2 percent to 6 percent of the total value of the loans. For budget-strapped schools, that can translate to millions of dollars of funding.See the full content of this document
Extract
Colleges Lending Directly to Students
About 100 schools now participate in school-as-lender programs, including Tufts University, the University of Arizona and Widener University in Pennsylvania. That's up from 64 in 2003-04, when schools made more than $1.5 billion in loans, the last year for which dollar figures are available, according to a Government Accountability Office report....
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