Tag Archives: Higher education

UPDATE AND CORRECTION: The List Keeps Growing:The Student Loan Industry’s DIRTY Secret

A special purpose entity (SPE; or, especially in Europe, special purpose vehicle/SPV, in Ireland – FVC financial vehicle corporation) is a legal entity (usually a limited company of some type or, sometimes, a limited partnership) created to fulfill narrow, specific or temporary objectives. SPEs are typically used by companies to isolate the firm from financial risk. A company will transfer assets to the SPE for management or use the SPE to finance a large project thereby achieving a narrow set of goals without putting the entire firm at risk. SPEs are also commonly used in complex financings to separate different layers of equity infusion. In addition, they are commonly used to own a single asset and associated permits and contract rights (such as an apartment building or a power plant), to allow for easier transfer of that asset. Moreover, they are an integral part of public private partnerships common throughout Europe which rely on a project finance type structure-WIKIPEDIA


Banks partnered with student loan guaranty agencies, student loan servicers, and other banks to create student loan brokerage firms aka student loan special purpose entities the majority of which were incorporated in State of Florida. For example, Student Loan Xpress, Goal Financial, K2 Financial, Education Finance Partners, US Education Finance etc. Kinda like the storefront mortgage companies and unlicensed brokers, think Enron’s LJM2, the Raptors, Chewco etc

The bank ffelp lenders, servicers and guaranty agencies used the student loan brokerage companies to access and repeatedly access students’ personal information, nslds, and credit reports for what they claimed were Marketing or Promotional Purposes. If you don’t believe me then just check your credit reports from 2006-2008. I bet you’ll have 3 ‘Promotional Purpose’ pages that are all student loan companies. Unfortunately, they weren’t accessing your reports for marketing purposes as they claimed. They were accessing the reports for your personal information which they unlawfully used to originate federal consolidation loans.

The Education Department’s Office of Inspector General found that American Education Services/Pennsylvania Higher Education Assistance Authority  (CLICK THE LINK I PROMISE IT’S WORTH IT!) received about $33 million in overpayments — and possibly much more — under an exemption in federal law that allowed lenders that financed the student loans they issued using tax-exempt bonds issued before 1993 to earn a government subsidized interest rate of 9.5 percent. Congress engaged in several aborted attempts to fully close the loophole throughout the 1990s and the early part of this decade, but some lenders continued to find ways to take advantage of it by recycling the pre-1993 loan funds, before Congress, as part of the Higher Education Reconciliation Act, finally closed it permanently last year.

Guess how they did it? You guessed it, by partnering with lenders to create student loan brokerage firms, special purpose entities and special purpose vehicles that unlawfully used your personal information to create federal consolidation loans. The lenders then used the fraudulent consolidations loans to replace loans that defeased, were repaid or discharged in their 9.5 percent floor loan securitized trusts and student loan revenue bonds. Consequently, because the federal consolidation loans were unlawfully created by the student loan brokerage firms (lenders + servicers + guaranty agencies) theft of your personal information they are not valid obligations; thus they are not enforceable! So, in protest of the nearly $1 trillion dollar student loan debt bubble and your ASTRONOMICAL student loan debt that’s growing bigger by the day pull your NSLDS report highlight that fraudulent loan, complete an UNAUTHORIZED SIGNATURE / UNAUTHORIZED PAYMENT false certification discharge form, and send it to fraudnet@gao.gov!

Don’t forget to name your lender, servicer, and guaranty agency on the discharge form and attach your NSLDS report with showing the fraudulent consolidation loan you never applied for or agreed to!

So without further ado here are a few of the Student Loan Special Purpose Entities that you should LOOK FOR ON YOUR CREDIT REPORTS. Please note this list is a daily work in progress and by no means complete:

National Collegiate Trust/                                                         PHEAA/American Education Services

American Educational Loan Services                               PHEAA/American Education Services

MRU HOLDINGS:                                                                             J.P. Morgan Chase, Key Bank, Morgan Stanley,

                                                                                                                       Lehman Bros, Assured Guaranty,

                                                                                                                        Global Securitization Service, LLC,

 Sallie Mae
J.P. Morgan Chase,

Bank of America,

J.C. Flowers & Co.,

Friedman Fleischer & Lowe.

First National Wachovia
First Savings Wachovia
Affinity Direct d/b/a Educational Direct Citibank Student Loans
Credit Card Protection Bain Capital Ventures

Bain Private Equity

CORTRUST Bank Citibank
Academic Funding Foundation Educaid/


Class Notes Inc

Erie Processing Corp Wachovia
Xanthus Higher Education ABN AMRO
Student Loan Processors US Bank
K2 Financial Ceigis LLC



University Financial Lenders Bank of New York
Educational Lending Group Citibank
Post Collegiate Financial First American Title Ins.


Federal Family Education Wachovia Securities
Goal Financial Cit Group/Bank of New York
American Educational Loan Processing PHEAA/

American Education Services

Student Loan Xpress Bank of Lake Mills,



HedgeForum Renaissance

Education Finance Partners

Education Finance Partners ACS Inc
PHEAA/American Education Services Citibank


Academic Finance Corporation ACS/

US Bank

Amerifund Education Corporation ACS/

Fifth Third/

RBC Bank/

US Bank

Ardent Financial, LLC/NSL Direct Citibank
US Education Finance PHEAA/





Academic Financial Services ACS
Acapita Education Finance Corporation ACS/

US Bank

AMS Education ACS/

Bank One/

Sallie Mae

Fleet National Bank

Student Capital Corporation ACS/


Bank of New York/

P Morgan Chase/


Studentloans.com ACS/


Wells Fargo

Bosque HEA AES/

Wells Fargo Bank/


Pecos Student Finacnial Corp AES/

US Bank

us Education Finance Corporation AES
US Contracting Corp PHEAA/


American Educational Services PHEAA/


Education Funding Resources Cit Group
Education Lending Group Cit Group
Education Finance Partners ACS/


HedgeForum Renaissance



Grad Partners Student Loan Xpress/

Education Lending Group

Cit Group


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Filed under 9.5 percent, 9.5 percent SAP, American Education Services, federal direct loans, federal financial aid, FFELP, for-profit colleges, for-profit schools, fraud, higher education, muni bond fraud, muni bond probe, municipal bonds, PHEAA, PLUS, Stafford, student loan lenders, student loan program, student loan scandal, student loans, Uncategorized



Student loans were designed to put many students who wouldn’t have ordinarily been able to afford higher education, into colleges and universities. The U.S. government actually believed that education was the primary responsibility of the parents. But they also recognized that many parents just couldn’t afford to send their children to college, no matter how much they wanted to.[1]


Today in the student loan program, thousands of corporate and government entities enjoy, by law, a contractual right of payment from the U.S. government—all part of the effort to lubricate the system with enough cash so that students ultimately get the loans they need. The current entitlements include the following:

  • Thirty-six federally-backed “guarantee agencies” are entitled to a .4% “loan processing and issuance fee,” paid by the federal government. These agencies are also entitled to a .1% “account” maintenance fee,” paid by the federal government, and they have the legal authority to charge students a 1% “guarantee fee.”
  • Thousands of banks and secondary markets (which purchase loans from banks) are entitled to quarterly returns equal to the rates on commercial paper plus 2.34 percentage points during repayment and plus 1.74 percentage points during the in-school and grade period, assured by the federal government.
  • If a borrower’s payments are late, the guarantee agency has an opportunity to encourage the borrower to make a payment. If successful, the agency is entitled to a 1% “default aversion fee.”
  • If the borrower defaults, the lender or secondary market is entitled to receive a minimum payment of 98% of the principal and interest.
  • If a loan defaults, the guarantee agency is entitled to keep 28% of any amounts it is able to collect. All of these provisions—and more—are set and adjusted through the political process, without the benefit of competitive market forces or even a regulatory check.

This patchwork quilt system leads to a second problem: unanticipated loopholes, requiring legislative repairs that further complicate the system. Over the years, the troubles have included lenders that timed their requests for federal payments in order to hide high default rates, guarantee agencies that had conflicts-of interest with board members and affiliates, and schools that used multiple intermediaries in order to mask large increases in loan volume. All of these situations cost taxpayers. In one case, the collapse of a guarantee agency led to an expensive federal taxpayer bailout. The Government Accountability Office (known then as the General Accounting Office) has repeatedly labeled student aid as a creating a high risk of waste, fraud, abuse, and mismanagement. President Bush’s budget office describes the FFEL program as structurally flawed, with “unnecessary subsidies” and questionable cost effectiveness.[2]

[1] Financial Shopper Network The History of Student Loans

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Filed under federal direct loans, FFELP, PLUS, Stafford, student loan lenders, student loan program, student loans