posted on Sep, 25 2007 @ 10:33 PM
American college student:
I know why your student loan check was late this semester.
You, and most of the students at your university, applied for student loans this semester. You needed the check in order to buy textbooks and pay for
your dorm and tuition.
The university told you that your check would be held for two weeks, until they could verify that you had registered for classes, and are actually
attending them; and that only then could they issue your student loan check. In they mean time, if you complained, they probably offered you a
"short-term loan" for a $25 or $50 fee, to be taken out of your student loan check, when it arrives.
Where was your student loan money for the two weeks (or more) between the time your lender "released the funds," and the time the university
credited your account or wrote a check?
Well, the university was playing in the markets with your money.
Their accountants told the government that they would hold your money in a sequestered account, or convert it to bonds, until it "could be released
to the student." which is code for arbing the prime rate change by the FED meeting this month.
It's also pure crap. YOU are the borrower of record, NOT the university. They held the money for 9 to 14 days, and their books probably even show
that they money "was in an account" the whole time, merely "hedged."
What their books DON'T show is that, because of the extra money in the account, their bank allowed them to hypothecate the money until the
checks were cut. In other words, so they could speculate on your dime.
If you asked the university, they'd tell you that "it takes time to cut 5,000 student loan checks, and verify each one." Which is crap. They
didn't spend two weeks mailing checks. They played the markets until markets closed on the weekend, and mailed every check, or credited every
account, in one fell swoop.
Their whole rationale, that "they have to verify your student status," is pure D crap. YOU are the borrower of record. NOT THEM. But you are also
a student, who is living in a city away from your residence, maybe even out of state. So statistically, you're not a voter. And your state
government is not about to intervene, since many of your politicians sit on the board of regents of your university, or at least play golf with
I started noticing this when working with some colleagues to quantify the extra liquidity in the markets this fall. Someone else actually pointed me
in the direction of seasonal student loan disbursements. I originally thought the person was claiming that students were playing the market.
But I quickly saw that it was institutional; I talked to several college students I know, and the timing perfectly matches up with the liquidity in
the debt, currency, and oil markets recently.
I asked one of the students to phone the bursar's office of their school, and the person at the desk pretty much verified this. A banking official
from a nationwide california based bank also corroborated this theory.
Think about it. If your college has 10,000 students, and each of them takes out a $2,250 student loan, that equals twenty two point five million
dollars that the institution has in its pocket for two weeks. now figure four thousand colleges and universities across the U.S., and you see how
rush week can affect the national economy. (Or you could estimate that 80% of the 16 million U.S. college students will take out an average $2,250
loan this term, and you end up with 28.8 billion dollars every semester.)
So, if your student loan check was late, this was because the university bet on the wrong side of its equation, and needed "a couple of
days" to produce your money.
It may not be illegal, but it is unethical as hell for them to hypothecate with money you borrowed, and are paying interest on.
[edit on 25-9-2007 by dr_strangecraft]