The markers of a mushrooming student loan scandal are identical to so many of the rest: The Bush administration, determined to turn the federal government into a favor bank for its corporate cronies, ignored every indicator that the $85 billion-a-year student loan industry was rife with corruption...

Never mind, the Bush people said. The lenders could police themselves.

So the lenders voluntarily heaped ever more lavish perks on colleges and financial aid officers, including "revenue sharing" arrangements under which institutions of higher education got a percentage of each loan taken out by students who, in innocence, had signed on with the preferred lender. New York Attorney General Andrew M. Cuomo calls it "a form of kickback scheme." That Cuomo has uncovered this cesspool -- not the federal Department of Education or Congress, when it was run by Republicans -- is part of the pattern...

Here is what the lending industry gets in the deal: The federal government assumes all risk against default. It fixes the interest rates, but the student's interest payments on these risk-free loans go to the lender, not the Treasury. Still more taxpayer subsidies are given to lenders to "induce" them -- there's that word again -- to participate in the program. "The student loan system is effective in getting dollars to kids," says Michael Dannenberg, director of education policy at the nonpartisan New America Foundation. "But from a taxpayer standpoint, it's a public policy disgrace." He suggests that lenders compete directly for student business, rather than have colleges act as gatekeepers...

For the complete article, please visit The Indianapolis Star website.